A N N U A L R E P O R T
2 0 2 1
N A S D A Q : B S E T
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
In 2021, Bassett continued to expand
In 2021, Bassett continued to expand
the BenchMade Collection, which
the BenchMade Collection, which
has resonated with customers for its
has resonated with customers for its
solid American lumber and artisan-
solid American lumber and artisan-
crafted story.
crafted story.
The new BenchMade Leather is a
The new BenchMade Leather is a
curated line of leather upholstery
curated line of leather upholstery
with a palette of luxury, boutique-
with a palette of luxury, boutique-
tannery leathers from Italy.
tannery leathers from Italy.
Financial Summary
Financial Summary
INCOME STATEMENT DATA
INCOME STATEMENT DATA
Net Sales
Net Sales
Income (loss) From Operations
Income (loss) From Operations
Adjusted Income From Operations
Adjusted Income From Operations
Net Income (loss)
Net Income (loss)
Adjusted Net Income
Adjusted Net Income
PER SHARE DATA
PER SHARE DATA
Diluted Income (loss)
Diluted Income (loss)
Adjusted Diluted Income
Adjusted Diluted Income
Cash Dividends
Cash Dividends
Book Value
Book Value
BALANCE SHEET DATA
BALANCE SHEET DATA
Cash & Cash Equivalents
Cash & Cash Equivalents
Investments
Investments
Total Assets
Total Assets
Long-Term Debt
Long-Term Debt
Stockholders’ Equity
Stockholders’ Equity
Fiscal years ended November
Fiscal years ended November
2021
2021
2020
2020
2019
2019
2018
2018
2017
2017
$486,534
$486,534
25,999
25,999
25,999
25,999
18,042
18,042
18,042
18,042
$385,863
$385,863
$452,087
$452,087
$456,855
$456,855
$452,503
$452,503
(16,223)
(16,223)
(1,018)
(1,018)
(10,421)
(10,421)
1,235
1,235
(595)
(595)
7,446
7,446
(1,928)
(1,928)
4,560
4,560
14,084
14,084
14,854
14,854
8,218
8,218
10,119
10,119
27,018
27,018
26,297
26,297
18,256
18,256
15,826
15,826
$ 1.83
$ 1.83
1.83
1.83
0.78
0.78
16.67
16.67
$ (1.05)
$ (1.05)
$ (0.19)
$ (0.19)
$ 0. 77
$ 0. 77
$ 1.70
$ 1.70
0.12
0.12
0.455
0.455
15.89
15.89
0. 44
0. 44
0.50
0.50
17.66
17.66
0.95
0.95
0.47
0.47
18.08
18.08
1.47
1.47
0.77
0.77
17.83
17.83
$ 34,374
$ 34,374
17,715
17,715
421,660
421,660
—
—
162,732
162,732
$ 45,799
$ 45,799
$ 19,687
$ 19,687
$ 33,468
$ 33,468
$ 53,949
$ 53,949
17,715
17,715
402,548
402,548
—
—
17,436
17,436
275,766
275,766
—
—
22,643
22,643
291,641
291,641
—
—
23,125
23,125
293,748
293,748
329
329
158,030
158,030
178,670
178,670
190,309
190,309
191,460
191,460
Dollars in thousands except per share amounts
Dollars in thousands except per share amounts
TO O U R S H A R E H O L D E R S
TO O U R S H A R E H O L D E R S
As I said in last year’s letter to shareholders, I remain very proud of
As I said in last year’s letter to shareholders, I remain very proud of
the perseverance of our associates in their willingness to “do what
the perseverance of our associates in their willingness to “do what
it takes” to market, sell, and craft our products while operating
it takes” to market, sell, and craft our products while operating
amidst the COVID-related frustration that characterized both
amidst the COVID-related frustration that characterized both
fiscal 2021 and 2020 for Bassett. Their collective efforts generated
fiscal 2021 and 2020 for Bassett. Their collective efforts generated
almost $487 million in consolidated revenue in 2021, a 26%
almost $487 million in consolidated revenue in 2021, a 26%
increase over 2020 and the highest level since the mid 1990’s
increase over 2020 and the highest level since the mid 1990’s
(when Bassett was a much different company), and operating
(when Bassett was a much different company), and operating
profit of $26 million, our best showing since 2017. As I write this
profit of $26 million, our best showing since 2017. As I write this
letter on January 25, 2022, the evening news in my kitchen reports
letter on January 25, 2022, the evening news in my kitchen reports
“officials warn that supply chain woes could be worsening.” Are we
“officials warn that supply chain woes could be worsening.” Are we
really dealing with this disturbance two years after the outbreak
really dealing with this disturbance two years after the outbreak
of the pandemic? Yes. Has the supply chain situation gotten
of the pandemic? Yes. Has the supply chain situation gotten
better? Somewhat. Are rampant inflation and the corresponding
better? Somewhat. Are rampant inflation and the corresponding
price increases to our customers affecting business? Not yet.
price increases to our customers affecting business? Not yet.
Is all of this worrisome? Absolutely. While acknowledging that
Is all of this worrisome? Absolutely. While acknowledging that
challenges will exist for the foreseeable future, it is time to change
challenges will exist for the foreseeable future, it is time to change
the narrative. There will certainly be life after COVID, but what will
the narrative. There will certainly be life after COVID, but what will
it look like? That’s the question we are all trying to figure out! With
it look like? That’s the question we are all trying to figure out! With
our strong balance sheet and conservative approach to business,
our strong balance sheet and conservative approach to business,
we are well-equipped to thrive after the pandemic and related
we are well-equipped to thrive after the pandemic and related
disruptions are fully behind us.
disruptions are fully behind us.
The mark of a strong company is its ability to generate cash to
The mark of a strong company is its ability to generate cash to
fund the business. During 2020 and 2021, we generated over
fund the business. During 2020 and 2021, we generated over
$51 million of operating cash flow which has allowed us to build
$51 million of operating cash flow which has allowed us to build
inventory some $26 million in 2021 to cope with supply chain
inventory some $26 million in 2021 to cope with supply chain
woes. Bolstered by our strong balance sheet, the five primary
woes. Bolstered by our strong balance sheet, the five primary
components of our future growth strategies are:
components of our future growth strategies are:
•
•
•
•
•
•
•
•
•
•
Digital transformation
Digital transformation
Store redesign and refurbishment
Store redesign and refurbishment
Open market sales: Bassett Design Centers
Open market sales: Bassett Design Centers
and Club Level
and Club Level
Outdoor product growth
Outdoor product growth
New logistics strategy
New logistics strategy
Our work to transform our corporate data platform began in
Our work to transform our corporate data platform began in
earnest a year ago and currently involves cross functional teams
earnest a year ago and currently involves cross functional teams
and resources throughout the Company. The major components
and resources throughout the Company. The major components
of our data architecture were created over two decades ago
of our data architecture were created over two decades ago
and were largely designed to digitally allow us to configure our
and were largely designed to digitally allow us to configure our
custom furniture products for our manufacturing processes. In
custom furniture products for our manufacturing processes. In
short, they are too inconsistent and cumbersome to serve today’s
short, they are too inconsistent and cumbersome to serve today’s
world of consumer digital engagement and e-commerce. With
world of consumer digital engagement and e-commerce. With
the construction of our new product information management
the construction of our new product information management
(PIM) system, we are creating the means by which we will manage
(PIM) system, we are creating the means by which we will manage
our multichannel marketing strategy. Although e-commerce
our multichannel marketing strategy. Although e-commerce
represents slightly less than 3% of our total wholesale revenue
represents slightly less than 3% of our total wholesale revenue
today, our pursuit of higher levels of sales starts with the
today, our pursuit of higher levels of sales starts with the
implementation of the new PIM system this spring. From there,
implementation of the new PIM system this spring. From there,
we will begin the integration of our new web platform that is
we will begin the integration of our new web platform that is
scheduled to stand up this fall. This work is essential to creating
scheduled to stand up this fall. This work is essential to creating
the a seamless consumer experience between our web traffic and
a seamless consumer experience between our web traffic and
our stores. In concert with the creation of the new data model is
our stores. In concert with the creation of the new data model is
the work being done to simplify our custom furniture programs,
the work being done to simplify our custom furniture programs,
which have been, frankly, too complicated to provide a frictionless
which have been, frankly, too complicated to provide a
web experience. Still extremely important, the modernization of
important, the
frictionless web experience. Still extremely
our custom programs is well underway and is essential to our
modernization of our custom programs is well underway and
complete digital transformation.
is essential to our complete digital transformation.
We began work on making our stores more inspirational in late
We began work on making our stores more inspirational in late
2020. The work continues and will culminate with the opening of
2020. The work continues and will culminate with the opening of
a reimagined retail space in Dallas this summer. There are many
a reimagined retail space in Dallas this summer. There are many
new elements that will be part of the new experience, including
new elements that will be part of the new experience, including
the use of natural materials that evoke imagery of the local market,
the use of natural materials that evoke imagery of the local market,
a new fixture package designed to drive accessory sales and a
a new fixture package designed to drive accessory sales and a
“take with” selling capability, and a hospitality section designed to
“take with” selling capability, and a hospitality section designed to
serve our design-based clients while they collaborate with our in-
serve our design-based clients while they collaborate with our in-
store designers. We plan to retrofit our two other Dallas stores with
store designers. We plan to retrofit our two other Dallas stores with
the distinguishing elements of the new concept and grand open
the distinguishing elements of the new concept and grand open
all three simultaneously when the work is complete. Also, we plan
all three simultaneously when the work is complete. Also, we plan
a major remodel of our Austin, Texas, store this year and open in a
a major remodel of our Austin, Texas, store this year and open in a
new market late in the year. Our Corporate retail group produced
new market late in the year. Our Corporate retail group produced
its most profitable year ever in 2021, thanks largely to 200bp
its most profitable year ever in 2021, thanks largely to 200bp
year over year gross margin improvement and the significant
year over year gross margin improvement and the significant
cost reductions that were made at the onset of the pandemic.
cost reductions that were made at the onset of the pandemic.
Embellishing our new operating model with brand extension and
Embellishing our new operating model with brand extension and
our new vision for customer experience should allow this higher
our new vision for customer experience should allow this higher
level of performance to carry on.
level of performance to carry on.
2021 was a banner year for wholesale sales generated outside
2021 was a banner year for wholesale sales generated outside
of our store network – the “open market” – which grew at a 49%
of our store network – the “open market” – which grew at a 49%
clip. Shipments were almost evenly divided between our Bassett
clip. Shipments were almost evenly divided between our Bassett
Design Centers (BDC) and general furniture stores. Our BDCs
Design Centers (BDC) and general furniture stores. Our BDCs
are intended to mirror our store experience as much as possible
are intended to mirror our store experience as much as possible
in terms of merchandising, selling strategy, and marketing.
in terms of merchandising, selling strategy, and marketing.
(continued)
(continued)
(continued)
(continued)
Most of the products are Made in America and are featured in
Most of the products are Made in America and are featured in
settings that are often suggested by our in-house design team.
settings that are often suggested by our in-house design team.
Following up on this year’s success, we plan to further strengthen
Following up on this year’s success, we plan to further strengthen
the BDC program by integrating new brand imagery depicting
the BDC program by integrating new brand imagery depicting
Bassett’s rich history and the skill that our local craftsmen exhibit
Bassett’s rich history and the skill that our local craftsmen exhibit
every day in building our beautiful BenchMade furniture. On the
every day in building our beautiful BenchMade furniture. On the
other end of the product spectrum, our imported Club Level by
other end of the product spectrum, our imported Club Level by
Bassett motion product was a big hit this year as category sales
Bassett motion product was a big hit this year as category sales
grew by 78%! Part of the previously mentioned strategic build in
grew by 78%! Part of the previously mentioned strategic build in
inventory was designed to support this higher rate of Club Level
inventory was designed to support this higher rate of Club Level
sales. Many of the customers are U.S. furniture “Top 100” stores,
sales. Many of the customers are U.S. furniture “Top 100” stores,
a noteworthy departure from the profile of our BDCs, which are
a noteworthy departure from the profile of our BDCs, which are
typically smaller upscale, design-oriented operations located in
typically smaller upscale, design-oriented operations located in
secondary markets across the U.S. Navigating the skyrocketing
secondary markets across the U.S. Navigating the skyrocketing
prices of ocean freight was a challenge in 2021 and will be in 2022
prices of ocean freight was a challenge in 2021 and will be in 2022
as well. Partly for that reason, we introduced our first domestically
as well. Partly for that reason, we introduced our first domestically
made Club Level motion product this past fall. We expect to see
made Club Level motion product this past fall. We expect to see
strong retail sell-through from this product as floor placements
strong retail sell-through from this product as floor placements
were strong.
were strong.
As casual
As casual
lifestyles proliferated over the past few years,
lifestyles proliferated over the past few years,
accelerated by COVID lockdowns, sales of outdoor furniture have
accelerated by COVID lockdowns, sales of outdoor furniture have
risen disproportionally to general furniture sales. Recognizing this
risen disproportionally to general furniture sales. Recognizing this
trend, we acquired Lane Venture in 2017 and followed up with
trend, we acquired Lane Venture in 2017 and followed up with
the purchase of the assets of Crimson Casual, a small aluminum
the purchase of the assets of Crimson Casual, a small aluminum
outdoor manufacturer located in northwest Alabama in October
outdoor manufacturer located in northwest Alabama in October
2019. Both entities hit their stride in 2021 as combined orders
2019. Both entities hit their stride in 2021 as combined orders
grew by 61%. Shipments grew at a more subdued 28%, with the
grew by 61%. Shipments grew at a more subdued 28%, with the
difference ending up in our year-end wholesale backlog as our
difference ending up in our year-end wholesale backlog as our
fabric suppliers could not provide yardage to keep up with our sales.
fabric suppliers could not provide yardage to keep up with our sales.
Our seating comfort (an oxymoron in most outdoor products), and
Our seating comfort (an oxymoron in most outdoor products), and
our domestic capabilities in upholstery and aluminum allowed us
our domestic capabilities in upholstery and aluminum allowed us
to fare better than most in terms of providing decent service in
to fare better than most in terms of providing decent service in
light of all the disruption. This year, we plan on purchasing the
light of all the disruption. This year, we plan on purchasing the
Alabama manufacturing facility (now leased), invest in precision
Alabama manufacturing facility (now leased), invest in precision
metal fabricating machinery and re-engineer the production
metal fabricating machinery and re-engineer the production
work flow to produce at higher levels more efficiently. Outdoor
work flow to produce at higher levels more efficiently. Outdoor
is coming into its own to be a significant part of the Bassett story.
is coming into its own to be a significant part of the Bassett story.
On January 31, 2022, we made a joint announcement with J.B. Hunt
On January 31, 2022, we made a joint announcement with J.B. Hunt
Transport Services, Inc. (J.B. Hunt) to sell Zenith Freight Lines to a
Transport Services, Inc. (J.B. Hunt) to sell Zenith Freight Lines to a
subsidiary of J.B. Hunt for $87 million, subject to customary closing
subsidiary of J.B. Hunt for $87 million, subject to customary closing
conditions. We expect to close the deal by the end of February.
conditions. We expect to close the deal by the end of February.
This transaction will open an exciting new chapter in our quest to
This transaction will open an exciting new chapter in our quest to
(continued)
(continued)
provide the highest level of service to our customers. Disruption
provide the highest level of service to our customers. Disruption
caused by the pandemic aside, we believe that the consolidation
caused by the pandemic aside, we believe that the consolidation
of the traditional “middle mile” segment of specialized furniture
of the traditional “middle mile” segment of specialized furniture
carriers is inevitable. There are already significantly fewer of
carriers is inevitable. There are already significantly fewer of
these providers today than were in existence a few years ago.
these providers today than were in existence a few years ago.
Accordingly, this reality led us to seriously consider selling Zenith
Accordingly, this reality led us to seriously consider selling Zenith
to J. B. Hunt when the initial overtures were made last year. As
to J. B. Hunt when the initial overtures were made last year. As
due diligence progressed, we came to understand the benefits
due diligence progressed, we came to understand the benefits
that the scale of J.B. Hunt could provide in terms of equipment,
that the scale of J.B. Hunt could provide in terms of equipment,
technology, driver recruitment, intermodal transportation, and
technology, driver recruitment, intermodal transportation, and
warehousing density. As we became more familiar with their
warehousing density. As we became more familiar with their
management team and developed respect for them, we became
management team and developed respect for them, we became
convinced that they were the right partners for our vision to
convinced that they were the right partners for our vision to
build out a nationwide network of Regional Fulfillment Centers
build out a nationwide network of Regional Fulfillment Centers
that could serve as local warehouses for our “Make, Then Sell”
that could serve as local warehouses for our “Make, Then Sell”
stocking assortment while serving as cross docks for our “Sell,
stocking assortment while serving as cross docks for our “Sell,
Then Make” custom programs that have been so successful for
Then Make” custom programs that have been so successful for
us for so long. The idea is to reduce costs to our customers and
us for so long. The idea is to reduce costs to our customers and
get them their goods faster, while providing more visibility to the
get them their goods faster, while providing more visibility to the
status of their shipment in the process. We plan to open the first
status of their shipment in the process. We plan to open the first
of these new facilities in Florida this spring and we are working
of these new facilities in Florida this spring and we are working
on every aspect of the model that will be required to allow our
on every aspect of the model that will be required to allow our
new logistics strategy to serve as a linchpin for future wholesale
new logistics strategy to serve as a linchpin for future wholesale
and retail growth for Bassett. We are extremely enthusiastic about
and retail growth for Bassett. We are extremely enthusiastic about
the potential to better serve our customers with the 50-year
the potential to better serve our customers with the 50-year
accumulated furniture know-how of Zenith in combination with
accumulated furniture know-how of Zenith in combination with
the power of the J.B. Hunt platform.
the power of the J.B. Hunt platform.
Hopefully, we are emerging from the day to day turmoil that the
Hopefully, we are emerging from the day to day turmoil that the
pandemic has created for the past two years. We are still dealing
pandemic has created for the past two years. We are still dealing
with inflationary pressure and an undependable supply chain. But
with inflationary pressure and an undependable supply chain. But
we also have a solid strategy to generate growth, a large backlog
we also have a solid strategy to generate growth, a large backlog
of orders that give us a tailwind in 2022, and a very strong financial
of orders that give us a tailwind in 2022, and a very strong financial
foundation on which to build. With all of that in mind, I once again
foundation on which to build. With all of that in mind, I once again
commend and thank our associates for their stellar work in 2021,
commend and thank our associates for their stellar work in 2021,
our Board of Directors for their support, and our shareholders for
our Board of Directors for their support, and our shareholders for
their investment in Bassett.
their investment in Bassett.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Amounts in thousands except share and per share data)
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(Amounts in thousands except share and per share data)
Our fiscal year, which ends on the last Saturday of November, periodically results in a 53-week year instead of the normal
52 weeks. The fiscal year ending November 30, 2019 was a 53-week year, with the additional week being included in the
first fiscal quarter. Accordingly, the information presented below includes 53 weeks of operations for the year ended
November 30, 2019 as compared to 52 weeks included in the years ended November 27, 2021 and November 28, 2020.
Impact of COVID-19
For a discussion of how COVID-19 has impacted and may continue to impact our business and financial condition, please
refer to the discussion under the heading "Ongoing Impact of the COVID-19 Pandemic and Related Supply Chain and Labor
Issues Upon Our Business " in Part I, Item 1 of this report.
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 also sell our products through our website at www.bassettfurniture.com. We were founded in
1902 and incorporated under the laws of Virginia in 1930. Our rich 119-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 27, 2021, 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 or virtual 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 or virtual design services for our customers.
We have factories in Newton, North Carolina that manufacture Bench Made custom upholstered and outdoor furniture. We
also have factories in Martinsville and Bassett, Virginia that assemble and finish our custom dining offerings, including our
Bench Made line of solid hardwood furniture. We currently lease a facility in Haleyville, Alabama where we manufacture
aluminum frames for our outdoor furniture. Our manufacturing team takes great pride in the breadth of its options, the
precision of its craftsmanship, and the speed of its manufacturing process. Our logistics team then 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, Thailand and China. Over 75% of the products we currently sell
are manufactured in the United States.
During fiscal 2018, we acquired Lane Venture, a manufacturer and distributor of premium outdoor furniture which is operated
as a component of our wholesale segment. This acquisition marked our entry into the market for outdoor furniture and we
believe that Lane Venture has provided a foundation for us to become a significant participant in this category. Our strategy
is to distribute this brand outside of our BHF store network only.
With the knowledge we have gained through operating Lane Venture, we have developed the Bassett Outdoor brand that is
only marketed through the BHF store network. This allows Bassett branded product to move from inside the home to outside
the home to capitalize on the growing trend of outdoor living.
We also own 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 60% of Zenith’s revenue is generated from services provided to non-Bassett customers.
We consider our website to be the front door to our brand experience where customers can research our furniture and
accessory offerings and subsequently buy online or engage with an in-store design consultant. Customer acquisition resulting
from our digital outreach strategies has significantly increased our traffic to the website and our online orders over the last
two years. While the growth in website traffic and orders moderated somewhat in late fiscal 2021 compared to 2020, both
have nearly doubled since 2019. The migration to digital brand research has caused us to comprehensively evaluate all of our
American made custom products. While our Custom Upholstery, Custom Dining, and Bench Made product lines continue to
be our most successful offerings, most of these items must be purchased in a store as they are not conducive to web
transactions due to the number of options available. Consequently, we will continue to methodically re-design each one of
these important lines. Our intent is to continue to offer the consumer custom options that will help them personalize their
home but to do so in an edited fashion that will provide a better web experience in the research phase and will also allow the
final purchase to be made either on the web or in the store. While we work to make it easier to purchase either in store or on-
line, we will not compromise on our in-store experience or the quality of our in-home makeover capabilities.
Analysis of Operations
The following discussion provides an analysis of our results of operations and reasons for material changes therein for fiscal
year 2021 as compared to fiscal year 2020 and 2019. Because of the significant adverse impact that the COVID-19 pandemic
had on our operations during the second quarter of fiscal 2020, we believe that a better understanding of the revenue and
profitability growth that has resulted from our product and marketing initiatives as well as the cost reductions implemented
in fiscal 2020 is obtained by comparing our current year results to the pre-pandemic results of fiscal 2019. Therefore, 2019
results are presented below for the purpose of showing a comparison with 2021. For an analysis of the fiscal year 2020 results
as compared to fiscal year 2019, see “Analysis of Operations” in Part II, Item 7, Management’s Discussion and Analysis of
Financial Condition and Results of Operations in the Company’s 2020 Annual Report on Form 10-K, filed with the SEC on
January 21, 2021
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 27, 2021,
November 28, 2020 and November 30, 2019:
2021
2020
2019*
Dollars Percent Dollars Percent
Comparative Change
2021 vs 2020
2021 vs 2019
Sales Revenue:
Furniture and
accessories
Logistics
Total net sales
revenue
Cost of furniture and
accessories sold
SG&A
New store pre-opening
costs
Cost of logistical
services
Other charges
Income (loss) from
$ 430,886 88.6% $ 337,672 87.5% $ 403,865 89.3% $ 93,214
7,457
55,648 11.4% 48,191 12.5% 48,222 10.7%
27.6% $ 27,021
7,426
15.5%
6.7%
15.4%
486,534 100.0% 385,863 100.0% 452,087 100.0% 100,671
26.1% 34,447
7.6%
209,799 43.1% 163,567 42.4% 179,244 39.6% 46,232
196,831 40.5% 176,368 45.7% 217,913 48.2% 20,463
28.3% 30,555
11.6% (21,082)
17.0%
-9.7%
-
0.0%
-
0.0%
1,117
0.2%
-
NM
(1,117) -100.0%
53,905 11.1% 46,946 12.2% 46,367 10.3%
-
0.0% 15,205
3.9%
8,041
14.8%
6,959
1.8% (15,205) -100.0%
7,538
16.3%
(8,041) -100.0%
operations
$ 25,999
5.3% $ (16,223)
-4.2% $
(595)
-0.1% $ 42,222
N/M $ 26,594
N/M
*53 weeks for fiscal 2019 as compared with 52 weeks for fiscal 2021 and 2020.
1
2
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(Amounts in thousands except share and per share data)
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(Amounts in thousands except share and per share data)
Our consolidated net sales by segment were as follows:
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 operations.
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 operations. Zenith’s operating costs are included in
selling, general and administrative expenses. See “Recent Development Regarding Zenith” under Part I, Item 1 of
the Annual Report regarding our entry into an agreement to sell substantially all of the assets of Zenith.
Sales Revenue
Wholesale sales of furniture and accessories
Less: Sales to retail segment
Wholesale sales to external customers
Retail sales of furniture and accessories
Consolidated net sales of furniture and
2021
2020
2019* Dollars Percent Dollars Percent
Comparative Change
2021 vs 2020
2021 vs 2019
$ 295,329 $ 221,075 $ 261,105 $ 74,254
(112,270 ) (95,347) (125,933) (16,923)
183,059 125,728 135,172 57,331
247,827 211,944 268,693 35,883
33.6% $ 34,224
17.7% 13,663
45.6% 47,887
16.9% (20,866)
13.1%
-10.8%
35.4%
-7.8%
accessories
430,886 337,672 403,865 93,214
27.6% 27,021
6.7%
Logistical services revenue
Less: Services to wholesale segment
Logistical services to external customers
Total sales revenue
86,977 75,158 80,074 11,819
(4,362)
(31,329 ) (26,967) (31,852)
55,648 48,191 48,222
7,457
$ 486,534 $ 385,863 $ 452,087 $ 100,671
15.7% 6,903
16.2%
523
15.5% 7,426
26.1% $ 34,447
8.6%
-1.6%
15.4%
7.6%
*53 weeks for fiscal 2019 as compared with 52 weeks for fiscal 2021 and 2020.
Total sales revenue for fiscal 2021 increased $100,671, or 26.1%, from prior year due primarily to the major impact of the
COVID-19 pandemic on our operations during fiscal 2020, which forced a near total shut-down of our manufacturing and
retail operations from late March through early May of 2020, followed by an exceptionally strong recovery in demand for
home furnishings that has continued into fiscal 2021. Sales of furniture and accessories for fiscal 2021 increased $34,447 or
7.6%, over fiscal 2019. This growth as compared to fiscal 2019 is attributable not only to the exceptionally strong demand
for home furnishings that has benefited our industry over the past eighteen months, but also due to increases in our wholesale
business through growth in our Lane Venture line of outdoor furniture, the introduction of our Bassett Outdoor line of outdoor
furniture sold through our BHF store network, and the expansion of our wholesale customer base of independent dealers
partially offset by lower retail sales from the closure of seven Company-owned stores since the end of 2019.
Cost of furniture and accessories sold as a percentage of total revenue for the fiscal 2021 increased over fiscal 2020 and 2019
primarily due to rising raw material and inbound freight costs, partially offset by improved leverage on fixed costs during
fiscal 2021 versus 2020 when our operations were temporarily shut down due to the pandemic. SG&A expenses as a
percentage of sales for fiscal 2021 decreased significantly from fiscal 2020 and 2019 due to increased leverage of fixed costs
due to higher sales volume coupled with the fact that we have been able to maintain various expense reductions implemented
in the second and third quarters of fiscal 2020 in response to the COVID-19 pandemic. This was partially offset by increased
operating costs in the logistical services segment.
Other charges of $15,205 incurred during fiscal 2020 included $11,114 of non-cash asset impairment charges on five
underperforming retail stores, including $6,239 for the impairment of operating lease right-of-use assets, and $1,070 of non-
cash impairment charges in our wholesale segment, primarily due to the closure of our custom upholstery manufacturing
facility in Grand Prairie, Texas in May of 2020, a non-cash charge of $1,971 for the impairment of goodwill associated with
our wood reporting unit within our wholesale segment, and $1,050 of litigation costs relating to certain wage and hour
violation claims that had been asserted against the Company. These claims have since been settled at no additional cost.
Certain other items affecting comparability between fiscal 2021 and 2020 are discussed below in “Other Items Affecting Net
Income”.
3
4
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(Amounts in thousands except share and per share data)
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 for the full fiscal years ended November 27, 2021, November 28, 2020 and November
30, 2019:
Sales revenue:
Furniture & accessories
Logistics
Total sales revenue
Cost of furniture and
accessories sold
SG&A expense
Cost of logistical services
Income from operations
Sales revenue:
Furniture & accessories
Logistics
Total sales revenue
Cost of furniture and
accessories sold
SG&A expense
Cost of logistical services
Income (loss) from
operations (6)
Wholesale
Retail
Logistics
Eliminations
Consolidated
Year Ended November 27, 2021
$
$
295,329 $
-
295,329
202,026
75,813
-
17,490 $
247,827 $
-
247,827
118,455
122,328
-
7,044 $
- $
86,977
86,977
(112,270) (1) $
(31,329) (2)
(143,599)
-
-
85,234
1,743 $
(110,682) (3)
(1,310) (4)
(31,329) (5)
$
(278)
430,886
55,648
486,534
209,799
196,831
53,905
25,999
Wholesale
Retail
Logistics
Eliminations
Consolidated
Year Ended November 28, 2020
$
221,075 $
-
221,075
211,944 $
-
211,944
- $
75,158
75,158
(95,347) (1) $
(26,967) (2)
(122,314)
152,982
63,506
-
107,233
114,208
-
-
-
73,913
(96,648) (3)
(1,346) (4)
(26,967) (5)
337,672
48,191
385,863
163,567
176,368
46,946
$
4,587 $
(9,497) $
1,245 $
2,647
$
(1,018)
Sales revenue:
Furniture & accessories
Logistics
Total sales revenue
Cost of furniture and
accessories sold
SG&A expense
New store pre-opening costs
Cost of logistical services
Income (loss) from
operations (6)
Wholesale
Retail
Logistics
Eliminations
Consolidated
Year Ended November 30, 2019
$
261,105 $
-
261,105
268,693 $
-
268,693
- $
80,074
80,074
(125,933) (1) $
(31,852) (2)
(157,785)
173,350
76,299
-
-
131,528
143,057
1,117
-
-
-
-
78,219
(125,634) (3)
(1,443) (4)
-
(31,852) (5)
403,865
48,222
452,087
179,244
217,913
1,117
46,367
$
11,456 $
(7,009) $
1,855 $
1,144
$
7,446
(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.
(4) Represents the elimination of rent paid by our retail stores occupying Company-owned real estate.
(5) Represents the elimination of the cost of logistical services provided by Zenith to our wholesale segment.
(6) Excludes the effects of goodwill and asset impairment charges, cost of early retirement program, litigation costs
and lease exit costs which are not allocated to our segments.
Non-GAAP Financial Information
To supplement the financial measures prepared in accordance with GAAP, we use certain non-GAAP financial measures,
including income (loss) from operations before other charges and gross profit on wholesale sales of furniture and accessories
by segment inclusive of intercompany sales. The reconciliations of these non-GAAP financial measures to the most directly
comparable financial measures calculated and presented in accordance with GAAP are shown in tables below.
Income (Loss) from Operations before Other Charges
The following table reconciles income (loss) from operations as shown above for our consolidated segment results with
income (loss) from operations as reported in accordance with GAAP for fiscal years ended November 27, 2021, November
28, 2020 and November 30, 2019:
Consolidated segment income (loss) from
operations excluding special charges
Less:
Asset impairment charges
Goodwill impairment charge
Early retirement program
Litigation expense
Lease exit costs
2021
2020
2019
$
25,999 $
(1,018) $
7,446
-
-
-
-
-
12,184
1,971
-
1,050
-
4,431
1,926
835
700
149
Income (loss) from operations as reported
$
25,999 $
(16,223) $
(595)
Asset Impairment Charges
During fiscal 2020 the loss from operations included $11,114 of non-cash asset impairment charges on five underperforming
retail stores, including $6,239 for the impairment of operating lease right-of-use assets, and $1,070 of non-cash impairment
charges in our wholesale segment, primarily due to the closure of our custom upholstery manufacturing facility in Grand
Prairie, Texas.
During fiscal 2019 the loss from operations included $4,431 of non-cash impairment charges recognized on the assets of six
underperforming retail stores.
Goodwill Impairment Charges
Due to the impact of the COVID-19 pandemic, we performed an interim impairment assessment of our goodwill as of May
30, 2020. As a result, we recognized a non-cash charge of $1,971 during fiscal 2020 for the impairment of goodwill associated
with our wood reporting unit within our wholesale segment (see Note 6 to our Consolidated Financial Statements).
During fiscal 2019 our annual evaluation of the carrying value of our recorded goodwill resulted in the recognition of a $1,926
non-cash charge for the impairment of goodwill associated with our retail reporting unit (see Note 6 to our Consolidated
Financial Statements).
Early Retirement Program
During the first quarter of fiscal 2019, we offered a voluntary early retirement package to certain eligible employees of the
Company. These employees received pay equal to one-half their current salary plus benefits over a period of one year from
the final day of each individual’s active employment. Accordingly, we recognized a charge of $835 during the year ended
November 30, 2019.
5
6
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(Amounts in thousands except share and per share data)
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(Amounts in thousands except share and per share data)
Litigation Expense
Wholesale Segment
During fiscal 2020 and 2019 we accrued $1,050 and $700, respectively for the estimated costs to resolve certain wage and
hour violation claims that had been asserted against the Company.
Net sales, gross profit, SG&A expense and operating income for our Wholesale Segment were as follows for the fiscal years
ended November 27, 2021, November 28, 2020 and November 30, 2019:
Lease Exit Costs
During fiscal 2019 we recognized a $149 charge for lease exit costs incurred in connection with the repositioning of a
Company-owned retail store in Palm Beach, Florida to a new location within the same market.
Gross Profit by Segment
In the following analysis of results for our wholesale and retail segments, we present a measure of gross profit on sales which
is inclusive of intercompany sales from our wholesale segment to our retail segment. We believe that this is a key metric by
which to evaluate the performance of each segment and is consistent with management’s view of our operating results. The
following table reconciles the sales, cost of sales and gross profit presented for each of the wholesale and retail segments to
the consolidated amounts for sales, cost of sales and the implied gross profit in accordance with GAAP.
Year Ended November 27, 2021
Non-GAAP Presentation
Retail
Wholesale
Eliminations
GAAP
Presentation
Consolidated
Sales revenue: furniture & accessories
Cost of furniture and accessories sold
Gross profit
$
$
295,329 $
202,026
93,303 $
247,827 $
118,455
129,372 $
(112,270) (1) $
(110,682) (2)
(1,588) (3) $
430,886
209,799
221,087
Year Ended November 28, 2020
Sales revenue: furniture & accessories
Cost of furniture and accessories sold
Gross profit
Non-GAAP Presentation
Retail
Wholesale
$
221,075 $
152,982
68,093 $
211,944 $
107,233
104,711 $
$
Eliminations
GAAP
Presentation
Consolidated
337,672
163,567
174,105
(95,347) (1) $
(96,648) (2)
1,301 (3) $
Year Ended November 30, 2019
Non-GAAP Presentation
Retail
Wholesale
Eliminations
GAAP
Presentation
Consolidated
2021
2020
2019*
Comparative Change
2021 vs 2020
Dollars Percent Dollars Percent
2021 vs 2019
Net sales
Gross profit (1)
SG&A
Income from operations $ 17,490 5.9% $ 4,587
$ 295,329 100.0% $221,075 100.0% $261,105 100.0% $74,254
93,303 31.6% 68,093 30.8% 87,755 33.6% 25,210
75,813 25.7% 63,506 28.7% 76,299 29.2% 12,307
33.6% $ 34,224
37.0% 5,548
(486)
19.4%
2.1% $ 11,456 4.4% $12,903 281.3% $ 6,034
13.1%
6.3%
-0.6%
52.7%
(1) Gross profit at the segment level is considered a Non-GAAP financial measure due to the included effects of
intercompany transactions. Refer to the reconciliation of gross profit by segment to consolidated gross profit presented
under Non-GAAP Financial Information above.
*53 weeks for fiscal 2019 as compared with 52 weeks for fiscal 2021 and 2020.
Wholesale shipments by category for the fiscal years ended November 27, 2021, November 28, 2020 and November 30, 2019
are summarized below:
External Intercompany
Total
External Intercompany
Total
External Intercompany
Total
2021
2020
2019*
Bassett
Custom
Upholstery $ 105,445 $
Bassett
69,533 $ 174,978 59.2 % $ 71,840 $
56,360 $ 128,200 58.0 % $ 78,856 $
73,559 $ 152,415 58.4 %
Leather
36,157
61 36,218 12.3 % 20,487
949 21,436 9.7 % 17,083
2,137 19,220 7.4 %
Bassett
Custom
Wood
Bassett
24,079
24,066 48,145 16.3 % 19,682
19,629 39,311 17.8 % 21,264
24,818 46,082 17.6 %
Casegoods 17,378
18,610 35,988 12.2 % 13,719
18,409 32,128 14.5 % 17,221
23,699 40,920 15.7 %
Accessories
(1)
-
-
- 0.0 %
-
-
- 0.0 %
748
1,720
2,468 0.9 %
Total
$ 183,059 $
112,270 $ 295,329 100.0 % $ 125,728 $
95,347 $ 221,075 100.0 % $ 135,172 $
125,933 $ 261,105 100.0 %
(1) Beginning with the third quarter of fiscal 2019, our wholesale segment no longer purchases accessory items for resale to
our retail segment or to third party customers such as licensees or independent furniture retailers. Our retail segment and
third-party customers now source their accessory items directly from the accessory vendors.
Sales revenue: furniture & accessories
Cost of furniture and accessories sold
Gross profit
$
$
261,105 $
173,350
87,755 $
268,693 $
131,528
137,165 $
(125,933) (1) $
(125,634) (2)
(299) (3) $
403,865
179,244
224,621
*53 weeks for fiscal 2019 as compared with 52 weeks for fiscal 2021 and 2020.
Fiscal 2021 as Compared to Fiscal 2020
(1) Represents the elimination of sales from our wholesale segment to our Company-owned BHF stores.
(2) Represents the elimination of purchases by our Company-owned BHF stores from our wholesale segment, as well
as the change for the period in the elimination of intercompany profit in ending retail inventory.
(3) Represents the change for the period in the elimination of intercompany profit in ending retail inventory.
Net sales for the fiscal year ended November 27, 2021 increased $74,254, or 33.6%, from the prior year due primarily to the
major impact of the COVID-19 pandemic on our operations during fiscal 2020, which forced a nearly total shut-down of our
manufacturing and retail operations from late March through early May of 2020, followed by an exceptionally strong recovery
in demand for home furnishings that has continued through fiscal 2021. The increase in orders resulting from this surge in
demand, coupled with continuing supply chain disruptions in the wake of the pandemic, has resulted in a wholesale backlog
of $90,057 at November 27, 2021 as compared to $54,874 at November 28, 2020. As previously discussed, Bassett and most
of the home furnishings industry has been faced with continuing logistical challenges from COVID-related labor shortages
and supply chain disruptions creating significant delays in order fulfillment and increased backlogs. For fiscal 2021, gross
margins improved primarily due to improved leverage on fixed costs versus the prior year period when our operations were
temporarily shut down due to the pandemic partially offset by various cost increases including foam, plywood and various
other commodity costs and container freight and other logistics costs. As a result of the aforementioned cost increases, we
7
8
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(Amounts in thousands except share and per share data)
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(Amounts in thousands except share and per share data)
have instituted multiple price increases during the year, some of which have not been fully realized in the operations as those
price increases have generally not been implemented against the existing backlog at the time those increases were given.
SG&A expenses as a percentage of sales for fiscal 2021 decreased significantly from fiscal 2020 due to increased leverage
of fixed costs due to higher sales volume partially offset by higher spending in the marketing and information technology
areas.
Fiscal 2021 as Compared to Fiscal 2019
Because of the significant adverse impact that the COVID-19 pandemic had on our operations during the second quarter of
fiscal 2020, we believe that a better understanding of the revenue growth that has resulted from our product and marketing
initiatives is obtained by comparing our current year revenues to the pre-pandemic levels of fiscal 2019. Wholesale sales for
fiscal 2021 increased $34,224 or 13.1% over fiscal 2019. On an average weekly basis normalizing for fiscal 2019 being a 53-
week year, sales increased 15.3% over 2019. Shipments to the BHF store network declined 3.6% for fiscal 2021 as compared
to fiscal 2019. Growth in shipments to the BHF store network of the Bassett Outdoor line of outdoor furniture, introduced in
fiscal 2020, was offset by lower retail sales from the closure of seven Company-owned stores since the end of 2019 and the
fact that fiscal 2021 included one less week of sales as compared to 2019. Shipments to the open market (independent dealers
outside of the BHF store network) increased 41% for fiscal 2021 over fiscal 2019 primarily due to increases from existing
dealers along with an expansion of the dealer base. Shipments of our Lane Venture line of outdoor furniture increased 35%
for fiscal 2021, respectively, over the comparable fiscal 2019 periods. In addition, wholesale orders for fiscal 2021, increased
28% over fiscal 2019. Wholesale orders from independent dealers increased 67% for fiscal 2021 over fiscal 2019 driven by
increases from existing dealers along with an expansion of the dealer base. Also, orders from the Bassett Home Furnishings
store network for fiscal 2021 increased 4.7% over fiscal 2019 in spite of having seven fewer stores in the fleet during 2021
as well as one less week in 2021 as compared to 2019. Lane Venture orders increased by 83% for fiscal 2021 over fiscal
2019.
Retail Segment – Company Owned Stores
Net sales, gross profit, SG&A expense, new store pre-opening costs and operating income (loss) for our retail segment were
as follows for the fiscal years ended November 27, 2021, November 28, 2020 and November 30, 2019:
2021
2020
2019*
Comparative Change
2021 vs 2020
Dollars Percent Dollars Percent
2021 vs 2019
Net sales
Gross profit (1)
SG&A
New store pre-opening
$247,827 100.0% $211,944 100.0% $268,693 100.0% $35,883
129,372 52.2% 104,711 49.4% 137,165 51.0% 24,661
122,328 49.4% 114,208 53.9% 143,057 53.2% 8,120
16.9% $ (20,866)
23.6% (7,793)
7.1% (20,729)
-7.8%
-5.7%
-14.5%
costs
Loss from operations
-
$ 7,044
0.0%
-
2.8% $ (9,497)
0.0% 1,117
-4.5% $ (7,009)
0.4%
0.0% (1,117) -100.0%
-2.6% $16,541 NM $ 14,053 NM
-
(1) Gross profit at the segment level is considered a Non-GAAP financial measure due to the included effects of intercompany
transactions. Refer to the reconciliation of gross profit by segment to consolidated gross profit presented under Non-
GAAP Financial Information above.
Retail sales by major product category for the fiscal years ended November 27, 2021, November 28, 2020 and November 30,
2019 were as follows:
2021
2020
2019*
Bassett Custom Upholstery
Bassett Leather
Bassett Custom Wood
Bassett Casegoods
Accessories, mattresses & other (1)
Total
53.2 %
$ 139,527
1.4 %
226
13.1 %
30,931
16.7 %
42,658
34,485
15.7 %
$ 247,827 100.0 % $ 211,944 100.0 % $ 268,693 100.0 %
53.3 % $ 142,865
1.1 %
3,782
13.7 % 35,092
16.9 % 44,827
15.1 % 42,127
56.3 % $ 112,888
0.1 %
2,326
12.5 % 28,942
17.2 % 35,728
13.9 % 32,060
(1)
Includes the sale of goods other than Bassett-branded products, such as accessories and bedding, and also
includes the sale of furniture protection plans.
*53 weeks for fiscal 2019 as compared with 52 weeks for fiscal 2021 and 2020.
Fiscal 2021 as Compared to Fiscal 2020
Net sales for fiscal 2021 increased $35,886 or 16.9% from the prior year due primarily to the major impact of the COVID-19
pandemic on our operations in fiscal 2020, which forced a nearly total shut-down of our retail operations from late March
through early May of that year, followed by an exceptionally strong recovery in demand for home furnishings that has
continued through fiscal 2021. The increase in written sales (the value of sales orders taken but not delivered) resulting from
this surge in demand has resulted in a retail backlog of $82,894 at November 27, 2021 as compared to $57,041 at November
28, 2020. As previously discussed, Bassett and most of the home furnishings industry has been faced with continuing
logistical challenges from COVID-related labor shortages and supply chain disruptions creating significant delays in order
fulfillment and increased backlogs. Gross margins for fiscal 2021 increased by 280 basis points, primarily driven by lower
levels of promotional activity coupled with improved margins on clearance activity. SG&A expenses for fiscal 2021 as a
percentage of sales decreased significantly as compared to fiscal 2020. This was driven by workforce and other overhead
reductions and greater leverage on fixed costs from higher sales volumes. In addition, over the course of fiscal 2020 we closed
seven unprofitable store locations.
Fiscal 2021 as Compared to Fiscal 2019
Because of the significant adverse impact that the COVID-19 pandemic had on our operations during the second quarter of
fiscal 2020, we believe that a better understanding of the retail revenue trend that has resulted from our product and marketing
initiatives is obtained by comparing our current year revenues to the pre-pandemic levels of fiscal 2019. Compared to fiscal
2019, net sales for fiscal 2021 decreased $20,866 or 7.8%, as sales increases from the introduction of the Bassett Outdoor
product line were offset by sales decreases from having seven fewer stores in operation. On an average weekly basis
normalizing for fiscal 2019 being a 53-week year, sales decreased 6.0% as compared to 2019. Written sales increased 3.0%
for fiscal 2021, respectively over fiscal 2019 in spite of having seven fewer stores in operation and one less week on fiscal
2021.
9
10
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(Amounts in thousands except share and per share data)
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(Amounts in thousands except share and per share data)
Logistical Services Segment
Provision for Income taxes
Revenues, operating expenses and income from operations for our logistical services segment were as follows for the fiscal
years ended November 27, 2021, November 28, 2020 and November 30, 2019:
Comparative Change
Logistics revenue
Operating expenses
$ 86,977 100.0% $75,158 100.0% $80,074 100.0% $11,819
85,234 98.0% 73,913 98.3% 78,219 97.7% 11,321
2021
2020
2019*
2021 vs 2019
2021 vs 2020
Dollars Percent Dollars Percent
8.6%
9.0%
15.7% $ 6,903
15.3% 7,015
Income from operations $ 1,743 2.0% $ 1,245 1.7% $ 1,855 2.3% $
498
40.0% $ (112)
-6.0%
*53 weeks for fiscal 2019 as compared with 52 weeks for fiscal 2020.
Analysis of Operations – Logistical Services
Net revenues for fiscal 2021 increased $11,819 over the prior year due primarily to the major impact of the COVID-19
pandemic on our operations in fiscal 2020, which forced a near total shut-down of furniture retail operations throughout the
country from late March through early May of 2020. Zenith’s operating expenses as a percentage of revenue for 2021
improved as compared to fiscal 2020 due to better operating efficiency in our middle mile service compared to fiscal 2020
when we were forced during the second quarter of 2020 to run some of our trucks at substantially lower than optimal load
levels resulting in inefficiencies. These improvements were partially offset by significantly higher warehouse labor costs as
Zenith has been challenged to find and retain freight-handling personnel in the warehousing operation since reopening from
the COVID shutdown. Operating expense as a percent of revenue for 2021 increased as compared to 2019 primarily due to
the previously mentioned increased labor costs.
Other Items Affecting Net Income (Loss)
Other items affecting net income (loss) for fiscal 2021 and 2020 are as follows:
2021
2020
Interest income (1)
Interest expense (2)
Net periodic pension costs (3)
Net gains (cost) of company-owned life insurance (4)
Other
$
54 $
(322)
(422)
(364)
(705)
Total other loss, net
$
(1,759) $
236
(49)
(499)
647
(898)
(563)
(1) Consists of interest income arising from our short-term investments and interest-
bearing cash equivalents. The decline in interest income for fiscal 2021 as
compared with fiscal 2020 was due primarily to lower interest rates. See Note 3
to the Consolidated Financial Statements for additional information regarding our
investments in certificates of deposit.
(2) The increase in interest expense in fiscal 2021 over fiscal 2020 is due to the
increase in finance leases for tractor, trailer and office equipment. See Note 14 to
the Consolidated Financial Statements for additional information regarding our
leases.
(3) Represents the portion of net periodic pension costs not included in income from
operations. See Note 9 to the Consolidated Financial Statements for additional
information related to our defined benefit pension plans.
(4) Includes a gain arising from death benefits from Company-owned life insurance
of $914 in fiscal 2020.
On March 27, 2020 the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. A
major provision of the CARES Act allows net operating losses from the 2018, 2019 and 2020 tax years to be carried back up
to five years. As a result, for the year ended November 28, 2020, we were able to recognize tax benefits substantially in
excess of the current federal statutory rate of 21% due to the effects of carrying back our current net operating loss to tax
years in which the federal statutory rate was 35%.
We recorded an income tax provision (benefit) of $6,198, $(6,365) and $188 in fiscal 2021, 2020 and 2019, respectively. Our
effective tax rate for 2021 of 25.6% differs from the federal statutory rate of 21.0% due to the effects of state income taxes
and various permanent differences. Our effective tax rate of 37.9% for 2020 differs from the federal statutory rate of 21.0%
primarily due to the benefit of the CARES Act and to the effects of state income taxes and various permanent differences,
including those related to the non-deductible goodwill impairment charge. Our effective tax rate of (10.8%) for 2019 differs
from the federal statutory rate of 21.0% primarily due to the non-deductible goodwill impairment charge along with the
effects of state income taxes and certain other non-deductible expense. See Note 12 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 $3,189 as of November 27, 2021, which, upon utilization, are expected to reduce our cash
outlays for income taxes in future years. It will require approximately $12,000 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 2021 was $14,563 compared to $36,675 for fiscal 2020, representing a decrease of
$22,112. This decrease in operating cash flow is primarily due to significantly increased investment in inventory as we work
to fulfill our order backlog and cope with ongoing supply chain disruptions partially offset by increased customer deposits
associated with the increase in retail backlogs.
Our overall cash position decreased by $11,425 during fiscal 2021, compared to an overall increase of $26,112 during fiscal
2020, a decline of $37,537 from the prior year. In addition to the decline in cash flows from operations, net cash used in
investing activities during fiscal 2021 increased $7,824 to a net use of $11,571 compared to net cash used in investing
activities of $3,747 for the prior year. This increase was primarily due to increased capital expenditures in the current year
while the prior year period also included proceeds from the sale of our closed Gulfport store location. Net cash used in
financing activities during fiscal 2021 increased $7,601 to a net use of $14,417 as compared to a net use of $6,816 for the
prior year, primarily due to increased share repurchases of $5,566 during fiscal 2021 as compared to $2,208 repurchased
during fiscal 2020 along with a special dividend of $2,479 declared and paid during fiscal 2021. As of November 27, 2021,
$19,348 remains authorized under our existing share repurchase plan. With cash and cash equivalents and short-term
investments totaling $52,089 on hand at November 27, 2021, expected future operating cash flows and the availability under
our credit line noted below, we believe we have sufficient liquidity to fund operations for the foreseeable future.
Debt and Other Obligations
Our bank credit facility provides for a line of credit of up to $25,000. At November 27, 2021, we had $3,931 outstanding
under standby letters of credit against our line, leaving availability under our credit line of $21,069. In addition, we have
outstanding standby letters of credit with another bank totaling $325. The line bears interest at the rate of LIBOR plus 1.9%,
with a fee of 0.25% charged for the unused portion of the line and is secured by a general lien on our accounts receivable and
inventory. We were in compliance with all covenants under the agreement as of November 27, 2021. The credit facility
matures on January 31, 2022.
11
12
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(Amounts in thousands except share and per share data)
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(Amounts in thousands except share and per share data)
On January 27, 2022, we entered into a new credit facility with our bank which also provides for a credit line of up to $25,000.
The line bears interest at the One-Month Term Secured Overnight Financing Rate (“One-Month Term SOFR”) plus 1.5%
and is unsecured. Our bank will charge a fee of 0.25% on the daily unused balance of the line, payable quarterly. Under the
terms of the new facility, we must maintain the following financial covenants, measured quarterly on a rolling twelve-month
basis:
●
●
Consolidated fixed charge coverage ratio of not less than 1.4 times,
Consolidated lease-adjusted leverage ratio not to exceed 3.0 times, and
● Minimum tangible net worth ratio of $140,000, which will change to $120,000 if we do not complete the sale
of Zenith (see “Recent Development Regarding Zenith” under Part I, Item 1 of this Annual Report regarding
our entry into an agreement to sell substantially all of the assets of Zenith).
We were in compliance with these covenants at November 27, 2021 and expect to remain in compliance for the foreseeable
future. The new credit facility will mature on January 27, 2025, at which time any amounts outstanding under the facility will
be due.
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 and retail segments. The total future minimum lease payments for leases with
terms in excess of one year at November 27, 2021 is $164,855, the present value of which is $141,674 and is included in our
accompanying consolidated balance sheet at November 27, 2021. We were contingently liable under licensee lease obligation
guarantees in the amount of $1,845 at November 27, 2021. Remaining terms under these lease guarantees range from
approximately one to five years. See Note 14 to our consolidated financial statements for a schedule of future cash payments
on our lease obligations and additional details regarding our leases and lease guarantees.
We provide post-employment benefits to certain current and former executives and management level employees of the
Company. Included among these benefits are two defined-benefit plans with a combined projected benefit obligation of
$10,740 at November 27, 2021. See Note 9 to our consolidated financial statements for a projection of future benefit payments
under these plans from 2022 through 2031. We also have deferred compensation plans with a total liability of $3,437 at
November 27, 2021, the current portion of which is $296. See Note 9 to our consolidated financial statements for additional
information regarding these plans.
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. Our primary non-recurring fair value estimates, typically involving the valuation of business
acquisitions, goodwill impairments (see Note 7 to the Consolidated Financial Statements) and asset impairments (see Note
13 to the Consolidated Financial Statements) have utilized Level 3 inputs.
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 Note 14 to the Consolidated Financial Statements,
included in Item 8 of this Annual Report on Form 10-K, for further discussion of lease guarantees, including descriptions of
the terms of such commitments and methods used to mitigate risks associated with these arrangements.
Contingencies
We are involved in various 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.
Dividends and Share Repurchases
Critical Accounting Policies and Estimates
During fiscal 2021, we declared and paid four quarterly dividends totaling $5,210, or $0.53 per share, as well as one special
dividend totaling $2,479, or $0.25 per share. During fiscal 2021, we repurchased 204,714 shares of our stock for $5,566 under
our share repurchase program. The weighted-average effect of these share repurchases on both our basic and diluted earnings
per share was approximately $0.02 per share. On July 15, 2021, our Board of Directors increased the remaining limit of the
repurchase plan to $20,000. The approximate dollar value that may yet be purchased pursuant to our stock repurchase program
as of November 27, 2021 was $19,348.
Capital Expenditures
We currently anticipate that total capital expenditures for fiscal 2022 will be approximately $25 to $30 million, approximately
half of which will be used for the purchase and renovation of a site for a new retail store in a new market as well as repositions
of two other retail locations, with the remainder used for the expansion and upgrade of our outdoor furniture manufacturing
facilities in Haleyville, Alabama along with additional investments in technology and various other manufacturing upgrades
within our wholesale segment. 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 store program, 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.
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
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 - We adopted ASU 2014-09, Revenue from Contracts with Customers (ASC Topic 606 or "ASC 606")
effective as of November 25, 2018, the beginning of our 2019 fiscal year. ASC 606 requires a company to recognize revenue
when it transfers promised goods or services to customers in an amount that reflects the consideration the company expects
to receive in exchange for those goods or services. For our wholesale and retail segments, revenue is recognized when the
risks and rewards of ownership and title to the product have transferred to the buyer.
At wholesale, transfer occurs and revenue is recognized upon the shipment of goods to independent dealers and licensee-
owned BHF stores. We offer payment terms varying from 30 to 60 days for wholesale customers. Estimates for returns and
allowances have been recorded as a reduction of revenue based on our historical return patterns. The contracts with our
licensee store owners do not provide for any royalty or license fee to be paid to us.
13
14
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(Amounts in thousands except share and per share data)
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(Amounts in thousands except share and per share data)
At retail, transfer occurs and revenue is recognized upon delivery of goods to the customer. We typically collect a significant
portion of the purchase price as a customer deposit upon order, with the balance typically collected upon delivery. These
deposits are carried on our balance sheet as a current liability until delivery is fulfilled and amounted to $51,492 and $25,341
as of November 27, 2021 and November 28, 2020, respectively. Substantially all of the customer deposits held at November
28, 2020 related to performance obligations satisfied during fiscal 2021 and have therefore been recognized in revenue for
the year ended November 27, 2021. Estimates for returns and allowances have been recorded as a reduction of revenue based
on our historical return patterns. We also sell furniture protection plans to our retail customers on behalf of a third party which
is responsible for the performance obligations under the plans. Revenue from the sale of these plans is recognized upon
delivery of the goods net of amounts payable to the third party service provider.
For our logistical services segment, line-haul freight revenue is recognized as services are performed and are billed to the
customer upon the completion of delivery to the destination. Because the customer receives the benefits of these services as
the freight is in transit from point of origin to destination, we recognize revenue using a percentage of completion method
based on our estimate of the amount of time freight has been in transit as of the reporting date compared with our estimate of
the total required time for the deliveries. We recognize an asset for the amount of line-haul revenue earned but not yet billed
which is included in other current assets. The balance of this asset was $1,240 and $783 at November 27, 2021 and November
28, 2020, respectively. Warehousing services revenue is based upon warehouse space occupied by a customer’s goods and
inventory movements in and out of a warehouse and is recognized as such services are provided and billed to the customer
concurrently in the same period. All invoices for logistical services are due 30 days from invoice date.
Allowance for credit losses - We maintain an allowance for credit losses for estimated losses resulting from the inability of
our customers to make required payments. Our accounts receivable reserves were $796 and $1,211 at November 27, 2021
and November 28, 2020, respectively, representing 2.7% and 5.1% of our gross accounts receivable balances at those dates,
respectively. The allowance for credit losses is based on a review of specifically identified customer accounts in addition to
an overall aging analysis which is applied to accounts pooled on the basis of similar risk characteristics. Judgments are made
with respect to the collectibility of accounts receivable within each pool based on historical experience, current payment
practices and current economic trends based on our expectations over the expected life of the receivables, which is generally
ninety days or less. 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 accounted for under the first-in, first out (“FIFO”) method are stated at the lower of cost or net
realizable value, and inventory accounted for under the last-in, first out method (“LIFO”) is stated at the lower of cost or
market. Cost is determined for domestic furniture inventories, excluding outdoor furniture products, using the LIFO method.
The cost of imported inventories and domestic outdoor furniture products is determined on a FIFO 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 $4,816 and $4,522
at November 27, 2021 and November 28, 2020, respectively, representing 5.8% and 7.6%, respectively, of our inventories
on a LIFO 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 fair value of consideration given over the fair value of the tangible assets
and liabilities and identifiable intangible assets of businesses acquired. The acquisition of assets and liabilities and the
resulting goodwill is allocated to the respective reporting unit: Wood, Upholstery, Retail or Logistical Services. We review
goodwill at the reporting unit level annually for impairment or more frequently if events or circumstances indicate that assets
might be impaired.
In accordance with ASC Topic 350, Intangibles – Goodwill & Other, we first assess qualitative factors to determine whether
it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining
whether it is necessary to perform the quantitative goodwill impairment test described in ASC Topic 350 (as amended by
Accounting Standards Update No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill
Impairment, which we adopted for our annual evaluation of goodwill performed as of September 1, 2019). The more likely
than not threshold is defined as having a likelihood of more than 50 percent. If, after assessing the totality of events or
circumstances, we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying
amount, then performing the quantitative impairment test is unnecessary and our goodwill is considered to be unimpaired.
However, if based on our qualitative assessment we conclude that it is more likely than not that the fair value of a reporting
unit is less than its carrying amount, we will proceed with performing the quantitative evaluation process. Based on our
qualitative assessment as described above for the annual test during fiscal 2019, we concluded that, given declines in our
income from operations, primarily resulting from operating losses incurred in our retail reporting unit, as well as in our stock
price since the previous analysis in fiscal 2018, it was necessary to perform the quantitative evaluation in the current year.
As a result of this test, we recorded an impairment charge of $1,926 during the year ended November 30, 2019. In addition,
we performed an interim test of goodwill as of May 30, 2020 due to the severe impact of the COVID-19 pandemic and
resulting business interruption during the second fiscal quarter of 2020. This interim test resulted in an impairment charge of
$1,971 for the year ended November 28, 2020. For the annual tests of goodwill performed as of the beginning of the fourth
fiscal quarters of 2020 and 2021, we performed the qualitative assessment as described above and concluded that there has
been no additional impairment of our goodwill as of November 27, 2021.
The quantitative evaluation compares the carrying value of each reporting unit that has goodwill with the estimated fair value
of the respective reporting unit. Should the carrying value of a reporting unit be in excess of the estimated fair value of that
reporting unit, a goodwill impairment charge will be recognized in the amount by which the reporting unit’s carrying amount
exceeds its fair value, but not to exceed the total goodwill assigned to the reporting unit. The determination of the fair value
of our reporting units is based on a combination of a market approach, that considers benchmark company market multiples,
an income approach, that utilizes discounted cash flows for each reporting unit and other Level 3 inputs as specified in the
fair value hierarchy in ASC Topic 820, Fair Value Measurements and Disclosure, and, in the case of our retail reporting unit,
a cost approach that utilizes estimates of net asset value. The cash flows used to determine fair value are dependent on a
number of significant management assumptions such as our expectations of future performance and the expected future
economic environment, which are partly based upon our historical experience. Our estimates are subject to change given the
inherent uncertainty in predicting future results. Additionally, the discount rate and the terminal growth rate are based on our
judgment of the rates that would be utilized by a hypothetical market participant. As part of the goodwill impairment testing,
we also consider our market capitalization in assessing the reasonableness of the combined fair values estimated for our
reporting units. While we believe such assumptions and estimates are reasonable, the actual results may differ materially
from the projected amounts.
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 27, 2021, 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 27,
2021 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 $1,964.
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. Right of use assets under operating leases are written down to
their estimated fair value. Our estimates of the fair value of the impaired right of use assets include estimates of discounted
cash flows based upon current market rents and other inputs which we consider to be Level 3 inputs as specified in the fair
value hierarchy in ASC Topic 820, Fair Value Measurement and Disclosure.
15
16
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Continued
(Amounts in thousands except share and per share data)
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.
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 2021.
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. 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 and retail
segments. 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 $16,971 and $17,338 at November 27, 2021 and November 28, 2020, respectively, for Company-owned stores,
consisting of eight locations with a total of 201,096 square feet of space, 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 $1,845 and $1,811 which
we have guaranteed on behalf of licensees as of November 27, 2021 and November 28, 2020, respectively, we may not be
able to secure sufficient sub-lease income in the current market to offset the payments required under the guarantees. We are
also exposed to risk related to conditions in the commercial real estate rental market with respect to the right-of-use assets
we carry on our balance sheet for leased retail store locations and warehouse and distribution facilities. At November 27,
2021, the unamortized balance of such right-of-use assets totaled $104,799. Should we have to close or otherwise abandon
one of these leased locations, we could incur additional impairment charges if rental market conditions do not support a fair
value for the right of use asset in excess of its carrying value.
17
18
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 2021, 2020 and 2019 mean the fiscal years ended
November 27, 2021, November 28, 2020 and November 30, 2019. Please note that fiscal 2019 contained 53 weeks.
SAFE-HARBOR, FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act
of 1995 with respect to the financial condition, results of operations and business of Bassett Furniture Industries, Incorporated
and subsidiaries. Such forward-looking statements are identified by use of forward-looking words such as “anticipates”,
“believes”, “plans”, “estimates”, “expects”, “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”, that could cause actual results to differ
materially from those contemplated by such forward-looking statements include:
●
●
●
●
●
●
●
●
●
●
●
●
●
the impact of the ongoing coronavirus (“COVID-19”) outbreak upon our ability to maintain normal operations
at our retail stores, manufacturing facilities and in our logistical services operations, and the resulting effects any
future interruption of those operations may have upon our financial condition, results of operations and liquidity,
as well as the impact of the outbreak upon general economic conditions, including consumer spending and the
strength of the housing market in the United States
competitive conditions in the home furnishings industry
overall retail traffic levels in stores and on the web and consumer demand for home furnishings
ability of our customers and consumers to obtain credit
the profitability of the stores (independent licensees and Company-owned retail stores) which may result in
future store closings
ability to implement our Company-owned retail strategies and realize the benefits from such strategies, including
our initiatives to expand and improve our digital marketing and advertising capabilities, as they are implemented
fluctuations in the cost and availability of raw materials, fuel, labor and sourced products, including those which
may result from supply chain disruptions and 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 and possible disruptions due to cybersecurity
threats, including any impacts from a network security incident; and the sufficiency of our insurance coverage,
including cybersecurity insurance
future tax legislation, or regulatory or judicial positions
ability to efficiently manage the import supply chain to minimize business interruption
concentration of domestic manufacturing, particularly of upholstery products, and the resulting exposure to
business interruption from accidents, weather and other events and circumstances beyond our control
general risks associated with providing freight transportation and other logistical services by our wholly-owned
subsidiary Zenith Freight Lines, LLC
You should keep in mind that any forward-looking statement made by us in this report speaks only as of the date on which
such forward-looking statement is made. New risks and uncertainties arise from time to time, and it is impossible for us to
predict these events or how they may affect us. We have no duty to, and do not intend to, update or revise the forward-looking
statements in this report after the date hereof, except as may be required by law. In light of these risks and uncertainties, you
should keep in mind that the events described in any forward-looking statement made in this report, might not occur.
Consolidated Balance Sheets
Bassett Furniture Industries, Incorporated and Subsidiaries
November 27, 2021 and November 28, 2020
(In thousands, except share and per share data)
Assets
Current assets
Cash and cash equivalents
Short-term investments
Accounts receivable, net of allowance for credit losses of $796 and $1,211 as of
$
November 27, 2021 and November 28, 2020, respectively
Inventories
Recoverable income taxes
Other current assets
Total current assets
Property and equipment, net
Other long-term assets
Deferred income taxes, net
Goodwill and other intangible assets
Right of use assets under operating leases
Other
Total other long-term assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable
Accrued compensation and benefits
Customer deposits
Current portion of operating lease obligations
Other accrued liabilities
Total current liabilities
Long-term liabilities
Post employment benefit obligations
Long-term portion of operating lease obligations
Other long-term liabilities
Total long-term liabilities
Commitments and Contingencies
Stockholders’ equity
$
$
2021
2020
34,374 $
17,715
28,168
78,004
8,379
13,644
180,284
45,799
17,715
22,340
54,886
9,666
10,272
160,678
94,066
90,917
3,189
23,448
114,148
6,525
147,310
421,660 $
28,324 $
15,934
51,492
27,693
10,776
134,219
12,968
105,841
5,900
124,709
4,587
23,827
116,903
5,637
150,954
402,549
23,426
16,964
39,762
27,078
11,141
118,371
12,089
111,972
2,087
126,148
Common stock, $5 par value; 50,000,000 shares authorized; issued and outstanding
9,762,125 at November 27, 2021 and 9,942,787 at November 28, 2020
Retained earnings
Additional paid-in-capital
Accumulated other comprehensive loss
Total stockholders' equity
Total liabilities and stockholders’ equity
48,811
115,631
113
(1,823)
162,732
421,660 $
49,714
109,710
-
(1,394 )
158,030
402,549
$
The accompanying notes to consolidated financial statements are an integral part of these statements.
19
20
Consolidated Statements of Operations
Bassett Furniture Industries, Incorporated and Subsidiaries
For the years ended November 27, 2021, November 28, 2020, and November 30, 2019
(In thousands, except per share data)
Consolidated Statements of Comprehensive Income (Loss)
Bassett Furniture Industries, Incorporated and Subsidiaries
For the years ended November 27, 2021, November 28, 2020, and November 30, 2019
(In thousands)
Net income (loss)
Other comprehensive income (loss):
Recognize prior service cost associated
Actuarial adjustment to 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
2021
2020
2019
$
18,042 $
(10,421 ) $
(1,928)
26
144
(44)
(788)
44
190
(86 )
125
(10 )
(259 )
8
64
(141)
124
4
1,313
184
(382)
Other comprehensive income (loss), net of tax
(428)
(158 )
1,102
Total comprehensive income (loss)
$
17,614 $
(10,579 ) $
(826)
The accompanying notes to consolidated financial statements are an integral part of these statements.
Sales revenue:
Furniture and accessories
Logistics
Total sales revenue
2021
2020
2019
$
430,886 $
55,648
486,534
337,672 $
48,191
385,863
403,865
48,222
452,087
Cost of furniture and accessories sold
209,799
163,567
179,244
Selling, general and administrative expenses excluding new store
pre-opening costs
New store pre-opening costs
Cost of logistical services
Asset impairment charges
Goodwill impairment charge
Litigation expense
Lease exit costs
Early retirement program
196,831
-
53,905
-
-
-
-
-
176,368
-
46,946
12,184
1,971
1,050
-
-
217,913
1,117
46,367
4,431
1,926
700
149
835
Income (loss) from operations
25,999
(16,223 )
(595)
Interest income
Interest expense
Other loss, net
54
(322)
(1,491)
236
(49 )
(750 )
568
(6)
(1,707)
Income (loss) before income taxes
24,240
(16,786 )
(1,740)
Income tax expense (benefit)
Net income (loss)
Net income per share
Basic income (loss) per share
Diluted income (loss) per share
Dividends per share
Regular dividends
Special dividend
$
$
$
$
$
6,198
18,042 $
(6,365 )
(10,421 ) $
188
(1,928)
1.83 $
1.83 $
0.53 $
0.25 $
(1.05 ) $
(1.05 ) $
0.46 $
- $
(0.19)
(0.19)
0.50
-
The accompanying notes to consolidated financial statements are an integral part of these statements.
21
22
Consolidated Statements of Cash Flows
Bassett Furniture Industries, Incorporated and Subsidiaries
For the years ended November 27, 2021, November 28, 2020, and November 30, 2019
(In thousands)
Operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
2021
2020
2019
$
18,042 $
(10,421 ) $
(1,928)
Depreciation and amortization
Non-cash goodwill impairment charge
Non-cash asset impairment charges
Non-cash portion of lease exit costs
Bad debt valuation charges
Net (gain) loss on disposals of property and equipment
Gains on lease modifications
Inventory valuation charges
Deferred income taxes
Other, net
Changes in operating assets and liabilities
Accounts receivable
Inventories
Other current and long-term assets
Right of use assets under operating leases
Customer deposits
Accounts payable and accrued liabilities
Obligations under operating leases
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
Puchases of investments
Proceeds from maturities of investments
Other
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
Repayment of finance lease obligations
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
Cash and cash equivalents - end of year
$
14,597
-
-
-
(156)
(367)
(37)
2,969
1,545
765
(5,672)
(26,087)
(2,241)
26,243
11,730
2,153
(28,921)
14,563
(10,750)
382
-
-
-
(1,203)
(11,571)
(7,689)
42
363
(5,566)
(219)
(1,348)
-
(14,417)
(11,425)
45,799
34,374 $
13,480
1,971
12,184
-
492
(81 )
(1,313 )
4,922
2,513
(51 )
(1,454 )
6,494
(9,325 )
32,107
14,421
5,965
(35,229 )
36,675
(6,029 )
2,345
-
(295 )
16
216
(3,747 )
(4,544 )
-
285
(2,208 )
(228 )
(121 )
-
(6,816 )
26,112
19,687
45,799 $
13,500
1,926
4,431
149
61
515
-
2,254
(2,890)
1,497
(2,616)
(5,196)
1,017
-
(1,816)
(1,095)
-
9,809
(17,375)
1,643
-
-
5,207
(648)
(11,173)
(5,133)
25
328
(7,345)
-
-
(292)
(12,417)
(13,781)
33,468
19,687
The accompanying notes to consolidated financial statements are an integral part of these statements.
Consolidated Statements of Stockholders’ Equity
Bassett Furniture Industries, Incorporated and Subsidiaries
For the years ended November 27, 2021, November 28, 2020, and November 30, 2019
(In thousands, except share and per share data)
Common Stock
Shares
Amount
Additional
paid-in
capital
Retained
earnings
Accumulated
other
comprehensive
income (loss)
Total
Balance, November 24, 2018
10,527,636 $
52,638 $
- $
140,009 $
(2,338 ) $
190,309
Comprehensive income (loss)
Net loss
Amortization of defined benefit
plan costs, net of tax
Actuarial adjustments to defined
benefit plans, net of tax
Cumulative effect of a change in
accounting principle
Regular dividends ($0.50 per share)
Issuance of common stock
Purchase and retirement of common
stock
Stock-based compensation
Balance, November 30, 2019
-
-
-
-
-
102,303
-
-
-
-
-
511
(513,649)
-
10,116,290
(2,568 )
-
50,581
-
(1,928)
-
(1,928)
-
-
-
-
217
(980)
958
195
-
-
(21)
(5,133)
-
(3,797)
-
129,130
230
872
-
-
-
230
872
(21)
(5,133)
728
-
-
(1,236 )
(7,345)
958
178,670
Comprehensive income (loss)
Net loss
Amortization of defined benefit
plan costs, net of tax
Actuarial adjustments to defined
benefit plans, net of tax
Cumulative effect of a change in
accounting principle
Regular dividends ($0.455 per share)
Issuance of common stock
Purchase and retirement of common
-
-
-
-
-
43,218
-
-
-
-
-
216
-
(10,421)
-
(10,421)
-
-
-
-
69
-
-
(3,785)
(4,545)
-
98
98
(256 )
(256)
-
-
-
(3,785)
(4,545)
285
stock
Stock-based compensation
Balance, November 28, 2020
(216,721)
-
9,942,787
(1,083 )
-
49,714
(684)
420
-
(669)
-
109,710
-
-
(1,394 )
(2,436)
420
158,030
Comprehensive income (loss)
Net income
Amortization of defined benefit
plan costs, net of tax
Actuarial adjustments to defined
benefit plans, net of tax
Regular dividends ($0.53 per share)
Special dividend ($0.25 per share)
Issuance of common stock
Purchase and retirement of common
stock
Stock-based compensation
Balance, November 27, 2021
-
-
-
-
-
34,902
-
-
-
-
-
175
-
18,042
-
18,042
-
-
138
138
-
-
-
230
-
(5,210)
(2,479)
-
(567 )
-
-
-
(567)
(5,210)
(2,479)
405
(215,564)
-
9,762,125 $
(1,078 )
-
48,811 $
(275)
158
113 $
(4,432)
-
115,631 $
-
-
(1,823 ) $
(5,785)
158
162,732
The accompanying notes to consolidated financial statements are an integral part of these statements.
23
24
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 63 stores (“Company-owned retail stores”) with the other 34 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.
We sourced approximately 24% of our wholesale products from various foreign countries, with the remaining volume
produced at our five domestic manufacturing facilities.
Impact of the COVID-19 Pandemic Upon our Financial Condition and Results of Operations
On March 11, 2020, the World Health Organization declared the coronavirus (“COVID-19”) outbreak to be a global
pandemic. In response to this declaration and the rapid spread of COVID-19 within the United States, federal, state and local
governments throughout the country imposed varying degrees of restrictions on social and commercial activity to promote
social distancing in an effort to slow the spread of the illness. These measures had a significant adverse impact upon many
sectors of the economy, including non-essential retail commerce, beginning in our second fiscal quarter of 2020.
In response to the restrictive measures imposed by governmental authorities and for the protection of our employees and
customers, we temporarily closed our dedicated stores, our manufacturing locations and many of our warehouses for much
of the second fiscal quarter of 2020. This extended period of suspended operations had a material adverse impact upon our
results of operations during the second fiscal quarter of 2020 and resulted in a significant net loss for 2020. In addition to
operating losses resulting from severely reduced sales volumes, we also recorded charges for goodwill impairment (Note 7)
as well as for the impairment of certain other long-lived assets (Note 13). However, since restarting our manufacturing
operations and reopening stores, we have seen a significant improvement in business conditions which allowed us to return
to overall profitability for the third and fourth fiscal quarters of 2020 continuing through fiscal 2021. Tempering these
improvements are the continuing logistical challenges faced by the entire home furnishings industry resulting from COVID-
related labor shortages and supply chain disruptions creating significant delays in order fulfillment and increasing backlogs.
Whereas the progress in mass vaccination programs in the U.S. has prompted state and local governments to substantially lift
most remaining restrictions on commercial retail activity, the recent resurgence in COVID-19 cases due to the Delta and
Omicron variants, as well as any future variants of the coronavirus entering the U.S., could prompt a return to tighter
restrictions in certain areas of the country. Furthermore, pandemic-related labor shortages and supply chain disruptions are
ongoing and order cancellations could result if the present delays in order fulfillment continue. Therefore, uncertainty remains
regarding the ongoing impact of the COVID-19 pandemic upon our financial condition and future results of operations, as
well as upon the significant estimates and assumptions we utilize in reporting certain assets and liabilities.
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 2019 contained
53 weeks while fiscal 2021 and 2020 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. Sales of logistical services from Zenith
to our wholesale and retail segments have been eliminated, and Zenith’s operating costs and expenses are reported as cost of
logistical services in our consolidated statements of operations. 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 2021, 2020 and 2019 are to Bassett's fiscal year ended November 27, 2021,
November 28, 2020 and November 30, 2019, 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.
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
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 14 for disclosure of leases and lease guarantees. Based on financial
projections and best available information, all licensees have sufficient equity to carry out their principal operating activities
without subordinated financial support. Furthermore, we believe that the power to direct the activities that most significantly
impact the licensees’ operating performance continues to lie with the ownership of the licensee dealers. Our rights to assume
control over or otherwise influence the licensees’ significant activities only exist pursuant to our license and security
agreements and are in the nature of protective rights as contemplated under ASC Topic 810. We completed our assessment
for other potential VIEs, and concluded that there were none. We will continue to reassess the status of potential VIEs
including when facts and circumstances surrounding each potential VIE change.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States
requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Some of the more significant estimates include allowances for doubtful accounts, calculation of inventory
reserves, the valuation of our reporting units for the purpose of testing the carrying value of goodwill, and the valuation of
our right of use assets. We also utilize estimates in determining the 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
ASC Topic 606, Revenue from Contracts with Customers, requires a company to recognize revenue when it transfers
promised goods or services to customers in an amount that reflects the consideration the company expects to receive in
exchange for those goods or services. For our wholesale and retail segments, revenue is recognized when the risks and rewards
of ownership and title to the product have transferred to the buyer.
At wholesale, transfer occurs and revenue is recognized upon the shipment of goods to independent dealers and licensee-
owned BHF stores. We offer payment terms varying from 30 to 60 days for wholesale customers. Estimates for returns and
allowances have been recorded as a reduction of revenue based on our historical return patterns. The contracts with our
licensee store owners do not provide for any royalty or license fee to be paid to us.
At retail, transfer occurs and revenue is recognized upon delivery of goods to the customer. We typically collect a significant
portion of the purchase price as a customer deposit upon order, with the balance typically collected upon delivery. These
deposits are carried on our balance sheet as a current liability until delivery is fulfilled and amounted to $51,492 and $39,762
as of November 27, 2021 and November 28, 2020, respectively. Substantially all of the customer deposits held at November
28, 2020 related to performance obligations satisfied during fiscal 2021 and have therefore been recognized in revenue for
the year ended November 27, 2021. Estimates for returns and allowances have been recorded as a reduction of revenue based
on our historical return patterns. We also sell furniture protection plans to our retail customers on behalf of a third party which
is responsible for the performance obligations under the plans. Revenue from the sale of these plans is recognized upon
delivery of the goods net of amounts payable to the third party service provider.
For our logistical services segment, line-haul freight revenue is recognized as services are performed and are billed to the
customer upon the completion of delivery to the destination. Because the customer receives the benefits of these services as
the freight is in transit from point of origin to destination, we recognize revenue using a percentage of completion method
based on our estimate of the amount of time freight has been in transit as of the reporting date compared with our estimate of
the total required time for the deliveries. We recognize an asset for the amount of line-haul revenue earned but not yet billed
which is included in other current assets. The balance of this asset was $1,240 and $783 at November 27, 2021 and November
28, 2020, respectively. Warehousing services revenue is based upon warehouse space occupied by a customer’s goods and
inventory movements in and out of a warehouse and is recognized as such services are provided and billed to the customer
concurrently in the same period. All invoices for logistical services are due 30 days from invoice date.
25
26
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
Sales commissions are expensed as part of selling, general and administrative expenses at the time revenue is recognized
because the amortization period would have been one year or less. Sales commissions at wholesale are accrued upon the
shipment of goods. Sales commissions at retail are accrued at the time a sale is written (i.e. – when the customer’s order is
placed) and are carried as prepaid commissions in other current assets until the goods are delivered and revenue is recognized.
At November 27, 2021 and November 28, 2020, our balance of prepaid commissions included in other current assets was
$6,221 and $4,279, respectively. We do not incur sales commissions in our logistical services segment.
For our accounting and reporting under ASC 606, we apply the following policy elections and practical expedients:
• We exclude from revenue amounts collected from customers for sales tax, which is consistent with our policy prior
to the adoption of ASC 606.
• We do not adjust the promised amount of consideration for the effects of a significant financing component since
the period of time between transfer of our goods or services and the collection of consideration from the customer
is less than one year.
• We do not disclose the value of unsatisfied performance obligations because the transfer of goods or services is
made within one year of the placement of customer orders.
See Note 18 for disaggregated revenue information.
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 credit losses for estimated losses resulting from the inability of our customers to make required payments. The
allowance for credit losses is based on a review of specifically identified accounts in addition to an overall aging analysis
which is applied to accounts pooled on the basis of similar risk characteristics. Judgments are made with respect to the
collectibility of accounts receivable within each pool based on historical experience, current payment practices and current
economic trends based on our expectations over the expected life of the receivables, which is generally ninety days or less.
Actual credit losses could differ from those estimates.
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 27, 2021 and November 28, 2020, our aggregate exposure from
receivables and guarantees related to customers consisted of the following:
Accounts receivable, net of allowances (Note 4)
Contingent obligations under lease and loan guarantees, less amounts
$
recognized (Note 14)
Other
Total credit risk exposure related to customers
$
2021
2020
28,168 $
22,340
1,794
86
30,048 $
1,760
376
24,476
At November 27, 2021 and November 28, 2020, approximately 22% and 24%, respectively, of the aggregate risk exposure,
net of reserves, shown above was attributable to five customers. In fiscal 2021, 2020 and 2019, no customer accounted for
more than 10% of total consolidated net sales. However, two customers accounted for approximately 23%, 29% and 44% of
our consolidated revenue from logistical services during 2021, 2020 and 2019, respectively.
We have no foreign manufacturing or retail operations. We define export sales as sales to any country or territory other than
the United States or its territories or possessions. Our export sales were approximately $488, $789, and $1,846 in fiscal 2021,
2020, and 2019, 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) accounted for under the first-in, first out
(“FIFO”) method are stated at the lower of cost or net realizable value or, in the case of inventory accounted for under the
last-in, first out (“LIFO”) method, at the lower of cost or market. Cost is determined for domestic manufactured furniture
inventories using the LIFO method because we believe this methodology provides better matching of revenue and expenses.
The cost of imported inventories as well as Lane Venture and Bassett Outdoor product inventories are determined on a first-
in, first-out (“FIFO”) basis. Inventories accounted for under the LIFO method represented 53% and 53% of total inventory
before reserves at November 27, 2021 and November 28, 2020, 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.
Goodwill
Goodwill represents the excess of the fair value of consideration given over the fair value of the tangible assets and liabilities
and identifiable intangible assets of businesses acquired. The acquisition of assets and liabilities and the resulting goodwill is
allocated to the respective reporting unit: Wood, Upholstery, Retail or Logistical Services. We review goodwill at the
reporting unit level annually for impairment or more frequently if events or circumstances indicate that assets might be
impaired.
In accordance with ASC Topic 350, Intangibles – Goodwill & Other, we first assess qualitative factors to determine whether
it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining
whether it is necessary to perform the quantitative goodwill impairment test described in ASC Topic 350 (as amended by
Accounting Standards Update No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill
Impairment, which we adopted for our annual evaluation of goodwill performed as of September 1, 2019). The more likely
than not threshold is defined as having a likelihood of more than 50 percent. If, after assessing the totality of events or
circumstances, we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying
amount, then performing the quantitative impairment test is unnecessary and our goodwill is considered to be unimpaired.
However, if based on our qualitative assessment we conclude that it is more likely than not that the fair value of a reporting
unit is less than its carrying amount, we will proceed with performing the quantitative evaluation process. Based on our
qualitative assessment as described above for the annual test during fiscal 2019, we concluded that, given declines in our
income from operations, primarily resulting from operating losses incurred in our retail reporting unit, as well as in our stock
price since the previous analysis in fiscal 2018, it was necessary to perform the quantitative evaluation. As a result of this
test, we recorded an impairment charge of $1,926 during the year ended November 30, 2019. In addition, we performed an
interim test of goodwill as of May 30, 2020 due to the severe impact of the COVID-19 pandemic and resulting business
interruption during the second fiscal quarter of 2020. This interim test resulted in an impairment charge of $1,971 for the year
ended November 28, 2020. For the annual tests of goodwill performed as of the beginning of the fourth fiscal quarters of
2021 and 2020, we performed the qualitative assessment as described above and concluded that there was no additional
impairment of our goodwill as of November 27, 2021 or November 28, 2020.
27
28
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
The quantitative evaluation compares the carrying value of each reporting unit that has goodwill with the estimated fair value
of the respective reporting unit. Should the carrying value of a reporting unit be in excess of the estimated fair value of that
reporting unit, a goodwill impairment charge will be recognized in the amount by which the reporting unit’s carrying amount
exceeds its fair value, but not to exceed the total goodwill assigned to the reporting unit. The determination of the fair value
of our reporting units is based on a combination of a market approach, that considers benchmark company market multiples,
an income approach, that utilizes discounted cash flows for each reporting unit and other Level 3 inputs as specified in the
fair value hierarchy in ASC Topic 820, Fair Value Measurements and Disclosure (see Note 4), and, in the case of our retail
reporting unit, a cost approach that utilizes estimates of net asset value. The cash flows used to determine fair value are
dependent on a number of significant management assumptions such as our expectations of future performance and the
expected future economic environment, which are partly based upon our historical experience. Our estimates are subject to
change given the inherent uncertainty in predicting future results. Additionally, the discount rate and the terminal growth rate
are based on our judgment of the rates that would be utilized by a hypothetical market participant. As part of the goodwill
impairment testing, we also consider our market capitalization in assessing the reasonableness of the combined fair values
estimated for our reporting units. While we believe such assumptions and estimates are reasonable, the actual results may
differ materially from the projected amounts. See Note 7 for additional information regarding the results of our annual
goodwill impairment test performed as of September 1, 2019 and our interim test performed as of May 30, 2020.
Leases
Effective as of the beginning of fiscal 2020, we adopted ASU 2016-02, Leases (Topic 842) and all related amendments. The
guidance requires lessees to recognize substantially all leases on their balance sheet as a right-of-use (“ROU”) asset and a
lease liability.
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 used in our retail segment. We determine if a contract
contains a lease at inception based on our right to control the use of an identified asset and our right to obtain substantially
all of the economic benefits from the use of that identified asset. Our real estate lease terms range from one to 15 years and
generally have renewal options of between five and 15 years. We assess these options to determine if we are reasonably
certain of exercising these options based on all relevant economic and financial factors. Any options that meet this criteria
are included in the lease term at lease commencement.
Most of our leases do not have an interest rate implicit in the lease. As a result, for purposes of measuring our ROU asset and
lease liability, we determine our incremental borrowing rate by applying a spread above the U.S. Treasury borrowing rates.
In the case an interest rate is implicit in a lease we will use that rate as the discount rate for that lease. Some of our leases
contain variable rent payments based on a Consumer Price Index or percentage of sales. Due to the variable nature of these
costs, they are not included in the measurement of the ROU asset and lease liability.
We adopted the standard utilizing the transition election to not restate comparative periods for the impact of adopting the
standard and recognizing the cumulative impact of adoption in the opening balance of retained earnings. We elected the
package of transition expedients available for expired or existing contracts, which allowed the carry-forward of historical
assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. In addition, we
have elected the practical expedient to not separate lease and non-lease components when determining the ROU asset and
lease liability and have elected the practical expedient related to land easements, allowing us to carry forward our accounting
treatment for land easements on existing agreements. We have also elected the hindsight practical expedient to determine the
lease term for existing leases. In our application of hindsight, we evaluated the performance of the leased stores and the
associated markets in relation to our overall real estate strategies, which resulted in the determination that most renewal
options would not be reasonably certain in determining the expected lease term. We have made an accounting policy election
to not recognize ROU assets and lease liabilities on the balance sheet for those leases with initial terms of one year or less
and instead such lease obligations will be expensed on a straight-line basis over the lease term.
Adoption of the standard resulted in the recording of additional net lease-related assets and lease-related liabilities of $146,585
and $151,672, respectively, as of December 1, 2019. The difference between the additional lease assets and lease liabilities,
net of the $1,302 deferred tax impact, was $3,785 and was recorded as an adjustment to retained earnings. This adjustment
to retained earnings primarily represents the impairment of right-of-use assets associated with certain underperforming retail
locations. Our estimates of the fair value of the impaired ROU assets included estimates of discounted cash flows based upon
current market rents and other inputs which we consider to be Level 3 inputs as specified in the fair value hierarchy in ASC
Topic 820, Fair Value Measurement and Disclosure (see Note 3). Our adoption of this standard did not have a material impact
on our consolidated statements of operations, comprehensive income or cash flows.
Prior to fiscal 2020, our leases have been accounted for and reported in accordance with ASC Topic 840, Leases. Total lease
payments over the non-cancellable term of a lease were recognized as rent expense on a straight-line basis over the lease
term, with the excess of expense recognized over lease payments made carried as a deferred rent liability on the balance sheet.
Any lease incentive payments received from lessors were recorded as a liability on the balance sheet and amortized as a
reduction of rent expense over the term of the lease.
See Note 14 for additional information regarding our leases.
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. ROU
assets under operating leases are written down to their estimated fair value. Our estimates of the fair value of the impaired
ROU assets included estimates of discounted cash flows based upon current market rents and other inputs which we consider
to be Level 3 inputs as specified in the fair value hierarchy in ASC Topic 820, Fair Value Measurement and Disclosure (see
Note 3).
Income Taxes
We account for income taxes under the liability method which requires that we recognize deferred tax assets and liabilities
for the future tax consequences attributable to differences between the financial statement carrying amount of existing assets
and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the
enactment date. See Note 12.
29
30
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
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 or carryback
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 12.
New Store Pre-Opening Costs
Income from operations for fiscal 2021, 2020 and 2019 includes new store pre-opening costs of $0, $0 and $1,117,
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 $17,829, $14,779, and $18,402 for fiscal 2021, 2020 and 2019, 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 $22,494, $19,024, and $23,710 for fiscal 2021, 2020 and 2019, 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 $15,272, $12,671, and $20,674 in fiscal
2021, 2020, and 2019, 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
Refer to the supplemental lease disclosures in Note 14 for cash flow impacts of leasing transactions during fiscal 2020.
Otherwise, there were no material non-cash investing or financing activities during fiscal 2021 or 2020. During the fourth
quarter of fiscal 2019, we purchased certain fixed assets and inventory with a total purchase price of $2,225, of which $375
was paid for with the issuance of 24,590 shares if our common stock.
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
Recent Accounting Pronouncements
Recently Adopted Pronouncements
Effective as of the beginning of fiscal 2021, we have adopted Accounting Standards Update No. 2016-13, Financial
Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The
guidance in ASU 2016-13 replaces the incurred loss impairment methodology under previous GAAP. The new impairment
model requires immediate recognition of estimated credit losses expected to occur for most financial assets and certain other
instruments. We assessed the guidance under ASU 2016-13 as applied to our trade receivables and contract assets, and
determined that there was no material impact to our financial condition or results of operations as a result of the adoption.
Effective as of the beginning of fiscal 2021, we have adopted 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 (“ASU 2018-15”). ASU 2018-15 was issued 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. We adopted ASU 2018-15 on a prospective
basis and the adoption did not have a material impact upon our financial condition or results of operations.
Recent Pronouncements Not Yet Adopted
In December 2019, the FASB issued Accounting Standards Update No. 2019-12 – Income Taxes (Topic 740) Simplifying
the Accounting for Income Taxes, as part of its initiative to reduce complexity in the accounting standards. The amendments
in ASU 2019-12 eliminate certain exceptions related to the approach for intraperiod tax allocation, the methodology for
calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU
2019-12 also clarifies and simplifies other aspects of the accounting for income taxes. The amendments in ASU 2019-12 will
become effective for us as of the beginning of our 2022 fiscal year. Early adoption is permitted, including adoption in any
interim period. We are currently evaluating the impact that this guidance will have upon our financial position and results of
operations, if any.
Reclassifications
Certain prior year amounts in the consolidated financial statements have been reclassified to conform to the current year
presentation with no effect on previously reported net income or Stockholders’ equity. The cost of logistical services,
previously included in our statements of operations within selling, general and administrative expenses excluding new store
pre-opening costs, is now presented separately.
3. 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, accounts payable and long-term debt. Because of their short maturities, the carrying amounts of cash and cash
equivalents, short-term investments in certificates of deposit, accounts receivable, and accounts payable approximate fair
value.
Investments
Our short-term investments of $17,715 at both November 27, 2021 and November 28, 2020 consisted of certificates of deposit
(CDs) with original terms of six to twelve months, bearing interest at rates ranging from 0.01% to 0.85%. At November 27,
2021, the weighted average remaining time to maturity of the CDs was approximately three months and the weighted average
yield of the CDs was approximately 0.04%. 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
31
32
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
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 27, 2021 and November 28, 2020 approximates their fair value.
5. Inventories
Inventories consist of the following:
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. Our primary non-recurring fair value estimates typically involve business acquisitions (Note 3) which
involve a combination of Level 2 and Level 3 inputs, goodwill impairment testing (Note 8), which involves Level 3 inputs,
and asset impairments (Note 14) which utilize Level 3 inputs.
4. Accounts Receivable
Accounts receivable consists of the following:
Gross accounts receivable
Allowance for credit losses
Net accounts receivable
Activity in the allowance for credit losses was as follows:
November 27,
2021
November 28,
2020
$
$
28,964 $
(796)
28,168 $
23,551
(1,211)
22,340
2021
2020
Balance, beginning of the year
Additions (recoveries) charged to expense
Reductions to allowance, net
Balance, end of the year
$
$
1,211 $
(156)
(259)
796 $
815
492
(96)
1,211
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.
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 27,
2021
November 28,
2020
$
$
40,254 $
482
21,653
30,914
93,303
(10,483)
(4,816)
78,004 $
25,001
516
14,836
27,946
68,299
(8,891)
(4,522)
54,886
We source a significant amount of our wholesale product from other countries. During 2021, 2020 and 2019, purchases from
our two largest vendors located in Vietnam and China were $34,658, $15,378 and $15,221 respectively.
We estimate an inventory reserve for excess quantities and obsolete items based on specific identification and historical write-
offs, taking into account future demand, market conditions and the respective valuations at LIFO. The need for these reserves
is primarily driven by the normal product life cycle. As products mature and sales volumes decline, we rationalize our product
offerings to respond to consumer tastes and keep our product lines fresh. If actual demand or market conditions in the future
are less favorable than those estimated, additional inventory write-downs may be required. In determining reserves, we
calculate separate reserves on our wholesale and retail inventories. Our wholesale inventories tend to carry the majority of
the reserves for excess quantities and obsolete inventory due to the nature of our distribution model. These wholesale reserves
primarily represent design and style obsolescence. Typically, product is not shipped to our retail warehouses until a consumer
has ordered and paid a deposit for the product. We do not typically hold retail inventory for stock purposes. Consequently,
floor sample inventory and inventory for delivery to customers account for the majority of our inventory at retail. Retail
reserves are based on accessory and clearance floor sample inventory in our stores and any inventory that is not associated
with a specific customer order in our retail warehouses.
Activity in the reserves for excess quantities and obsolete inventory by segment are as follows:
Wholesale
Segment
Retail Segment
Total
Balance at November 30, 2019
Additions charged to expense
Write-offs
Balance at November 28, 2020
Additions charged to expense
Write-offs
Balance at November 27, 2021
$
$
2,054 $
3,745
(2,378)
3,421
2,057
(1,795)
3,683 $
308 $
1,177
(384)
1,101
912
(880)
1,133 $
2,362
4,922
(2,762)
4,522
2,969
(2,675)
4,816
33
34
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
6. 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 27,
2021
November 28,
2020
$
$
9,478 $
117,297
130,534
257,309
(163,243)
94,066 $
9,478
114,961
118,112
242,551
(151,634)
90,917
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 27,
2021
November 28,
2020
$
$
30,020 $
39,148
24,898
94,066 $
26,999
44,820
19,098
90,917
Depreciation expense associated with the property and equipment shown above was included in income from operations in
our consolidated statements of operations as follows:
Cost of goods sold (wholesale segment)
Selling, general and adminstrative expenses:
2021
2020
2019
$
1,797 $
1,552 $
1,402
Wholesale segment
Retail segment
Logistical services segment
Total included in selling, general and adminstrative expenses
Total depreciation expense included in income from
1,532
6,580
4,308
12,420
1,516
6,578
3,454
11,548
1,672
7,479
3,697
12,848
operations
$
14,217 $
13,100 $
14,250
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
7. Goodwill and Other Intangible Assets
Goodwill and other intangible assets consisted of the following:
November 27, 2021
Gross
Carrying
Amount
Accumulated
Amortization
Intangible
Assets, Net
Intangibles subject to amortization:
Customer relationships
Technology - customized applications
Total intangible assets subject to amortization
$
$
3,550 $
834
4,384 $
(1,606) $
(814)
(2,420)
Intangibles not subject to amortization:
Trade names
Goodwill
1,944
20
1,964
9,338
12,146
Total goodwill and other intangible assets
$
23,448
November 28, 2020
Gross
Carrying
Amount
Accumulated
Amortization
Intangible
Assets, Net
Intangibles subject to amortization:
Customer relationships
Technology - customized applications
Total intangible assets subject to amortization
$
$
3,550 $
834
4,384 $
(1,346) $
(695)
(2,041)
Intangibles not subject to amortization:
Trade names
Goodwill
2,204
139
2,343
9,338
12,146
Total goodwill and other intangible assets
$
23,827
Due to the impact of the COVID-19 pandemic, we performed an interim impairment assessment of our remaining goodwill
as of May 30, 2020, the end of our second fiscal quarter. As a result of this test, we concluded that the carrying value of our
wood reporting unit exceeded its fair value by an amount in excess of the goodwill previously allocated to the reporting unit.
Therefore, we recognized a goodwill impairment charge of $1,971 for year ended November 28, 2020. Our subsequent annual
goodwill impairment tests, conducted as of the beginning of our fourth fiscal quarters of 2020 and 2021, resulted in no
additional impairments.
The determination of the fair value of our reporting units is based on a combination of a market approach, that considers
benchmark company market multiples, and an income approach, that utilizes discounted cash flows for each reporting unit
and other Level 3 inputs as specified in the fair value hierarchy in ASC Topic 820, Fair Value Measurements and Disclosure
(see Note 3). Under the income approach, we determine fair value based on the present value of the most recent cash flow
projections for each reporting unit as of the date of the analysis and calculate a terminal value utilizing a terminal growth
rate. The significant assumptions under this approach include, among others: income projections, which are dependent on
future sales, new product introductions, customer behavior, competitor pricing, operating expenses, the discount rate, and the
terminal growth rate. The cash flows used to determine fair value are dependent on a number of significant management
assumptions such as our expectations of future performance and the expected future economic environment, which are partly
based upon our historical experience. Our estimates are subject to change given the inherent uncertainty in predicting future
results. Additionally, the discount rate and the terminal growth rate are based on our judgment of the rates that would be
35
36
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
utilized by a hypothetical market participant. As part of the goodwill impairment testing, we also consider our market
capitalization in assessing the reasonableness of the combined fair values estimated for our reporting units.
Changes in the carrying amounts of goodwill by reportable segment were as follows:
Wholesale Retail
Logistics
Total
Balance as of November 30, 2019
$
Goodwill impairment
Balance as of November 28, 2020
No changes in fiscal 2021
9,188 $
(1,971 )
7,217
-
- $
-
-
-
4,929 $
-
14,117
(1,971)
4,929
-
12,146
-
Balance as of November 27, 2021
$
7,217 $
- $
4,929 $
12,146
Accumulated impairment losses were $3,897, $3,897 and $1,926 at November 27, 2021, November 28, 2020 and November
30, 2019, respectively.
The weighted average useful lives of our finite-lived intangible assets and remaining amortization periods as of November
27, 2021 are as follows:
Remaining
Amortization
Period in
Years
Useful Life
in Years
Customer relationships
Technology - customized applications
14
7
8
0
Amortization expense associated with intangible assets during fiscal 2021, 2020 and 2019 was $379, $379 and $379,
respectively and is included in selling, general and administrative expense in our consolidated statement of operations. All
expense arising from the amortization of intangible assets is associated with our logistical services segment except for $57,
$57 and $57 in fiscal 2021, 2020 and 2019, respectively, associated with our wholesale segment. Estimated future
amortization expense for intangible assets that exist at November 27, 2021 is as follows:
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal 2025
Fiscal 2026
Thereafter
Total
$
279
259
259
259
259
649
$
1,964
8. Bank Credit Facility
Bank Credit Facility
Our bank credit facility provides for a line of credit of up to $25,000. At November 27, 2021, we had $3,931 outstanding
under standby letters of credit against our line, leaving availability under our credit line of $21,069. In addition, we have
outstanding standby letters of credit with another bank totaling $325. The line bears interest at the rate of LIBOR plus 1.9%,
with a fee of 0.25% charged for the unused portion of the line and is secured by a general lien on our accounts receivable and
inventory. We were in compliance with all covenants under the agreement as of November 27, 2021. The credit facility
matures on January 31, 2022.
On January 27, 2022, we entered into a new credit facility with our bank which also provides for a credit line of up to $25,000.
The line bears interest at the One-Month Term Secured Overnight Financing Rate (“One-Month Term SOFR”) plus 1.5%
and is unsecured. Our bank will charge a fee of 0.25% on the daily unused balance of the line, payable quarterly. Under the
terms of the new facility, we must maintain the following financial covenants, measured quarterly on a rolling twelve-month
basis:
Consolidated fixed charge coverage ratio of not less than 1.4 times,
Consolidated lease-adjusted leverage ratio not to exceed 3.0 times, and
●
●
● Minimum tangible net worth ratio of $140,000, which will change to $120,000 if we do not complete the sale of
Zenith (see Note 20, Subsequent Event, regarding our entry into an agreement to sell substantially all of the
assets of Zenith).
We were in compliance with these covenants at November 27, 2021 and expect to remain in compliance for the foreseeable
future. The new credit facility will mature on January 27, 2025, at which time any amounts outstanding under the facility will
be due.
Total interest paid, including the interest component of financing lease payments, during fiscal 2021, 2020 and 2019 was
$322, $49 and $7, respectively.
9. 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 deferred
compensation under the Plan was $338, $264 and $196 for fiscal 2021, 2020 and 2019, respectively. Our liability for
Company contributions and participant deferrals at November 27, 2021 and November 28, 2020 was $1,789 and $1,250,
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 2021, 2020 and 2019, we invested $647,
$609 and $627 in life insurance policies covering all participants in the Plan. At November 27, 2021, these policies have a
37
38
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
net death benefit of $14,998 for which the Company is the sole beneficiary. These policies are intended to provide a potential
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 $2,054 at November
27, 2021 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:
2021
2020
2019
Components of Net Periodic Pension Cost:
Service cost
Interest cost
Amortization of prior service cost
Amortization of other loss
$
121 $
196
126
59
172 $
268
126
8
Net periodic pension cost
$
502 $
574 $
Assumptions used to determine net periodic pension
cost:
Discount rate
Increase in future compensation levels
Estimated Future Benefit Payments (with mortality):
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal 2025
Fiscal 2026
Fiscal 2027 through 2031
2.00%
3.00%
2.75%
3.00%
$
190
441
126
183
940
4.00%
3.00%
913
870
825
857
809
3,692
`
Change in Benefit Obligation:
Projected benefit obligation at beginning of year
Service cost
Interest cost
Actuarial (gains) and 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:
Prior service cost
Actuarial loss
Net amount recognized
Total recognized in net periodic benefit cost and accumulated
other comprehensive income:
$
$
$
$
$
$
$
$
2021
2020
10,071 $
120
196
762
(409)
10,740 $
10,090
172
268
345
(804)
10,071
10,740 $
10,034
Of the $2,448 recognized in accumulated other comprehensive income at November 27, 2021, amounts expected to be
recognized as components of net periodic pension cost during fiscal 2022 are as follows:
Prior service cost
Other loss
Total expected to be amortized to net periodic pension cost in 2022
$
$
126
51
177
The components of net periodic pension cost other than the service cost component are included in other loss, net in our
consolidated statements of operations.
2.25%
2.00%
Deferred Compensation Plan
913 $
9,827
10,740 $
355 $
2,093
2,448 $
613
9,458
10,071
480
1,394
1,874
1,078 $
785
We have an unfunded Deferred Compensation Plan that covers one current and certain former executives and provides for
voluntary deferral of compensation. This plan has been frozen with no additional participants or benefits permitted. We
recognized expense of $204, $176, and $204 in fiscal 2021, 2020, and 2019, respectively, associated with the plan. Our
liability under this plan was $1,648 and $1,676 as of November 27, 2021 and November 28, 2020, 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. During fiscal 2020, the Company’s matching
contribution was temporarily suspended for approximately six months as part of the cash conservation measures put into
place in response to the impact of the COVID-19 pandemic but was resumed during the fourth quarter. Expense for employer
matching contributions was $1,103, $611 and $1,157 during fiscal 2021, 2020 and 2019, respectively.
39
40
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
10. Accumulated Other Comprehensive Loss
The activity in accumulated other comprehensive loss for the fiscal years ended November 27, 2021 and November 28, 2020,
which is comprised solely of post-retirement benefit costs related to our SERP and LTC Awards, is as follows:
Balance at November 30, 2019
Actuarial losses
Net pension amortization reclassified from accumulated other comprehensive loss
Tax effects
Balance at November 28, 2020
Actuarial losses
Net pension amortization reclassified from accumulated other comprehensive loss
Tax effects
Balance at November 27, 2021
$
$
(1,236)
(345)
133
54
(1,394)
(762)
186
147
(1,823)
11. Capital Stock and Stock Compensation
We account for our stock-based employee and director compensation plans in accordance with ASC 718, Compensation –
Stock Compensation. ASC 718 requires recognition of the cost of employee services received in exchange for an award of
equity instruments in the financial statements over the period the employee is required to perform the services in exchange
for the award (presumptively the vesting period) which we recognize on a straight-line basis. Compensation expense related
to restricted stock and stock options included in selling, general and administrative expenses in our consolidated statements
of operations for fiscal 2021, 2020 and 2019 was as follows:
Stock based compensation expense
$
158 $
420 $
958
2021
2020
2019
Incentive Stock Compensation Plans
2021 Plan
On March 10, 2021, our shareholders approved the Bassett Furniture Industries, Incorporated 2021 Stock Incentive Plan (the
“2021 Plan”). All present and future non-employee directors, key employees and outside consultants for the Company are
eligible to receive incentive awards under the 2021 Plan. Our Organization, Compensation and Nominating Committee (the
“OCN Committee”) selects eligible key employees and outside consultants to receive awards under the 2021 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 2021 Plan in its discretion. Five hundred thousand (500,000) shares of common stock
are reserved for issuance under the 2021 Plan. Participants may receive the following types of incentive awards under the
2021 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. The full terms of the 2021 Plan have been filed as an exhibit to our
Schedule 14A filed with the United States Securities and Exchange Commission on February 8, 2021.
2010 Plan
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 non-employee directors, key employees and
outside consultants for the Company were eligible to receive incentive awards under the 2010 Plan. The 2010 Plan expired
in April of 2020 and no additional grants can be awarded under the plan.
The fair value of each option award was 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
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
using the simplified method. Forfeitures are recognized as they occur. We utilized the simplified method to determine the
expected life of our options due to insufficient exercise activity during recent years as a basis from which to estimate future
exercise patterns.
Stock Options
There were no new grants of options made in 2021, 2020 or 2019.
Changes in the outstanding options under our plans during the year ended November 27, 2021 were as follows:
Outstanding at November 28, 2020
Granted
Exercised
Forfeited/Expired
Outstanding at November 27, 2021
Exercisable at November 27, 2021
Weighted
Average
Exercise Price
Per Share
Number of
Shares
5,250 $
-
(5,250)
-
-
-
8.02
-
8.02
-
-
-
Additional information regarding activity in our stock options during fiscal 2021, 2020 and 2019 is as follows:
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
Restricted Shares
2021
2020
2019
93 $
42
18
- $
-
-
34
25
6
Changes in the outstanding non-vested restricted shares during the year ended November 27, 2021 were as follows:
Number of Shares
Weighted
Average Grant
Date Fair
Value Per Share
Non-vested restricted shares outstanding at November 28, 2020
Granted
Vested
Forfeited
Non-vested restricted shares outstanding at November 27, 2021
34,500 $
7,105
(31,000 )
-
10,605 $
33.58
24.63
35.75
-
21.24
During fiscal 2021, 31,000 restricted shares were vested and released, all of which had been granted to employees. During
fiscal 2021 and 2020, 10,850 shares and 14,010 shares, respectively, were withheld to cover withholding taxes of $219 and
$228, respectively, arising from the vesting of restricted shares. During fiscal 2021, 2020 and 2019, excess tax (expense)
benefits of $(133), $(114) and $0, respectively, were recognized within income tax expense upon the release of vested shares.
41
42
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
Additional information regarding our outstanding non-vested restricted shares at November 27, 2021 is as follows:
Grant
Date
Restricted
Shares
Outstanding
Share Value
at Grant Date
Per Share
Remaining
Restriction
Period
(Years)
October 9, 2019
March 10, 2021
3,500 $
7,105
10,605
14.37
24.63
0.9
0.3
Unrecognized compensation cost related to these non-vested restricted shares at November 27, 2021 is $58, all of which is
expected to be recognized within fiscal 2022.
Employee Stock Purchase Plan
In March of 2017 we adopted and implemented the 2017 Employee Stock Purchase Plan (“2017 ESPP”) that allows eligible
employees to purchase a limited number of shares of our stock at 85% of market value. Under the 2017 ESPP we sold 22,547,
50,217 and 23,460 shares to employees during fiscal 2021, 2020 and 2019, respectively, which resulted in an immaterial
amount of compensation expense. There are 132,534 shares remaining available for sale under the 2017 ESPP at November
27, 2021.
12. Income Taxes
The components of the income tax provision are as follows:
Current:
Federal
State
Deferred:
Federal
State
Total
2021
2020
2019
4,437 $
178
(8,486) $
155
2,150
892
435
1,148
6,198 $
2,457
(491)
(6,365) $
(2,191)
(663)
188
$
$
On March 27, 2020 the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. A
major provision of the CARES Act allows net operating losses from the 2018, 2019 and 2020 tax years to be carried back up
to five years. As a result, for the year ended November 28, 2020 we were able to recognize tax benefits substantially in excess
of the current federal statutory rate of 21% due to the effects of carrying back our current net operating loss to tax years in
which the federal statutory rate was 35%.
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
CARES Act benefit
State income tax, net of federal benefit
Impairment of non-deductible goodwill
Excess tax from stock-based compensation
Other
Effective income tax rate
2021
2020
2019
21.0%
-
4.2
-
0.4
-
25.6%
21.0 %
21.1
1.7
(2.5 )
(0.6 )
(2.8 )
37.9 %
21.0%
-
(14.0)
(23.2)
0.3
5.1
(10.8)%
Excess tax (expense) benefits in the amount of $(115), $(114), and $22 were recognized as a component of income tax
expense during fiscal 2021, 2020 and 2019, respectively, resulting from the exercise of stock options and the release of
restricted shares. The fiscal 2020 and 2019 adjustments for impairment of non-deductible goodwill reflect the fact that there
was no tax basis related to the impaired goodwill.
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
Leases
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 27,
2021
November 28,
2020
$
199 $
3,121
44
3,562
153
5,055
1,180
13,314
-
13,314
7,013
1,712
1,400
303
3,086
44
3,260
1,321
5,850
1,856
15,720
-
15,720
8,746
1,404
983
Total deferred income tax liabilities
10,125
11,133
Net deferred income tax assets
$
3,189 $
4,587
We have state net operating loss carryforwards available to offset future taxable state income of $3,010, which expire in
varying amounts between 2030 and 2040. Realization is dependent on generating sufficient taxable income prior to expiration
of the loss carryforwards.
Income taxes paid, net of refunds received, during fiscal 2021, 2020 and 2019 were $3,092, $539, and $1,228, 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 27, 2021 and November 28, 2020 were $324 and $68, respectfully. Our liabilities for uncertain tax
positions prior to 2021 were not material.
Significant judgment is required in evaluating the Company's federal and state tax positions and in the determination of its
tax provision. Despite our belief that the liability for unrecognized tax benefits is adequate, it is often difficult to predict the
final outcome or the timing of the resolution of any particular tax matter. We may adjust these liabilities as relevant
circumstances evolve, such as guidance from the relevant tax authority, or resolution of issues in the courts. These adjustments
are recognized as a component of income tax expense in the period in which they are identified. The Company also cannot
predict when or if any other future tax payments related to these tax positions may occur.
We remain subject to examination for tax years 2018 through 2021 for all of our major tax jurisdictions.
43
44
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
13. Other Gains and Losses
Gains on Dispositions of Retail Store Locations
Selling, general and administrative expenses for the year ended November 28, 2020 include gains totaling $1,313 resulting
from the settlement of lease obligations due to the early termination of leases at our retail store locations in Torrance,
California and Culver City, California.
Early Retirement Program
During the first quarter of fiscal 2019, we offered a voluntary early retirement package to certain eligible employees of the
Company. These employees received pay equal to one-half their current salary plus benefits over a period of one year from
the final day of each individual’s active employment. Accordingly, we recognized a charge of $835 during the year ended
November 30, 2019. All compensation accrued under the package had been paid out prior to November 28, 2020.
Asset Impairment Charges and Lease Exit Costs
During fiscal 2020 we recorded $11,114 of non-cash impairment charges on the assets of five underperforming retail stores,
including $6,239 for the impairment of operating lease right-of-use assets associated with the leased locations. We also
incurred $1,070 of non-cash impairment charges in our wholesale segment, primarily due to the closing of our custom
upholstery manufacturing facility in Grand Prairie, Texas, in May.
During fiscal 2019, the loss from operations included $4,431 of non-cash impairment charges recognized on the assets of six
underperforming retail stores. In addition, a $149 charge was accrued for lease exit costs incurred in connection with the
repositioning of a Company-owned retail store in Palm Beach, Florida to a new location within the same market.
Litigation Expense
During fiscal 2020 and 2019 we accrued $1,050 and $700, respectively for the estimated costs to resolve certain wage and
hour violation claims that had been asserted against the Company (see Note 15).
Gains from Company-Owned Life Insurance
Other loss, net for the fiscal 2020 and 2019 includes gains of $914 and $629, respectively, arising from death benefits from
Company-owned life insurance.
14. Leases and Lease Guarantees
Leases
Fiscal 2021 and 2020
Effective as of the beginning of fiscal 2020, we adopted ASU 2016-02, Leases (Topic 842) and all related amendments. See
“Leases” under Note 2 for a discussion of our accounting policies and elections under Topic 842 as well as the impact of the
adoption upon our financial statements.
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
Supplemental balance sheet information related to our leases as of November 27, 2021 and November 28, 2020 is as follows:
Operating leases:
Right of use assets
Lease liabilties, short-term
Lease liabilties, long-term
Finance leases:
Right of use assets (1)
Lease liabilties, short-term (2)
Lease liabilties, long-term (3)
November 27,
2021
November 28,
2020
$
$
114,148 $
27,693
105,841
116,903
27,078
111,972
7,538 $
1,759
5,801
2,623
534
1,862
(1) Included in property & equipment, net in our consolidated balance sheet.
(2) Included in other current liabilites and accrued expenses in our consolidated balance sheet.
(3) Included in other long-term liabilites and accrued expenses in our consolidated balance sheet.
Our right-of-use assets under operating leases by segment as of November 27, 2021 and November 28, 2020 are as follows:
Wholesale
Retail
Logistical services
Total right of use assets
November 27,
2021
November 28,
2020
$
$
9,842 $
86,114
18,192
114,148 $
10,232
90,487
16,184
116,903
The components of our lease cost for the years ended November 27, 2021 and November 28, 2020 are as follows:
Lease cost:
Operating lease cost
Financing lease cost:
2021
2020
$
32,168 $
33,207
Amortization of right-of-use assets
Interest on lease liabilities
Short-term lease cost
Variable lease cost (net of abatements received)
Sublease income
1,434
304
1,986
321
(1,670)
213
49
2,040
(605)
(1,557)
Total lease cost
$
34,543 $
33,347
45
46
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
Supplemental lease disclosures as of November 27, 2021 and November 28, 2020 and for the fiscal years then ended are as
follows:
Operating
Financing
For the year ended November 28, 2020:
Cash paid for amounts included in the measurements of lease liabilities
Lease liabilities arising from new right-of-use assets
$
35,310 $
10,804
For the year ended November 27, 2021:
Cash paid for amounts included in the measurements of lease liabilities
Lease liabilities arising from new right-of-use assets
As of November 28, 2020:
Weighted average remaining lease terms (years)
Weighted average discount rates
As of November 27, 2021:
Weighted average remaining lease terms (years)
Weighted average discount rates
35,432
24,518
6.2
4.98%
6.0
5.04%
260
2,623
1,668
6,511
4.3
4.43%
4.8
4.72%
Future payments under our leases and the present value of the obligations as of November 27, 2021 are as follows:
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal 2025
Fiscal 2026
Thereafter
$
Total lease payments
Less: interest
Total lease obligations
$
Operating
Leases
Financing
Leases
33,493 $
30,579
23,219
19,106
15,482
33,947
155,826
22,292
133,534 $
2,076
1,949
1,669
1,171
818
766
8,449
889
7,560
As of November 27, 2021, we had a commitment to acquire twenty-three trucks under leases for use in our logistical services
segment that are expected to commence at various times during fiscal 2022 and replace older units that will be coming off
lease. Five of these leases are expected to have annual payments totaling approximately $267 per year over three years, and
eighteen are expected to have annual payments totaling approximately $167 per year over five years. We also have a
commitment to lease showroom space for use by our wholesale segment with payments averaging approximately $229 per
year over eight years. This lease is expected to commence in the fourth quarter of fiscal 2022.
We sublease a small number of our leased locations to certain of our licensees for operation as BHF network stores. The
terms of these leases generally match those of the lease we have with the lessor. Minimum future lease payments due to us
under these subleases are as follows:
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal 2025
Fiscal 2026
Thereafter
$
Total minimum future rental income
$
1,979
1,662
1,027
599
156
-
5,423
We negotiated with a number of our landlords to obtain relief in the form of rent deferrals or abatements of rent as a result of
the effects of COVID-19 on our business. At November 28, 2020, the unpaid rent was $990 which primarily represented rent
deferred to fiscal 2021 and is included in other current liabilities and accrued expenses in our accompanying condensed
consolidated balance sheet. The remaining balance of deferred rent at November 27, 2021 was not material. In accordance
with FASB Staff Q&A - Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-
19 Pandemic ("FASB Staff Q&A") issued in April 2020, we have elected to account for any lease concessions resulting
directly from COVID-19 as if the enforceable rights and obligations for the concessions existed in the respective contracts at
lease inception and as such we will not account for any concession as a lease modification. Guidance from the FASB Staff
Q&A provided methods to account for rent deferrals which include the option to treat the lease as if no changes to the lease
contract were made or to treat deferred payments as variable lease payments. The FASB Staff Q&A allows entities to select
the most practical approach and does not require the same approach be applied consistently to all leases. As a result, we
account for the deferrals as if no changes to the lease contract were made and will continue to recognize lease expense, on a
straight-line basis, during the deferral period. For any abatements received, we account for those as variable rent in the period
in which the abatement is granted. For the year ended November 28, 2020, we were granted abatements against rent totaling
$775.
Fiscal 2019
Prior to the adoption of Topic 842, we accounted for and reported our leases in accordance with Topic 840, Leases. In
accordance with Topic 840 leases classified as operating leases were not included in our balance sheet as right of use assets
or lease obligations as of November 30, 2019. During fiscal 2019 we had no leases which were classified as capital leases.
Lease expense was $41,809 for 2019. Real estate rental net loss (rental income less lease costs, depreciation, insurance, and
taxes), related to licensee stores and other investment real estate, was $156 in 2019 and is reflected in other loss, net in the
accompanying consolidated statements of operations.
Guarantees
As part of the strategy for our store program, we have guaranteed certain lease obligations of licensee operators. Lease
guarantees range from one to three years. We were contingently liable under licensee lease obligation guarantees in the
amount of $1,845 and $1,811 at November 27, 2021 and November 28, 2020, 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 27, 2021 and
November 28, 2020, were not material.
15. 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. We carried reserves
for pending litigation claims in the amount of $100 and $1,050 as of November 27, 2021 and November 28, 2020,
respectively, which are included in other current liabilities and accrued expenses in our accompanying balance sheets.
47
48
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
16. Earnings (Loss) Per Share
The following table sets forth the computation of basic and diluted earnings (loss) per share:
Numerator:
Net income (loss)
Denominator:
2021
2020
2019
$
18,042 $
(10,421) $
(1,928)
Denominator for basic income per share - weighted average
shares
Effect of dilutive securities*
Denominator for diluted income per share — weighted
9,835,829
7,945
9,969,616
-
10,285,511
-
average shares and assumed conversions
9,843,774
9,969,616
10,285,511
Basic income (loss) per share:
Net income (loss) per share — basic
Diluted income (loss) per share:
Net income (loss) per share — diluted
$
$
1.83 $
(1.05) $
(0.19)
1.83 $
(1.05) $
(0.19)
* Due to the net losses in 2020 and 2019, the potentially dilutive securities would have been anti-dilutive and are therefore
excluded.
For fiscal 2021, 2020 and 2019, the following potentially dilutive shares were excluded from the computations as their effect
was anti-dilutive:
Unvested restricted shares
Stock options
2021
2020
2019
-
-
90,153
5,250
45,036
-
17. 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 operations.
● Retail – Company-owned stores. Our retail segment consists of Company-owned stores and includes the
revenues, expenses, assets and liabilities and capital expenditures directly related to these stores and the
Company-owned distribution network utilized to deliver products to our retail customers.
● Logistical services. With our acquisition of Zenith in 2015, we created the logistical services operating segment
which reflects the operations of Zenith. In addition to providing shipping and warehousing services for the
Company, Zenith also provides similar services to other customers, primarily in the furniture industry. Revenue
from the performance of these services to other customers is included in logistics revenue in our consolidated
statement of operations. See Note 20, Subsequent Event, regarding our entry into an agreement to sell substantially
all of the assets of Zenith.
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
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:
2021
2020
2019
Sales Revenue
Wholesale sales of furniture and accessories
Less: Sales to retail segment
Wholesale sales to external customers
Retail sales of furniture and accessories
Consolidated net sales of furniture and accessories
Logistical services revenue
Less: Services to wholesale segment
Logistical services to external customers
Total sales revenue
Income (loss) from Operations
Wholesale
Retail
Logistical services
Inter-company elimination
Asset impairment charges
Goodwill impairment charge
Early retirement program
Litigation expense
Lease exit costs
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
$
$
$
$
$
$
$
$
$
$
295,329 $
(112,270)
183,059
247,827
430,886
86,977
(31,329)
55,648
486,534 $
17,490 $
7,044
1,743
(278)
-
-
-
-
-
25,999 $
3,386 $
6,580
4,631
14,597 $
5,943 $
299
4,508
10,750 $
221,075 $
(95,347)
125,728
211,944
337,672
75,158
(26,967)
48,191
385,863 $
4,587 $
(9,497)
1,245
2,647
(12,184)
(1,971)
-
(1,050)
-
(16,223) $
3,125 $
6,578
3,777
13,480 $
2,434 $
695
2,900
6,029 $
261,105
(125,933)
135,172
268,693
403,865
80,074
(31,852)
48,222
452,087
11,456
(7,009)
1,855
1,144
(4,431)
(1,926)
(835)
(700)
(149)
(595)
3,178
6,303
4,019
13,500
5,650
8,473
3,627
17,750
197,543 $
160,929
63,188
421,660 $
176,243 $
169,105
57,201
402,549 $
144,392
91,997
39,377
275,766
See Note 18 for disaggregated revenue information regarding sales of furniture and accessories by product type for the
wholesale and retail segments.
49
50
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
18. Revenue Recognition
Disaggregated revenue information for sales of furniture and accessories by product category for fiscal years 2021, 2020
and 2019, excluding intercompany transactions between our segments, is as follows:
2021
2020
2019
Wholesale Retail
Total Wholesale Retail
Total Wholesale Retail
Total
Bassett Custom
Upholstery
Bassett Leather
Bassett Custom Wood
Bassett Casegoods
Accessories,
$ 105,445 $139,527 $244,972 $ 71,840 $112,888 $184,728 $ 78,856 $142,865 $ 221,721
20,865
56,356
62,048
22,813
48,624
49,447
36,157
24,079
17,378
3,782
35,092
44,827
17,083
21,264
17,221
2,326
28,942
35,728
36,383
55,010
60,036
226
30,931
42,658
20,487
19,682
13,719
mattresses and other
(1) (2)
Consolidated
-
34,485 34,485
-
32,060 32,060
748
42,127
42,875
Furniture and
Accessories revenue $ 183,059 $247,827 $430,886 $ 125,728 $211,944 $337,672 $ 135,172 $268,693 $ 403,865
(1)
Includes the sale of goods other than Bassett-branded products, such as accessories and bedding, and also includes
the sale of furniture protection plans.
(2) Beginning with the third quarter of fiscal 2019, our wholesale segment no longer purchases accessory items for
resale to third party customers such as licensees or independent furniture dealers. These customers now source their
accessory items from the accessory vendors.
19. Quarterly Results of Operations
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
Sales revenue:
Furniture and accessories
Logistics
Total sales revenue
Cost of furniture and accessories sold
Income (loss) from operations
Net income (loss)
Basic earnings (loss) per share
Diluted earnings (loss) per share
2021
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
$
101,655 $
12,018
113,673
48,252
6,021
4,011
0.40
0.40
109,997 $
14,062
124,059
52,911
8,379
5,974
0.60
0.60
104,870 $
14,036
118,906
52,263
4,490
3,016
0.31
0.31
114,364
15,532
129,896
56,373
7,109
5,041
0.52
0.52
2020
First
Quarter
Second
Quarter (1)
Third
Quarter (2)
Fourth
Quarter (3)
98,942 $
13,178
112,120
45,270
2,210
1,210
0.12
0.12
53,000 $
10,801
63,801
29,452
(31,229)
(20,352)
(2.04)
(2.04)
80,341 $
11,218
91,559
38,418
2,747
2,178
0.22
0.22
105,389
12,994
118,383
50,427
10,049
6,543
0.65
0.65
$
51
Notes to Consolidated Financial Statements – Continued
(In thousands, except share and per share data)
All quarters shown above for fiscal 2021 and 2020 consisted of 13-week fiscal periods.
(1)
(2)
(3)
Loss from operations reflects the severe impact of the COVID-19 pandemic on our operations due to the
temporary closure of substantially all of our operations during the quarter (see Note 1) and includes a goodwill
impairment charge of $1,971 (see Note 7), asset impairment charges of $12,184 and a litigation expense accrual
of $1,050 (see Note 13). Net loss includes the benefit of carrying back the loss to tax years with 35% federal
statutory rate as provided for in the CARES Act (see Note 12).
Net income includes a non-taxable gain of $914 arising from the recognition of a death benefit from Company-
owned life insurance (see Note 13).
Income from operations includes a gain of $1,161 arising from the settlement of a lease obligation (see Note 13).
20. Subsequent Event
On January 31, 2022, we entered into a definitive agreement to sell substantially all of the assets of Zenith Freight Lines,
LLC to J.B. Hunt Transport Services, Inc. for approximately $87,000 in cash. We expect the transaction to close by February
28, 2022 subject to customary closing conditions.
52
Bassett Furniture Industries, Incorporated
STOCKHOLDER PERFORMANCE GRAPH
Schedule II
Analysis of Valuation and Qualifying Accounts
For the Years Ended November 27, 2021, November 28, 2020 and November 30, 2019
(amounts in thousands)
Balance
Beginning
of
Period
Additions
Charged to
Cost and
Expenses
Deductions
(1)
Other
Balance
End
of Period
For the Year Ended November 30, 2019:
Reserve deducted from assets to which it applies
Allowance for doubtful accounts
Notes receivable valuation reserves
For the Year Ended November 28, 2020:
Reserve deducted from assets to which it applies
Allowance for doubtful accounts
Notes receivable valuation reserves
$
$
$
$
For the Year Ended November 27, 2021:
Reserve deducted from assets to which it applies
754 $
61 $
-
$
377 $
-
$
(18 ) $
-
-
$
$
815
359
815 $
492 $
(96 )
$
1,211
359 $
- $
-
$
-
$
359
Allowance for doubtful accounts
$
1,211 $
(156 ) $
(259 ) $
Notes receivable valuation reserves
$
359 $
- $
-
$
-
-
$
$
796
359
(1) Deductions are for the purpose for which the reserve was created.
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 old
and new peer groups. The Company’s peer groups consist of the following:
Old
American Woodmark, Inc.
Culp, Inc.
The Dixie Group, Inc.
Ethan Allan Interiors, Inc.
Flexsteel Industries, Inc.
Haverty Furniture Companies, Inc.
Hooker Furnishings Corporation
Kimball International, Inc.
Kirkland’s, Inc.
La-Z-Boy Incorporated
Nautilus, Inc.
New
American Woodmark, Inc.
Armstrong Flooring Inc.
The Dixie Group, Inc.
Ethan Allan Interiors, Inc.
Flexsteel Industries, Inc.
Haverty Furniture Companies, Inc.
Hooker Furnishings Corporation
Kimball International, Inc.
Kirkland’s, Inc.
La-Z-Boy Incorporated
The Lovesac Company
Nautilus, Inc.
Purple Innovation, LLC
This graph assumes that $100 was invested on November 28, 2015 in the Company’s Common Stock, the S&P Index and the
peer group and that any dividends paid were invested. Tile Shop Holdings, Inc. is no longer included in our peer group as its
common stock is no longer publicly traded.
53
54
Management’s Report of Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm
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.
To the Stockholders and the Board of Directors 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 27, 2021 and November 28, 2020, and the related consolidated statements of operations,
comprehensive income (loss), stockholders' equity and cash flows for each of the three years in the period ended November
27, 2021, 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 27, 2021 and November 28, 2020, and the results of its
operations and its cash flows for each of the three years in the period ended November 27, 2021, 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 27, 2021, 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 31, 2022 expressed an unqualified opinion thereon.
Based upon their controls evaluation, our CEO and CFO have concluded that our Disclosure Controls are effective at a
reasonable assurance level.
Basis for Opinion
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 27, 2021 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 27, 2021, 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.
Changes in internal control over financial reporting
There have been no changes in our internal controls over financial reporting during our fourth fiscal quarter that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements,
taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the
critical audit matter or on the accounts or disclosures to which it relates.
55
56
Measurement of Reserves for Excess and Obsolete Inventories
Report of Independent Registered Public Accounting Firm
Description of the
Matter
At November 27, 2021, the Company’s inventories were $78.0 million. As discussed in Note 2 and Note
6 to the consolidated financial statements, cost for domestic manufactured furniture inventories is
determined using the last-in, first-out (“LIFO”) method and are stated at the lower of cost or market. The
cost of imported inventories and domestic outdoor furniture products is determined using the first-in, first-
out (“FIFO”) method and stated at the lower of cost or net realizable value. Reserves for excess and
obsolete inventories are determined based upon historical write-offs, forecasted future demand, market
conditions and, for domestic manufactured furniture, the respective valuations at LIFO.
Auditing management’s lower of cost or net realizable value or market determination for excess or
obsolete inventories was complex due to the highly judgmental nature and estimation uncertainty in
determining future demand and market conditions.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over
the Company’s determination of the reserves for excess and obsolete inventories. For example, we tested
controls over management’s review of the calculation of reserves for excess and obsolete inventories
which included their review of the significant assumptions described above.
Our audit procedures to test the reserves for excess and obsolete inventories included, among others,
testing the completeness and accuracy of the underlying data used in management’s analyses. We
evaluated the reasonableness of management’s assumptions by performing a retrospective review of the
prior year assumptions to actual activity, including write-off history. We held discussions with senior
financial and operational management to determine whether any strategic or operational changes in the
business would impact expected demand for or related carrying value of inventory. We also performed
sensitivity analyses of significant assumptions to evaluate the impact that changes would have on the
inventory reserves. We searched for and evaluated information that corroborated or contradicted the
Company’s assumptions.
We have served as the Company’s auditor since 2002.
Richmond, Virginia
January 31, 2022
To the Stockholders and the Board of Directors 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 27, 2021, 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 27, 2021, 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 27, 2021 and November 28, 2020, and the related
consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows for each of the
three years in the period ended November 27, 2021, and the related notes and schedule and our report dated January 31, 2022
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.
57
58
Richmond, Virginia
January 31, 2022
INVESTOR INFORMATION
INVESTOR INFORMATION
Internet Site
Internet Site
Corporate Information and Investor Inquiries
Corporate Information and Investor Inquiries
Our site on the Internet has been updated recently and is
Our site on the Internet has been updated recently and is
Our annual report and proxy statement together
Our annual report and proxy statement together
filled with information about Bassett Furniture, including
filled with information about Bassett Furniture, including
contain much of the information presented in the
contain much of the information presented in the
this annual report, detailed financial information and
this annual report, detailed financial information and
Form 10-K report filed with the Securities and Exchange
Form 10-K report filed with the Securities and Exchange
updates, information about our home furnishings
updates, information about our home furnishings
Commission. Individuals who wish to receive the
Commission. Individuals who wish to receive the
products, and a dealer locator of Bassett stores and other
products, and a dealer locator of Bassett stores and other
Form 10-K or other corporate literature should visit our
Form 10-K or other corporate literature should visit our
stores that feature Bassett products. Visit us at
stores that feature Bassett products. Visit us at
website at bassettfurniture.com or contact Investor Relations,
website at bassettfurniture.com or contact Investor Relations,
bassettfurniture.com.
bassettfurniture.com.
at 276.629.6000.
at 276.629.6000.
Forward Looking Statements
Forward Looking Statements
Transfer Agent - Stockholder Inquiries
Transfer Agent - Stockholder Inquiries
This Annual Report contains forward-looking statements
This Annual Report contains forward-looking statements
Stockholders with inquiries relating to stockholder
Stockholders with inquiries relating to stockholder
as defined in the Private Securities Litigation and Reform
as defined in the Private Securities Litigation and Reform
records, stock transfers, change of ownership, change of
records, stock transfers, change of ownership, change of
Act of 1995 and within the meaning of Sections 27A of
Act of 1995 and within the meaning of Sections 27A of
address or dividend payments should write to:
address or dividend payments should write to:
the Securities Exchange Act of 1933, as amended, and
the Securities Exchange Act of 1933, as amended, and
American Stock Transfer & Trust Company, LLC
American Stock Transfer & Trust Company, LLC
Section 21E of the Securities Exchange Act of 1934, as
Section 21E of the Securities Exchange Act of 1934, as
Operations Center https://www.google.com/
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amended. When used in this Annual Report the words
amended. When used in this Annual Report the words
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6201 15th Avenue
“hope,” “believe,” “expect,” “plan” or “planned,” “intend,”
“hope,” “believe,” “expect,” “plan” or “planned,” “intend,”
Brooklyn, NY 11219
Brooklyn, NY 11219
“anticipate,” “potential” and similar expressions are
“anticipate,” “potential” and similar expressions are
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Toll free: (800) 937-5449
intended to identify forward-looking statements. Readers
intended to identify forward-looking statements. Readers
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Local & International: (718) 921-8124
are cautioned against placing undue reliance on these
are cautioned against placing undue reliance on these
Email: info@astfinancial.com
Email: info@astfinancial.com
statements. Such statements, including but not limited to
statements. Such statements, including but not limited to
Web site: www.astfinancial.com
Web site: www.astfinancial.com
those regarding increases in sales, improving gross
those regarding increases in sales, improving gross
margins, growth in earnings per share, and the operating
margins, growth in earnings per share, and the operating
Annual Meeting
Annual Meeting
performance of licensed Bassett stores are based upon
performance of licensed Bassett stores are based upon
The Bassett Annual Meeting of Shareholders will be held
The Bassett Annual Meeting of Shareholders will be held
management’s beliefs, as well as assumptions made by and
management’s beliefs, as well as assumptions made by and
Wednesday, March 9, 2022 at 10 a.m. EST at the Company’s
Wednesday, March 9, 2022 at 10 a.m. EST at the Company’s
information currently available to management, and involve
information currently available to management, and involve
headquarters in Bassett, Virginia.
headquarters in Bassett, Virginia.
various risks and uncertainties, certain of which are beyond
various risks and uncertainties, certain of which are beyond
the Company’s control. The Company’s actual results could
the Company’s control. The Company’s actual results could
Market and Dividend Information
Market and Dividend Information
differ materially from those expressed in any forward-
differ materially from those expressed in any forward-
Bassett’s common stock trades on the NASDAQ national
Bassett’s common stock trades on the NASDAQ national
looking statement made by or on behalf of the Company.
looking statement made by or on behalf of the Company.
market system under the symbol “BSET.” We had 4,950
market system under the symbol “BSET.” We had 4,950
If the Company does not attain its goals, its business and
If the Company does not attain its goals, its business and
share amounts for the high and low market prices and dividends
share amounts for the high and low market prices and dividends
results of operations might be adversely affected. For
results of operations might be adversely affected. For
declared for the last two fiscal years are listed below:
declared for the last two fiscal years are listed below:
beneficial stockholders as of January 20, 2022. The range of per
beneficial stockholders as of January 20, 2022. The range of per
a discussion of factors that may impair the Company’s
a discussion of factors that may impair the Company’s
ability to achieve its goals, please see the cautionary
ability to achieve its goals, please see the cautionary
statements in the Management’s Discussion and Analysis
statements in the Management’s Discussion and Analysis
section of this Annual Report.
section of this Annual Report.
MARKET PRICES OF
MARKET PRICES OF
COMMON STOCK
COMMON STOCK
DIVIDENDS
DIVIDENDS
DECLARED
DECLARED
Quarter
Quarter
2021
2021
2020
2020
2021
2021
2020
2020
HIGH
HIGH
LOW
LOW
HIGH
HIGH
LOW
LOW
First
First
$23.64
$23.64
$15.70
$15.70
$17.02
$17.02
$9.71
$9.71
$0.375
$0.375
Second
Second
36.00
36.00
21.29
21.29
Third
Third
Fourth
Fourth
31.46
31.46
19.61
19.61
21.63
21.63
16.79
16.79
9.93
9.93
12.72
12.72
17.42
17.42
4.35
4.35
6.13
6.13
12.07
12.07
0.125
0.125
0.14
0.14
0.14
0.14
$0.125
$0.125
$0.125
$0.125
0. 08
0. 08
0.125
0.125
BOARD OF DIRECTORS
BOARD OF DIRECTORS
ROBERT H. SPILMAN, JR.
ROBERT H. SPILMAN, JR.
Chairman of the Board and Chief Executive Officer
Chairman of the Board and Chief Executive Officer
Bassett Furniture Industries, Inc.
Bassett Furniture Industries, Inc.
VIRGINIA W. HAMLET
VIRGINIA W. HAMLET
Founder and Owner
Founder and Owner
Hamlet Vineyards, LLC
Hamlet Vineyards, LLC
EMMA S. BATTLE
EMMA S. BATTLE
Chief Executive Officer
Chief Executive Officer
Market Vigor, LLC
Market Vigor, LLC
JOHN R. BELK
JOHN R. BELK
Former President and Chief Operating Officer
Former President and Chief Operating Officer
Belk, Inc.
Belk, Inc.
Private Investor
Private Investor
KRISTINA K. CASHMAN
KRISTINA K. CASHMAN
Restaurant & Retail Consultant
Restaurant & Retail Consultant
J. WALTER MCDOWELL
J. WALTER MCDOWELL
Former Chief Executive Officer
Former Chief Executive Officer
Carolinas/Virginia Banking
Carolinas/Virginia Banking
Wachovia Corporation
Wachovia Corporation
WILLIAM C. WAMPLER, JR.
WILLIAM C. WAMPLER, JR.
Managing Member, WTX, LLC
Managing Member, WTX, LLC
Former Member, Senate of Virginia
Former Member, Senate of Virginia
WILLIAM C. WARDEN, JR.
WILLIAM C. WARDEN, JR.
Lead Independent Director of Bassett Furniture Industries, Inc.
Lead Independent Director of Bassett Furniture Industries, Inc.
Former Executive Vice President
Former Executive Vice President
Lowe’s Companies, Inc.
Lowe’s Companies, Inc.
OFFICERS
OFFICERS
ROBERT H. SPILMAN, JR.
ROBERT H. SPILMAN, JR.
Chairman of the Board and Chief Executive Officer
Chairman of the Board and Chief Executive Officer
BRIAN W. CLASPELL
BRIAN W. CLASPELL
Vice President, Chief Information Officer
Vice President, Chief Information Officer
DAVID C. BAKER
DAVID C. BAKER
Senior Vice President, Chief Retail Officer
Senior Vice President, Chief Retail Officer
ROBERT E. FLYNN
ROBERT E. FLYNN
Vice President, Club Level
Vice President, Club Level
JOHN E. BASSETT, III
JOHN E. BASSETT, III
Senior Vice President, Chief Operations Officer
Senior Vice President, Chief Operations Officer
NICHOLAS C. GEE
NICHOLAS C. GEE
Vice President, Corporate Retail Sales
Vice President, Corporate Retail Sales
BRUCE R. COHENOUR
BRUCE R. COHENOUR
Senior Vice President, Chief Sales Officer
Senior Vice President, Chief Sales Officer
DRURY E. INGRAM
DRURY E. INGRAM
Vice President, Corporate Controller
Vice President, Corporate Controller
J. MICHAEL DANIEL
J. MICHAEL DANIEL
Senior Vice President, Chief Financial & Administrative
Senior Vice President, Chief Financial & Administrative
Officer
Officer
JACK L. HAWN, JR.
JACK L. HAWN, JR.
Senior Vice President, Bassett
Senior Vice President, Bassett
President, Zenith
President, Zenith
KARA KELCHNER-STRONG
KARA KELCHNER-STRONG
Senior Vice President, Customer Experience Officer
Senior Vice President, Customer Experience Officer
JAY R. HERVEY
JAY R. HERVEY
Vice President, Secretary, General Counsel
Vice President, Secretary, General Counsel
EDWIN C. AVERY, JR.
EDWIN C. AVERY, JR.
Vice President, Upholstery Product Development
Vice President, Upholstery Product Development
MATTHEW S. JOHNSON
MATTHEW S. JOHNSON
Vice President, Sales
Vice President, Sales
MIKE R. KREIDLER
MIKE R. KREIDLER
Vice President, Upholstery
Vice President, Upholstery
BETH A. LARSON
BETH A. LARSON
Vice President, Upholstery Finance & Administration
Vice President, Upholstery Finance & Administration
PETER D. MORRISON
PETER D. MORRISON
Vice President, Chief Creative Officer
Vice President, Chief Creative Officer
J. CARTER UNDERWOOD
J. CARTER UNDERWOOD
Vice President, Wood Operations
Vice President, Wood Operations
EDWARD H. WHITE
EDWARD H. WHITE
Vice President, Human Resources
Vice President, Human Resources
A N N U A L R E P O R T
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N A S D A Q : B S E T
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