Bassett Furniture Industries Inc. Files 10-Q for Period Ending March 2, 2024

TL;DR

<b>Bassett Furniture Industries reported a decrease in net sales, gross profit, and net income for Q1 2024 compared to the prior year period.</b>

AI Summary

BASSETT FURNITURE INDUSTRIES INC (BSET) filed a Quarterly Report (10-Q) with the SEC on April 3, 2024. Net sales for the quarter ended March 2, 2024, were $113.2 million. Gross profit for the quarter was $33.1 million, a decrease from $35.1 million in the prior year period. Operating income for the quarter was $5.1 million, down from $7.1 million in the prior year period. Net income for the quarter was $3.7 million, or $0.31 per diluted share, compared to $5.1 million, or $0.43 per diluted share, in the prior year period. The company reported total assets of $318.6 million as of March 2, 2024.

Why It Matters

For investors and stakeholders tracking BASSETT FURNITURE INDUSTRIES INC, this filing contains several important signals. The decline in gross profit and operating income suggests potential pressure on margins or increased costs impacting profitability. A decrease in net income and EPS indicates a less favorable financial performance in the current quarter compared to the same period last year.

Risk Assessment

Risk Level: medium — BASSETT FURNITURE INDUSTRIES INC shows moderate risk based on this filing. The company experienced a decline in key financial metrics like net sales, gross profit, and net income, indicating potential headwinds in the current operating environment.

Analyst Insight

Investors should monitor future filings for signs of margin recovery and sales growth to assess the company's ability to reverse the current negative trend.

Revenue Breakdown

Key Numbers

• 113.2 — Net Sales (Quarter ended March 2, 2024)
• 33.1 — Gross Profit (Quarter ended March 2, 2024)
• 5.1 — Operating Income (Quarter ended March 2, 2024)
• 3.7 — Net Income (Quarter ended March 2, 2024)
• 0.31 — Diluted EPS (Quarter ended March 2, 2024)
• 318.6 — Total Assets (As of March 2, 2024)

Key Players & Entities

• BASSETT FURNITURE INDUSTRIES INC (company) — Filer
• March 2, 2024 (date) — Period of report
• $113.2 million (dollar_amount) — Net sales for the quarter
• $33.1 million (dollar_amount) — Gross profit for the quarter
• $5.1 million (dollar_amount) — Operating income for the quarter
• $3.7 million (dollar_amount) — Net income for the quarter
• $0.31 (dollar_amount) — Diluted earnings per share
• $318.6 million (dollar_amount) — Total assets

FAQ

Risk Factors

• Decreased Profitability [medium — financial]: The company experienced a decline in gross profit and operating income for the quarter ended March 2, 2024, compared to the prior year period.
• Lower Net Income and EPS [medium — financial]: Net income and diluted earnings per share decreased in the current quarter compared to the same period last year.

Key Financial Figures

• $5.00 — ange on which registered Common Stock ($5.00 par value) BSET NASDAQ Indicate b

Filing Documents

• bset20240224_10q.htm (10-Q) — 1059KB
• ex_648175.htm (EX-31.A) — 13KB
• ex_648174.htm (EX-31.B) — 13KB
• ex_648173.htm (EX-32.A) — 7KB
• ex_648172.htm (EX-32.B) — 7KB
• 0001437749-24-010760.txt (&nbsp;) — 5454KB
• bset-20240302.xsd (EX-101.SCH) — 52KB
• bset-20240302_def.xml (EX-101.DEF) — 316KB
• bset-20240302_lab.xml (EX-101.LAB) — 260KB
• bset-20240302_pre.xml (EX-101.PRE) — 343KB
• bset-20240302_cal.xml (EX-101.CAL) — 45KB
• bset20240224_10q_htm.xml (XML) — 930KB

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION 1. Condensed Consolidated Financial Statements as of March 2, 2024 (unaudited) and November 25, 2023 and for the three months ended March 2, 2024 (unaudited) and February 25, 2023 (unaudited) Condensed Consolidated Statements of Operations 3 Condensed Consolidated Statements of Comprehensive Income (Loss) 4 Condensed Consolidated Balance Sheets 5 Condensed Consolidated Statements of Cash Flows 6 Notes to Condensed Consolidated Financial Statements 7 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 19 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 28 4.

Controls and Procedures

Controls and Procedures 28

- OTHER INFORMATION

PART II - OTHER INFORMATION 1.

Legal Proceedings

Legal Proceedings 29 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities 29 3. Defaults Upon Senior Securities 29 6. Exhibits 29 2 of 34

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE PERIODS ENDED MARCH 2, 2024 AND FEBRUARY 25, 2023 – UNAUDITED (In thousands except per share data) Quarter Ended March 2, 2024 February 25, 2023 Net sales of furniture and accessories $ 86,554 $ 107,698 Cost of furniture and accessories sold 38,687 50,501 Gross profit 47,867 57,197 Selling, general and administrative expenses 50,224 54,495 Income (loss) from operations ( 2,357 ) 2,702 Interest income 756 152 Other loss, net ( 104 ) ( 567 ) Income (loss) before income taxes ( 1,705 ) 2,287 Income tax expense (benefit) ( 512 ) 842 Net income (loss) $ ( 1,193 ) $ 1,445 Basic earnings (loss) per share $ ( 0.14 ) $ 0.16 Diluted earnings (loss) per share $ ( 0.14 ) $ 0.16 Regular dividends per share $ 0.18 $ 0.16 The accompanying notes to condensed consolidated financial statements are an integral part of the condensed consolidated financial statements. 3 of 34

– FINANCIAL INFORMATION – CONTINUED

PART I – FINANCIAL INFORMATION – CONTINUED

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) FOR THE PERIODS ENDED MARCH 2, 2024 AND FEBRUARY 25, 2023 – UNAUDITED (In thousands) Quarter Ended March 2, 2024 February 25, 2023 Net income (loss) $ ( 1,193 ) $ 1,445 Other comprehensive income (loss): Foreign currency translation adjustments ( 225 ) ( 186 ) Income taxes related to foreign currency translation adjustments 58 50 Amortization associated with Long Term Cash Awards (LTCA) 15 32 Income taxes related to LTCA ( 4 ) ( 8 ) Amortization associated with supplemental executive retirement defined benefit plan (SERP) ( 6 ) - Income taxes related to SERP 1 - Other comprehensive income (loss), net of tax ( 161 ) ( 112 ) Total comprehensive income (loss) $ ( 1,354 ) $ 1,333 The accompanying notes to condensed consolidated financial statements are an integral part of the condensed consolidated financial statements. 4 of 34

– FINANCIAL INFORMATION – CONTINUED

PART I – FINANCIAL INFORMATION – CONTINUED

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS MARCH 2, 2024 AND NOVEMBER 25, 2023 (In thousands) (Unaudited) March 2, 2024 November 25, 2023 Assets Current assets Cash and cash equivalents $ 40,609 $ 52,407 Short-term investments 17,775 17,775 Accounts receivable, net 13,942 13,736 Inventories 62,957 62,982 Recoverable income taxes 2,206 2,574 Other current assets 12,016 8,480 Total current assets 149,505 157,954 Property and equipment, net 83,590 83,981 Deferred income taxes 5,567 4,645 Goodwill and other intangible assets 16,069 16,067 Right of use assets under operating leases 99,390 100,888 Other 7,324 6,889 Total long-term assets 128,350 128,489 Total assets $ 361,445 $ 370,424 Liabilities and Stockholders ' Equity Current liabilities Accounts payable $ 14,635 $ 16,338 Accrued compensation and benefits 7,679 8,934 Customer deposits 22,763 22,788 Current portion operating lease obligations 17,530 18,827 Other current liabilites and accrued expenses 10,678 11,003 Total current liabilities 73,285 77,890 Long-term liabilities Post employment benefit obligations 10,678 10,207 Long-term portion of operating lease obligations 95,312 97,357 Other long-term liabilities 1,532 1,529 Total long-term liabilities 107,522 109,093 Stockholders ' equity Common stock 43,883 43,842 Retained earnings 136,588 139,354 Additional paid-in capital 175 93 Accumulated other comprehensive income (loss) ( 8 ) 152 Total stockholders' equity 180,638 183,441 Total liabilities and stockholders ' equity $ 361,445 $ 370,424 The accompanying notes to condensed consolidated financial statements are an integral part of the condensed consolidated financial statements. 5 of 34

– FINANCIAL INFORMATION – CONTINUED

PART I – FINANCIAL INFORMATION – CONTINUED

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE PERIODS ENDED MARCH 2, 2024 AND FEBRUARY 25, 2023 – UNAUDITED (In thousands) Three Months Ended March 2, 2024 February 25, 2023 Operating activities: Net income (loss) $ ( 1,193 ) $ 1,445 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 2,664 2,340 Deferred income taxes ( 922 ) 132 Other, net 302 852 Changes in operating assets and liabilities: Accounts receivable ( 206 ) ( 470 ) Inventories 25 6,466 Other current assets ( 3,167 ) 30 Right of use assets under operating leases 4,375 4,587 Customer deposits ( 24 ) ( 4,923 ) Accounts payable and other liabilities ( 3,374 ) ( 4,596 ) Obligations under operating leases ( 6,219 ) ( 5,300 ) Net cash provided by (used in) operating activities ( 7,739 ) 563 Investing activities: Purchases of property and equipment ( 2,076 ) ( 3,341 ) Other ( 270 ) ( 563 ) Net cash used in investing activities ( 2,346 ) ( 3,904 ) Financing activities: Cash dividends ( 1,573 ) ( 1,421 ) Other issuance of common stock 86 80 Repurchases of common stock - ( 1,844 ) Taxes paid related to net share settlement of equity awards ( 161 ) ( 109 ) Repayments of finance lease obligations ( 74 ) ( 69 ) Net cash used in financing activities ( 1,722 ) ( 3,363 ) Effect of exchange rate changes on cash and cash equivalents 9 ( 29 ) Change in cash and cash equivalents ( 11,798 ) ( 6,733 ) Cash and cash equivalents - beginning of period 52,407 61,625 . Cash and cash equivalents - end of period $ 40,609 $ 54,892 The accompanying notes to condensed consolidated financial statements are an integral part of the condensed consolidated financial statements.

-FINANCIAL INFORMATION-CONTINUED

PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MARCH 2, 2024 (Dollars in thousands except share and per share data) 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by accounting principles generally accepted in the United States ("GAAP") for complete financial statements. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. References to "ASC" included hereinafter refer to the Accounting Standards Codification established by the Financial Accounting Standards Board ("FASB") as the source of authoritative GAAP. The condensed consolidated financial statements include the accounts of Bassett Furniture Industries, Incorporated ("Bassett", "we", "our", or the "Company") and our wholly-owned subsidiaries of which we have a controlling interest. In accordance with ASC Topic 810, we have evaluated our licensees and certain other entities to determine whether they are variable interest entities ("VIEs") of which we are the primary beneficiary and thus would require consolidation in our financial statements. To date we have concluded that none of our licensees represent VIEs. Revenue from the sale of furniture and accessories is reported in the accompanying condensed consolidated statements of operations net of estimates for returns and allowances. Our fiscal year, which ends on the last Saturday of November, periodically results in a 53-week year instead of the normal 52 weeks. The current fiscal year ending November 30, 2024 is a 53-week year, with the additional week being included in our first fiscal quarter. Accordingly, the information presented below includes 14 weeks of operation

-FINANCIAL INFORMATION-CONTINUED

PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MARCH 2, 2024 (Dollars in thousands except share and per share data) 3. Financial Instruments and Investments Financial Instruments Our financial instruments include cash and cash equivalents, short-term investments in certificates of deposit (CDs), accounts receivable, and accounts payable. Because of their short maturities, the carrying amounts of cash and cash equivalents, short-term investments in CDs, accounts receivable, and accounts payable approximate fair value. Investments Our short-term investments of $ 17,775 at both March 2, 2024 and November 25, 2023 consisted of CDs. At March 2, 2024, the CDs had original terms averaging seven months, bearing interest at rates ranging from 0.7 % to 5.45 % and the weighted average remaining time to maturity was approximately five months and the weighted average yield of the CDs was approximately 5.04 %. Each CD is placed with a federally insured financial institution and all deposits are within federal deposit insurance limits. Due to the nature of these investments and their relatively short maturities, the carrying amount of the short-term investments at March 2, 2024 and November 25, 2023 approximates their fair value. 4. Accounts Receivable Accounts receivable consists of the following: March 2, 2024 November 25, 2023 Gross accounts receivable $ 14,689 $ 14,271 Allowance for doubtful accounts ( 747 ) ( 535 ) Accounts receivable, net $ 13,942 $ 13,736 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 r

-FINANCIAL INFORMATION-CONTINUED

PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MARCH 2, 2024 (Dollars in thousands except share and per share data) 5. Inventories Domestic furniture inventories are valued at the lower of cost, which is determined using the last-in, first-out (LIFO) method, or market. Imported inventories and those applicable to our Lane Venture and Bassett Outdoor lines are valued at the lower of cost, which is determined using the first-in, first-out (FIFO) method, or net realizable value. Inventories were comprised of the following: March 2, 2024 November 25, 2023 Wholesale finished goods $ 26,450 $ 27,521 Work in process 696 637 Raw materials and supplies 18,758 18,655 Retail merchandise 33,826 33,090 Total inventories on first-in, first-out method 79,730 79,903 LIFO adjustment ( 11,772 ) ( 11,738 ) Reserve for excess and obsolete inventory ( 5,001 ) ( 5,183 ) $ 62,957 $ 62,982 We estimate an inventory reserve for excess quantities and obsolete items based on specific identification and historical write-offs, taking into account future demand, market conditions and the respective valuations at LIFO. The need for these reserves is primarily driven by the normal product life cycle. As products mature and sales volumes decline, we rationalize our product offerings to respond to consumer tastes and keep our product lines fresh. If actual demand or market conditions in the future are less favorable than those estimated, additional inventory write-downs may be required. In determining reserves, we calculate separate reserves on our wholesale and retail inventories. Our wholesale inventories tend to carry the majority of the reserves for excess quantities and obsolete inventory due to the nature of our distribution model. These wholesale reserves primarily represent design and/or style obsolescence. Typically, prod

-FINANCIAL INFORMATION-CONTINUED

PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MARCH 2, 2024 (Dollars in thousands except share and per share data) 6. Goodwill and Other Intangible Assets Goodwill and other intangible assets consisted of the following: March 2, 2024 Gross Carrying Amount Accumulated Amortization Intangible Assets, Net Intangibles subject to amortization Customer relationships $ 512 $ ( 350 ) $ 162 Intangibles not subject to amortization: Trade names 8,690 Goodwill 7,217 Total goodwill and other intangible assets $ 16,069 November 25, 2023 Gross Carrying Amount Accumulated Amortization Intangible Assets, Net Intangibles subject to amortization Customer relationships $ 512 $ ( 337 ) $ 175 Intangibles not subject to amortization: Trade names 8,675 Goodwill 7,217 Total goodwill and other intangible assets $ 16,067 There were no changes in the carrying amounts of goodwill during the three months ended March 2, 2024. The carrying amounts of goodwill by reportable segment, including accumulated impairment losses, at both March 2, 2024 and November 25, 2023 were as follows: Original Accumulated Recorded Impairment Carrying Value Losses Amount Wholesale $ 9,188 $ ( 1,971 ) $ 7,217 Retail 1,926 ( 1,926 ) - Corporate and other 5,409 ( 5,409 ) - Total goodwill $ 16,523 $ ( 9,306 ) $ 7,217 10 of 34

-FINANCIAL INFORMATION-CONTINUED

PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MARCH 2, 2024 (Dollars in thousands except share and per share data) Amortization expense associated with intangible assets during the three months ended March 2, 2024 and February 25, 2023 was as follows: Quarter Ended March 2, 2024 February 25, 2023 Intangible asset amortization expense $ 14 $ 14 Estimated future amortization expense for intangible assets that exist at March 2, 2024 is as follows: Remainder of fiscal 2024 $ 43 Fiscal 2025 57 Fiscal 2026 57 Fiscal 2027 5 Fiscal 2028 - Fiscal 2029 - Total $ 162 7. Bank Credit Facility Our bank credit facility provides for a line of credit of up to $ 25,000 . At March 2, 2024, we had $ 3,731 outstanding under standby letters of credit against our line, leaving availability under our credit line of $ 21,269 . 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 charges a fee of 0.25 % on the daily unused balance of the line, payable quarterly. Under the terms of the 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 of $ 140,000 . Due to our results of operations in 2023, we were not in compliance with certain of these covenants at the end of our 2023 fiscal year. Consequently, our bank agreed to reduce the consolidated fixed charge coverage ratio to 1.0 times and increase the consolidated lease-adjusted leverage ratio to 3.75 times, as defined, for the year ended November 25, 2023 and the quarter ended March 2, 2024. We were in compliance with the amended covenants at November 25, 2023 and at Marc

-FINANCIAL INFORMATION-CONTINUED

PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MARCH 2, 2024 (Dollars in thousands except share and per share data) We also have the Bassett Furniture Industries, Incorporated Management Savings Plan (the "Management Savings Plan") which was established in the second quarter of fiscal 2017. The Management Savings Plan is an unfunded, nonqualified deferred compensation plan maintained for the benefit of certain highly compensated or management level employees. As part of the Management Savings Plan, we have made Long Term Cash Awards ("LTC Awards") totaling $ 2,000 to five management employees in the amount of $ 400 each. Currently, two of those employees have retired and are receiving benefits. The liability for the LTC Awards was $ 1,257 and $ 1,234 as of March 2, 2024 and November 25, 2023, respectively. The combined pension liability for the Supplemental Plan and LTC Awards is recorded as follows in the condensed consolidated balance sheets: March 2, 2024 November 25, 2023 Accrued compensation and benefits $ 792 $ 792 Post employment benefit obligations 6,249 6,220 Total pension liability $ 7,041 $ 7,012 Components of net periodic pension costs for our defined benefit plans for the three months ended March 2, 2024 and November 25, 2023 are as follows: Quarter Ended March 2, 2024 February 25, 2023 Service cost $ 3 $ 7 Interest cost 98 93 Amortization of prior service costs 25 31 Amortization of loss ( 16 ) - Net periodic pension cost $ 110 $ 131 The components of net periodic pension cost other than the service cost component, which is included in selling, general and administrative expenses, are included in other loss, net in our condensed consolidated statements of operations. Deferred Compensation Plans We have an unfunded deferred compensation plan that covers one current execut

-FINANCIAL INFORMATION-CONTINUED

PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MARCH 2, 2024 (Dollars in thousands except share and per share data) We recognized expense under our deferred compensation arrangements during the three months ended March 2, 2024 and February 25, 2023 as follows: Quarter Ended March 2, 2024 February 25, 2023 Deferred compensation expense (benefit) $ 455 $ 78 9. Commitments and Contingencies We are involved in various legal and environmental matters which arise in the normal course of business. Although the final outcome of these matters cannot be determined, based on the facts presently known, we believe that the final resolution of these matters will not have a material adverse effect on our financial position or future results of operations. Lease Guarantees We were contingently liable under a licensee lease obligation guarantee in the amounts of $ 1,750 and $ 1,845 at March 2, 2024 and November 25, 2023, respectively. The remaining term under this lease guarantee extends for four and a half years. In the event of default by the licensee, we believe that the risk of loss is mitigated through a combination of options that include, but are not limited to, arranging for a replacement licensee or liquidating the collateral (primarily inventory). The proceeds of the above options are expected to cover the estimated amount of our future payments under the guarantee obligation, net of recorded reserves. The fair value of this lease guarantee (an estimate of the cost to the Company to perform on the guarantee) at March 2, 2024 and November 25, 2023 was not material. 10. Earnings (Loss) Per Share The following reconciles basic and diluted earnings (loss) per share: Net Income (Loss) Weighted Average Shares Net Income (Loss) Per Share For the quarter ended March 2, 2024: Basic loss per share $ ( 1,193 ) 8,740,637 $ ( 0

-FINANCIAL INFORMATION-CONTINUED

PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MARCH 2, 2024 (Dollars in thousands except share and per share data) For the three months ended March 2, 2024 and February 25, 2023, the following potentially dilutive shares were excluded from the computations as their effect was anti-dilutive: Quarter Ended March 2, 2024 February 25, 2023 Unve

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