BASSETT FURNITURE INDUSTRIES INC MANAGEMENT REPORT OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-Q)

Forward-Looking Statements and Refuge:



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", "aims" 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 that could cause actual results to differ materially from
those contemplated by such forward-looking statements include:



• the impact of the COVID-19 pandemic and resulting supply chain disruptions on

our ability to maintain normal operations at our retail stores, manufacturing

facilities and in our logistics services operations, and the resulting effects

any future interruption of these operations could have on our finances

condition, results of operations and liquidity, as well as the impact of the

pandemic on general economic conditions, including consumer spending and the

  strength of the housing market in the United States



• competitive conditions in the furniture industry

• overall in-store and web traffic levels and consumer demand for

  home furnishings



• ability of our customers and consumers to obtain credit

• the profitability of the bassette stores (independent licensees and

  Company-owned retail stores) which may result in future store closings



• ability to execute our corporate-owned retail strategies and achieve the

benefits from these strategies, including our initiatives to expand and improve

  our digital marketing capabilities, as they are implemented



• fluctuations in the cost and availability of raw materials, fuel, labor,

delivery costs and sourced products, including those that 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



• the results of marketing and advertising campaigns

• the effectiveness and security of our information and technology systems and

possible disruptions due to cybersecurity threats, including any impact of a

  network security incident; and the sufficiency of our insurance coverage,
  including cybersecurity insurance



• future tax legislation, or regulatory or judicial positions

• ability to effectively manage import supply chain to minimize business

  interruption



• concentration of domestic manufacturing, in particular of upholstery products,

and the resulting exposure to business interruption due to accidents, weather and

  other events and circumstances beyond our control




Additionally, other risks that could cause actual results to differ materially
from those contemplated by such forward-looking statements are set forth in Part
I, Item 1A. Risk Factors in the Company's Annual Report on Form 10-K for the
fiscal year ended November 27, 2021.



You should keep in mind that any forward-looking statement made by us in this
report or elsewhere 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 discussion 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 or
elsewhere, might not occur.



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                     PART I-FINANCIAL INFORMATION-CONTINUED

          BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

                               FEBRUARY 26, 2022

             (Dollars in thousands except share and per share data)



Overview



Bassett is a leading retailer, manufacturer and marketer of branded home
furnishings. Our products are sold primarily through a network of Company-owned
and licensee-owned branded stores under the Bassett Home Furnishings
("BHF") name, with additional distribution through other wholesale channels
including multi-line furniture stores, many of which feature Bassett galleries
or design centers. We 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 96 BHF stores at February 26, 2022, 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 for
the Bassett brand 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.



In 2018, we added outdoor furniture to our offerings with the acquisition of the
Lane Venture brand. Our strategy is to distribute these products outside of our
BHF store network through a network of over 15 independent sales
representatives. Using Lane Venture as a platform, we 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 have factories in Newton, North Carolina that manufacture both stationary and
motion upholstered furniture for inside the home along with our outdoor
furniture offerings. We also have factories in Martinsville and Bassett,
Virginia that assemble and finish our custom dining offerings. 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. 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.



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 since 2019. The migration to digital brand research has
caused us to comprehensively evaluate all of our American made custom products.
While our Bench Made line of Custom Upholstery and Custom Dining products
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 to best serve our customers online,
in the store or wherever our customer might be. 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 our in-store experience or the quality of our
in-home makeover capabilities.



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                     PART I-FINANCIAL INFORMATION-CONTINUED

          BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

                               FEBRUARY 26, 2022

             (Dollars in thousands except share and per share data)



We are engaged in a multi-year cross-functional digital transformation
initiative which has begun by examining, enhancing and standardizing our product
development and data management and governance processes. This will result in
more consistent underlying data that our merchandising and sales teams can use
in analyzing various product and sales trends for making better informed
decisions. It will also provide a uniform view of product data that can be
leveraged by our website, retail locations and wholesale partners. We expect to
complete this initial phase in mid-2022 at which time we will begin the process
of implementing a new eCommerce platform that we plan to introduce in 2023. 

the

new web platform will leverage world class features including enhanced customer
research capabilities and streamlined navigation.  We expect to spend between
$3,000 and $4,000 this fiscal year on these efforts.



During the first quarter of fiscal 2022, we closed a retail store in Ontario, California when the lease for this location expires.

Sale of the assets of Zenith Freight Lines, LLC



During the first quarter of 2022, we entered into a definitive agreement to sell
substantially all of the assets of our wholly-owned subsidiary, Zenith Freight
Lines, LLC ("Zenith") to J.B. Hunt Transport Services, Inc. ("J.B. Hunt") for
approximately $86,900 in cash. On February 28, 2022 the transaction was
completed with us receiving approximately $85,500 after the payment of $400 in
certain transaction costs and the funding of $1,000 held in escrow. The final
purchase price is subject to a customary post-closing working capital
adjustment. In the second quarter of 2022, we will recognize a substantial gain
on this transaction. As a result, the operations of our logistical services
segment, which consists entirely of the operations of Zenith, are presented in
the accompanying condensed consolidated statements of income and in the
following discussion as discontinued operations.



Impact of the COVID-19 pandemic on 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. The significant adverse economic
impact of the pandemic upon our results of operations was limited to fiscal
2020, however we continue to experience the 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. In addition, inflationary pressures throughout the
supply chain have resulted in us implementing multiple wholesale price increases
over the last several months. We expect that wholesale gross margins will be
slightly impacted during the first half of fiscal 2022 as we cycle through the
backlog.



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                     PART I-FINANCIAL INFORMATION-CONTINUED

          BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

                               FEBRUARY 26, 2022

             (Dollars in thousands except share and per share data)


Results from continuing operations – Periods ended February 26, 2022 compared to periods ended February 27, 2021:

Consolidated results from continuing operations for the three months ended
February 26, 2022 and February 27, 2021 are the following:



                                            Quarter Ended                                  Change
                           February 26, 2022            February 27, 2021          Dollars       Percent

Net sales of
furniture and
accessories             $  117,864         100.0 %   $  101,655         100.0 %   $  16,209           15.9 %
Cost of furniture and
accessories sold            60,471          51.3 %       48,252          47.5 %      12,219           25.3 %
Gross profit                57,393          48.7 %       53,403          52.5 %       3,990            7.5 %
SG&A expenses               50,915          43.2 %       47,842          47.1 %       3,073            6.4 %

Income from
operations              $    6,478           5.5 %   $    5,561           5.5 %   $     917           16.5 %



Total turnover for the three months ended February 26, 2022 increase
$16,209 compared to prior year periods primarily due to a 28% increase in wholesale shipments to the open market, as well as a 6.1% increase in retail sales.



Gross margins for the three months ended February 26, 2022 decreased 380 basis
points from 2021 primarily due to rising raw material and inbound freight costs,
including the impact of rising fuel prices. While these rising costs have been
somewhat mitigated by price increases implemented since the first quarter of
2021, the increase in order backlogs and order fulfillment times limited our
ability to match revised pricing to manufacturing costs. Another wholesale price
increase will be implemented during the second quarter of fiscal 2022, and we
will continue to monitor our costs to determine if additional price increases
are warranted.





Segment Information


We have strategically aligned our business into two 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 (Company-owned and licensee-owned retail stores) and
independent furniture retailers. Our wholesale segment includes our wood and
upholstery operations, which include Lane Venture, 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.
Also included in our wholesale segment are our short-term investments and our
holdings of retail real estate previously leased as licensee stores. The
earnings and costs associated with these assets are included in other loss, net,
in our condensed 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.


Our former logistics services segment which represented the activities of Zenith is now presented as discontinued operations.

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                     PART I-FINANCIAL INFORMATION-CONTINUED

          BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

                               FEBRUARY 26, 2022

             (Dollars in thousands except share and per share data)


Reconciliation of segment results to consolidated operating results



To supplement the financial measures prepared in accordance with GAAP, we
present gross profit by segment inclusive of the effects of intercompany sales
by our wholesale segment to our retail segment. Because these intercompany
transactions are not eliminated from our segment presentations and because we do
not present gross profit as a measure of segment profitability in the
accompanying condensed consolidated financial statements, the presentation of
gross profit by segment is considered to be a non-GAAP financial measure. The
reconciliation of this non-GAAP financial measure to the most directly
comparable financial measure calculated and presented in accordance with GAAP is
presented below along with the effects of various other intercompany
eliminations on our consolidated results of operations.



                                                               Quarter Ended February 26, 2022
                                             Non-GAAP Presentation                                GAAP Presentation
                                           Wholesale         Retail        Eliminations             Consolidated

Net sales of furniture and accessories $83,485 $64,107 $

      (29,728 ) (1)   $           117,864

Cost of furniture and accessories sold 59,662 29,951

     (29,142 ) (2)                60,471
Gross profit                                   23,823          34,156               (586 )                    57,393
SG&A expense                                   20,438          30,806               (329 ) (3)                50,915
Income from operations                    $     3,385       $   3,350     $         (257 )       $             6,478




                                                               Quarter Ended February 27, 2021
                                             Non-GAAP Presentation                                GAAP Presentation
                                           Wholesale         Retail        Eliminations             Consolidated

Net sales of furniture and accessories $70,264 $60,395 $

      (29,004 ) (1)   $           101,655

Cost of furniture and accessories sold 47,288 29,309

     (28,345 ) (2)                48,252
Gross profit                                   22,976          31,086               (659 )                    53,403
SG&A expense                                   18,179          29,992               (329 ) (3)                47,842
Income from operations                    $     4,797       $   1,094     $         (330 )       $             5,561



Notes on the sector consolidation table:

Represents the elimination of sales from our wholesale segment to our (1) corporate-owned BHF stores. (2) Represents the elimination of purchases from our BHF stores belonging to the Société de

our wholesale segment, as well as the variation for the elimination period

intercompany earnings in ending retail inventory.

Represents the elimination of rent paid by our retail stores occupying (3) Company-owned real estate.

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                     PART I-FINANCIAL INFORMATION-CONTINUED

          BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

                               FEBRUARY 26, 2022

             (Dollars in thousands except share and per share data)



Wholesale Segment



Wholesale segment results for periods ended February 26, 2022 and
February 27, 2021 are the following:



                                           Quarter Ended                              Change
                           February 26, 2022          February 27, 2021        Dollars      Percent

Net sales                $   83,485       100.0 %   $   70,264       100.0 %   $ 13,221         18.8 %
Gross profit (1)             23,823        28.5 %       22,976        32.7 %        847          3.7 %
SG&A expenses                20,438        24.5 %       18,179        25.9 %      2,259         12.4 %

Income from operations   $    3,385         4.1 %   $    4,797         6.8 %   $ (1,412 )      -29.4 %



(1) Segment-level gross margin is considered a non-GAAP financial measure

due to the included effects of intercompany transactions. Refer to

reconciliation of gross margin by segment to consolidated gross margin

      presented under the Reconciliation of Segment Results to Consolidated
      Results of Operations above.



Wholesale sales by major product category are as follows:


                                                                                          Quarter Ended
                                              February 26, 2022                                         February 27, 2021                           Total Change
                            External       Intercompany             Total             External       Intercompany             Total             Dollars      Percent
Bassett Custom Upholstery   $  31,929     $       20,096     $ 52,025        62.3 %   $  24,884     $       18,464     $ 43,348        61.7 %   $  8,677         20.0 %
Bassett Leather                12,939                 12       12,951        15.5 %       7,558                 29        7,587        10.8 %      5,364         70.7 %
Bassett Custom Wood             5,980              6,261       12,241        14.7 %       5,341              6,202       11,543        16.4 %        698          6.0 %
Bassett Casegoods               2,909              3,359        6,268         7.5 %       3,477              4,309        7,786        11.1 %     (1,518 )      -19.5 %
Total                       $  53,757     $       29,728     $ 83,485       100.0 %   $  41,260     $       29,004     $ 70,264       100.0 %   $ 13,221         18.8 %



Analysis of results – Wholesale trade



Net sales for the three months ended February 26, 2022 increased $13,221 from
the prior year period due primarily to a 28% increase in shipments to the open
market along with a 6.9% increase in shipments to the BHF store network. As
previously discussed, Bassett and most of the home furnishings industry have
been faced with continuing logistical challenges from COVID-related labor
shortages and supply chain disruptions creating significant delays in order
fulfillment and increasing backlogs. During the first quarter of fiscal 2022, we
made progress in decreasing these backlogs and expect them to continue
decreasing as our ability to manufacture and ship product has improved. At
February 26, 2022, wholesale backlog totaled $78,135 as compared to $90,057 at
November 27, 2021, $67,469 at February 27, 2021 and $14,617 at February 29,
2020. Gross margins for the three months ended February 26, 2022 declined 420
basis points compared to the prior year period as we have experienced
significant increases in material costs primarily in the upholstery operation,
partially offset by greater leverage on fixed costs due to higher sales volumes.



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                     PART I-FINANCIAL INFORMATION-CONTINUED

          BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

                               FEBRUARY 26, 2022

             (Dollars in thousands except share and per share data)


Retail – Company Owned Stores Segment

Retail segment results for the periods ended February 26, 2022 and
February 27, 2021 are the following:


                                            Quarter Ended                                  Change
                           February 26, 2022            February 27, 2021          Dollars        Percent

Net sales               $   64,107         100.0 %   $   60,395         100.0 %   $    3,712            6.1 %
Gross profit (1)            34,156          53.3 %       31,086          51.5 %        3,070            9.9 %
SG&A expenses               30,806          48.1 %       29,992          49.7 %          814            2.7 %
Income (loss) from
operations              $    3,350           5.2 %   $    1,094           1.8 %   $    2,256            N/M



(1) Segment-level gross margin is considered a non-GAAP financial measure

due to the included effects of intercompany transactions. Refer to

reconciliation of gross margin by segment to consolidated gross margin

presented under Reconciliation of segment results to consolidated results

       Results of Operations above.



Retail sales by major product category are as follows:


                                            Quarter Ended                                  Change
                           February 26, 2022            February 27, 2021          Dollars       Percent
Bassett Custom
Upholstery              $   37,818          59.0 %   $   34,461          57.1 %   $   3,357            9.7 %
Bassett Leather                240           0.4 %          252           0.4 %         (12 )         -4.8 %
Bassett Custom Wood          9,407          14.7 %        5,458           9.0 %       3,949           72.4 %
Bassett Casegoods            8,292          12.9 %       11,077          18.3 %      (2,785 )        -25.1 %
Accessories,
mattresses and other
(1)                          8,350          13.0 %        9,147          15.1 %        (797 )         -8.7 %
Total                   $   64,107         100.0 %   $   60,395         100.0 %   $   3,712            6.1 %



(1) Includes the sale of goods other than bassette– branded products, such as

accessories and bedding, and also includes the sale of furniture protection

       plans.




Analysis of Results - Retail



Net sales for the three months ended February 26, 2022 increased $3,712 from the
prior year period. Written sales (the value of sales orders taken but not
delivered) declined 2.4% from the first quarter of 2021. Retail backlog at
February 26, 2022 was $84,685 as compared to $82,894 at November 27, 2021,
64,806 at February 27, 2021 and $29,775 at February 29, 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
increasing backlogs. Gross margins for the three months ended February 26, 2022
increased by 180 basis points, primarily driven by improved pricing strategies,
lower levels of promotional activity and increased margins on clearance
activity. Selling, general and administrative expenses for the three months
ended February 26, 2022 as a percentage of sales decreased as compared to the
first quarter of 2021 primarily due to greater leverage on fixed costs from
higher sales volumes.



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                     PART I-FINANCIAL INFORMATION-CONTINUED

          BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

                               FEBRUARY 26, 2022

             (Dollars in thousands except share and per share data)


Discontinued Operations – Logistics Services

Results of operations of Zenith, which was sold to JB Hunt subsequent to the end of the first quarter, for the periods ended February 26, 2022 and
February 27, 2021 are the following:


                                            Quarter Ended                                  Change
                           February 26, 2022            February 27, 2021          Dollars        Percent
Logistical services
revenue                 $   16,776         100.0 %   $   12,018         100.0 %   $    4,758           39.6 %
Cost of logistical
services                    15,001          89.4 %       11,558          96.2 %        3,443           29.8 %
Other loss, net                (63 )        -0.4 %          (38 )        -0.3 %          (25 )         65.8 %

Income from
discontinued
operations before tax   $    1,712          10.2 %   $      422           3.5 %   $    1,290          305.7 %




The amounts shown above represent the results of Zenith's business transactions
with third parties. The increase in income from discontinued operations for the
three months ended February 26, 2022 as compared to the prior year period is
primarily due to freight and warehousing rate increases which Zenith primarily
implemented during the fourth quarter of fiscal 2021.



During the three months ended February 26, 2022 and February 27, 2021, Zenith
also charged Bassett $9,121 and $8,063, respectively, for logistical services
provided to our wholesale segment. These shipping and handling costs are
included in selling, general and administrative expenses in the accompanying
condensed consolidated statements of income. We have entered into a service
agreement with J.B. Hunt for the continuation of these services for a period of
seven years following the sale of Zenith.





Other items affecting net income


Other Loss, Net



Other loss, net, for the three months ended February 26, 2022 was $629 compared
to $299 for the three months ended February 27, 2021, a net increase of $330.
The net change was primarily due to higher net costs of Company-owned life
insurance.



Income Taxes



We calculate an anticipated effective tax rate for the year based on our annual
estimates of pretax income and use that effective tax rate to record our
year-to-date income tax provision.  Any change in annual projections of pretax
income could have a significant impact on our effective tax rate for the
respective quarter.



Our effective tax rates for the three months ended February 26, 2022 and
February 27, 2021 of 26.3% and 29.4%, respectively, differ from the federal
statutory rate of 21% primarily due to the effects of state income taxes and
various permanent differences, including charges of $135 during the three months
ended February 27, 2021 related to the vesting of stock awards.



Cash and capital resources


Cash Flows



Cash provided by operations for the first three months of fiscal 2022 was $2,866
compared to $4,984 for the first three months of fiscal 2021, representing a
decrease of $2,118. Cash provided by the operating activities of our
discontinued operations was $1,681 for the first three months of fiscal 2022
compared to $2,841 for the prior year period, a decline of $1,160.  Excluding
the decline in operating cash flow from discontinued operations, cash provided
by continuing operations declined $958 from the prior year period. This decrease
in operating cash flow is primarily due to changes in working capital as we
settled accounts payable in the first quarter of 2022 arising from increases in
inventory during fiscal 2021 as well as increases in accounts receivable arising
from strong sales in our wholesale segment.



Our overall cash position decreased by $2,494 during the first three months of
fiscal 2022, compared to a decline of $766 during the first three months of
fiscal 2021, a decline of $1,728 from the prior year period. Excluding the
decline in cash flow from discontinued operations, overall cash flow from
continuing operations declined $409 from the prior year period. In addition to
the decline in cash flows from operations, net cash used in investing activities
during the first three months of 2022 increased $1,691 to a net use of $2,880
compared to net cash used in investing activities of $1,189 for the prior year
period. This increase was primarily due to increased capital expenditures in the
current year. Net cash used in financing activities during the first three
months of 2022 decreased $2,081 to a net use of $2,480 as compared to a net use
of $4,561 for the prior year period, primarily due to a special dividend of
$2,479 declared and paid during the first quarter of 2021 partially offset by
increased share repurchases of $765 during the first three months of fiscal 2022
as compared to $534 repurchased during the quarter of fiscal 2021. On March 9,
2022 our Board of Directors increased the amount authorized under our existing
share repurchase plan to $40,000. With cash and cash equivalents and short-term
investments totaling $49,595 on hand at February 26, 2022, expected future
operating cash flows, pre-tax cash proceeds of approximately $85,500
subsequently received from the sale of Zenith before a special dividend of $1.50
per share, and the availability under our credit line noted below, we believe we
have sufficient liquidity to fund operations for the foreseeable future.



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                     PART I-FINANCIAL INFORMATION-CONTINUED

          BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

                               FEBRUARY 26, 2022

             (Dollars in thousands except share and per share data)



Debt and Other Obligations



Our bank credit facility provides for a line of credit of up to $25,000. At
February 26, 2022, 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 had outstanding standby letters of credit with another bank
totaling $325. 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 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.




We were in compliance with these covenants at February 26, 2022 and expect to
remain in compliance for the foreseeable future. The 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 used in our wholesale manufacturing
operations. We also lease local delivery trucks used in our retail segment. The
present value of our obligations for leases with terms in excess of one year at
February 26, 2022 is $115,861 and is included in our accompanying condensed
consolidated balance sheet at February 26, 2022. Lease obligations associated
with discontinued obligations totaled $22,834 at February 26, 2022. These leases
were subsequently transferred to J.B. Hunt in connection with the sale of
Zenith. We were contingently liable under licensee lease obligation guarantees
in the amount of $1,854 at February 26, 2022. Remaining terms under these lease
guarantees range from approximately one to three years. See Note 10 to our
condensed consolidated financial statements for additional details regarding our
lease guarantees.




Investment in Retail real estate

We have a substantial investment in real estate acquired for use as retail locations and occupied by Company-owned retail stores. These properties are included in property, plant and equipment, net, in the accompanying condensed consolidated balance sheets and consist of eight properties with a total area of ​​201,096 square feet and a net book value of $16,812 at February 26, 2022.

Significant Accounting Policies and Estimates

There have been no material changes in our critical accounting policies and estimates from the information provided in Section 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, included in our annual report on Form 10-K for the fiscal year ended November 27, 2021.

Off-balance sheet arrangements



We utilize stand-by letters of credit in the procurement of certain goods in the
normal course of business. In addition, we have guaranteed certain lease
obligations of licensee operators for some of their store locations. See Note 10
to our condensed consolidated financial statements for further discussion of
lease guarantees, including descriptions of the terms of such commitments and
methods used to mitigate risks associated with these arrangements.



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                     PART I-FINANCIAL INFORMATION-CONTINUED

          BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

                               FEBRUARY 26, 2022

             (Dollars in thousands except share and per share data)



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, it is our opinion that the final
resolution of these matters will not have a material adverse effect on our
financial position or future results of operations. See Note 9 to our condensed
consolidated financial statements for further information regarding certain
contingencies as of February 26, 2022.

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