BASSETT FURNITURE INDUSTRIES INC

Previous wording

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 newly redesigned website atwww.bassettfurniture.com. We were founded in 1902 and incorporated under the laws of Virginia in 1930. Our rich 121-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.

Current wording

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 122-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.

Previous wording

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. Digital outreach strategies have become the primary vehicle for brand advertising and customer acquisition. As a result, we have been engaged in a multi-year cross-functional digital transformation initiative with the first phase consisting of the examination and improvement of our underlying data management processes. During fiscal 2022, we implemented a comprehensive Product Information Management system which allows us to enhance and standardize our product development and data management and governance processes. This results in more consistent data that our merchandizing and sales teams can use in analyzing various product and sales trends in order to make better informed decisions. We also introduced a new web platform in August of 2023 that leverages world class features including enhanced customer research capabilities and streamlined navigation. Since the debut of the new site, we have seen increased engagement with the brand through a greater number of page views per customer along with more time spent on the site. We have also seen an increase in average order value that has resulted in increased e-commerce revenue. We plan to implement several enhancements to the site in 2024 that will improve the overall customer experience and brand presentation. While we have made it easier to purchase on-line, we will not compromise our in-store experience or the quality of our in-home makeover capabilities. We spent over $4 million on developing and implementing the new website in 2023.

Current wording

We introduced a new web platform late in 2023 that leverages world class features including enhanced customer research capabilities and streamlined navigation. Since the debut of the new site, we have seen increased engagement with the brand through a greater number of page views per customer along with more time spent on the site. We have also seen an increase in average order value that has resulted in increased e-commerce revenue. Although e-commerce sales continue to be small relative to in-store sales, we are pleased that we have seen a greater than 20% e-commerce sales increase over the back half of the fiscal year. We will continue to invest in ongoing improvements to the aesthetics and user experience that we provide on our website. While we have made it easier to purchase on-line, we will not compromise our in-store experience or the quality of our in-home makeover capabilities.

Previous wording

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 bedroom and dining offerings. In 2022, we purchased a facility which we had formerly leased in Haleyville, Alabama where we manufacture aluminum frames for our outdoor furniture.

Current wording

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 a factory in Martinsville, Virginia that assembles and finishes our custom bedroom and dining offerings. We also own a facility in Haleyville, Alabama where we manufacture aluminum frames for our outdoor furniture.

Previous wording

In addition to the furniture that we manufacture domestically, we source most of our formal bedroom and dining room furniture (casegoods) and certain leather upholstery offerings from several foreign plants, primarily in Vietnam and China. Over 75% of our wholesale revenues are derived from products that are manufactured in the United States using a mix of domestic and globally sourced components and raw materials.

Current wording

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. Approximately 80% of our wholesale revenues are derived from products that are manufactured in the United States using a mix of domestic and globally sourced components and raw materials.

Previous wording

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, to J.B. Hunt for $86,939 in cash. On February 28, 2022 the transaction was completed with us receiving $85,521 after the payment of $418 in certain transaction costs and the funding of $1,000 held in escrow, which was released to us on the first anniversary of the sale. The final purchase price was subject to a customary post-closing working capital adjustment, which was settled in the amount of $987 resulting in a pre-tax gain of $52,534 on this transaction. As a result of the sale, the operations of our former logistical services segment, which consisted entirely of the operations of Zenith, are presented in the accompanying condensed consolidated statements of income and in the following discussion as discontinued operations.

Current wording

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, to J.B. Hunt for $86,939 in cash (see Note 18 to the Consolidated Financial Statements for additional information regarding the sale of Zenith). On February 28, 2022 the transaction was completed with us receiving $85,521 after the payment of $418 in certain transaction costs and the funding of $1,000 held in escrow, which was released to us on the first anniversary of the sale. The final purchase price was subject to a customary post-closing working capital adjustment, which was settled in the amount of $987 resulting in a pre-tax gain of $52,534 on this transaction. As a result of the sale, the operations of our former logistical services segment, which consisted entirely of the operations of Zenith, are presented in the accompanying condensed consolidated statements of income and in the following discussion as discontinued operations.

Previous wording

The following discussion provides an analysis of our results of operations and reasons for material changes therein for fiscal year 2023 as compared to fiscal year 2022. It also compares fiscal year 2022 to fiscal year 2021 for the wholesale segment and the corporate and other segment due to changes in those segments as of the beginning of fiscal 2023. For additional analysis of the fiscal year 2022 results as compared to fiscal year 2021, 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 2022 Annual Report on Form 10-K, filed with the SEC on January 24, 2023.

Current wording

The following discussion provides an analysis of our results of operations and reasons for material changes therein for fiscal year 2024 as compared to fiscal year 2023. For additional analysis of the fiscal year 2023 results as compared to fiscal year 2022, 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 2023 Annual Report on Form 10-K, filed with the SEC on January 25, 2024.

Previous wording

Total sales revenue for the year ended November 25, 2023, decreased $95,465 or approximately 20% from the prior year period primarily due to decreases in wholesale shipments to both the open market and the BHF store network and decreases in retail delivered sales, partially offset by increased revenue in our Corporate and Other segment from Noa Home.

Current wording

Total sales revenue for the year ended November 30, 2024, decreased $60,213 or approximately 15% from the prior year period primarily due to decreases in wholesale shipments to both the open market and the BHF store network and decreases in retail delivered sales.

Previous wording

SG&A expenses as a percentage of sales for the year ended November 25, 2023 increased 770 basis points from 2022 primarily due to the deleverage of fixed costs caused by lower sales volumes.

Current wording

SG&A expenses as a percentage of sales for the year ended November 30, 2024 increased 420 basis points from 2023 primarily due to the deleverage of fixed costs caused by lower sales volumes.

Previous wording

During the year ended November 25, 2023, we recognized a goodwill impairment charge of $5,409 and a gain of $1,013 resulting from the write-down of our contingent consideration obligation both of which are associated with the acquisition of Noa Home. See Note 3 to the condensed consolidated financial statements. During the year ended November 26, 2022, we recognized a gain of $4,595 from the sale of the real estate at a former retail location in Houston, Texas.

Current wording

During fiscal 2023, we recognized a goodwill impairment charge of $5,409 and a gain of $1,013 resulting from the write-down of our contingent consideration obligation both of which are associated with the acquisition of Noa Home. See Note 3 to the consolidated financial statements.

Previous wording

(7) Represents the gain on the sale of the real estate at a former retail location.

Current wording

During the year ended November 26, 2022, we recognized a gain of $4,595 from the sale of the real estate at a former retail location in Houston, Texas.

Previous wording

Beginning in fiscal 2023, we strategically aligned our business into three reportable segments as defined in ASC 280,Segment Reporting, and as described below:

Current wording

We have strategically aligned our business into two reportable segments as defined in ASC 280,Segment Reporting, and as described below:

Previous wording

Our former logistical services segment which represented the operations of Zenith is now presented as a discontinued operation.

Current wording

Our former logistical services segment which represented the operations of Zenith is presented as a discontinued operation.

Previous wording

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. In addition, certain special gains or charges that are included in consolidated income from operations are not included in the measures of segment profitability. 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.

Current wording

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. In addition, certain special gains or charges that are included in consolidated income (loss) before income taxes are not included in the measures of segment profitability. 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.

Previous wording

Net sales for the year ended November 26, 2022 increased $29,240 or 9.9% from the prior year period due to a 13% increase in shipments to both the BHF store network, a 32% increase in shipments of Lane Venture product and a 3.8% increase in shipments to the open market. Gross margins for the year ended November 26, 2022 declined 90 basis points compared to the prior year period as we experienced significant increases in material and other production costs. In addition, we experienced reduced margins in our Bassett Leather product line due to price discounting during the last half of the year. As this product line is internationally sourced with extended lead times, we received significant amounts of inventory during the second and third quarters of 2022 just as product demand was weakening due to the market downturn in home furnishings. Also, the ocean freight costs associated with the majority of the product received was at significantly higher costs than are currently being realized on current product receipts. All of these cost increases were partially offset by greater leverage of fixed costs due to higher sales volumes. SG&A expenses as a percentage of sales increased 110 basis points primarily due to increased logistics and warehouse costs and higher bad debt expenses, partially offset by greater leverage of fixed costs from increased sales volumes.

Current wording

Net sales for the year ended November 30, 2024 decreased $41,449 or 17% from fiscal 2023 due primarily to a 19% decrease in shipments to the open market, a 16% decrease in shipments to our retail store network and a 3% decrease in Lane Venture shipments. Gross margins for the year ended November 30, 2024 increased 170 basis points over fiscal 2023 year primarily due to the expected improvement in the Bassett Leather business. As the Bassett Leather product line is internationally sourced with extended lead times, we received significant amounts of inventory during the second and third quarters of 2022 just as product demand was weakening due to the market downturn in home furnishings. Also, the ocean freight costs associated with the majority of the product received was at significantly higher costs than are currently being realized on current product receipts. Margins in our Bassett Casegoods business also improved as expected primarily due to shipping more product that contained lower in-bound freight costs partially offset by increased inventory valuation charges recorded in the second quarter of fiscal 2024 as we have been more aggressive in selling certain slow-moving products. These improvements were partially offset by slightly lower margins in the Bassett Custom Upholstery business due to deleverage of fixed costs from lower sales volumes. SG&A expenses as a percentage of sales increased 180 basis points primarily due to reduced leverage of fixed costs from decreased sales.

Previous wording

The dollar value of our wholesale backlog, representing orders received but not yet shipped to the BHF store network or independent dealers, was $18,478 at November 25, 2023 and $35,336 at November 26, 2022.

Current wording

The dollar value of our wholesale backlog, representing orders received but not yet shipped to the BHF store network or independent dealers, was $21,750 at November 30, 2024 and $18,478 at November 25, 2023.

Previous wording

Net sales for the year ended November 25, 2023 decreased $49,179 or approximately 17% from the prior year. Written sales (the value of sales orders taken but not delivered) declined 16% from fiscal 2022. Gross margins for the year ended November 25, 2023 increased by 20 basis points as compared to the prior year period as lower margins from store closure sales in the current year were offset by improved margins on in-line goods and lower unit costs as measured on a LIFO basis. SG&A expenses as a percentage of sales for the year ended November 25, 2023 increased 730 basis points primarily due to decreased leverage of fixed costs from lower sales volumes.

Current wording

Net sales for the year ended November 30, 2024 decreased $31,377 or 13% from fiscal 2023. Written sales (the value of sales orders taken but not delivered) declined 2.8% from fiscal 2023. Gross margin for the year ended November 30, 2024 improved 60 basis points over fiscal 2023 primarily due to higher margins on both in-line and clearance goods partially offset by additional inventory valuation charges in the second quarter of 2024 due to our strategy to be more aggressive in selling clearance goods to better control inventory levels. SG&A expenses as a percentage of sales for the year ended November 30, 2024 increased 350 basis points primarily due to decreased leverage of fixed costs from lower sales volumes.

Previous wording

Retail backlog at November 25, 2023 was $30,902 compared to $51,041 at November 26, 2022.

Current wording

Retail backlog at November 30, 2024 was $37,053 compared to $30,902 at November 25, 2023.

Previous wording

Revenues, costs and expenses of corporate and other for the fiscal years ended November 25, 2023, November 26, 2022 and November 27, 2021 are as follows:

Current wording

In addition to the two reportable segments discussed above, we include our remaining business activities and assets in a reconciling category known as Corporate and other, which includes the shared costs of various corporate functions along with any operating segments that do not meet the requirements to be reportable segments. Therefore, Noa Home is included within the Corporate and other reconciling category and accounts for all of the sales and gross profit within this reconciling category. Revenues, costs and expenses of Corporate and other for the fiscal years ended November 30, 2024, November 25, 2023 and November 26, 2022 are as follows:

Previous wording

Zenith charged Bassett $9,121 for logistical services provided to our wholesale segment during the year ended November 26, 2022, and $31,329 and $26,967 for fiscal 2021 and 2020, respectively. These shipping and handling costs are included in selling, general and administrative expenses in the accompanying condensed consolidated statements of income. We 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. Subsequent to the sale, we have incurred $26,125 and $27,604 of expense for the years ended November 25, 2023 and November 26, 2022, respectively, for the performance of logistical services by J.B. Hunt.

Current wording

Zenith only operated as a subsidiary of the Company for the first quarter of fiscal 2022, during which period Zenith charged Bassett $9,121 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 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. Subsequent to the sale, we incurred $22,721, $26,125 and $27,604 of expense during fiscal 2024, 2023 and 2022, respectively, for the performance of logistical services by J.B. Hunt.

Previous wording

We recorded an income tax provision on pre-tax income from continuing operations of $683, $8,702, and $5,836 in fiscal 2023, 2022 and 2021, respectively. Our effective tax rate of (27.5%) for 2023 differs from the federal statutory rate of 21.0% due to the non-taxable goodwill impairment and non-taxable gain on revaluation of contingent consideration both of which are associated with the acquisition of Noa Home, increases in the valuation allowance placed on deferred tax assets resulting from pre-tax losses in foreign tax jurisdictions associated with Noa Home and the effects of state income taxes and various permanent differences. Our effective tax rate of 25.5% for 2022 differs from the federal statutory rate of 21.0% due to the effects of state income taxes and various permanent differences.

Current wording

We recorded an income tax benefit of $4,675 on the loss from continuing operations for 2024. In 2023, we recorded income tax expense on the loss from continuing operations of $683 and in 2022, we recorded $8,702 of income tax expense on the income from continuing operations. Our effective tax rate of 32.5% for 2024 differs from the federal statutory rate of 21.0% due to the increases in the valuation allowance placed on deferred tax assets resulting from pre-tax losses in foreign tax jurisdictions associated with Noa Home, the nondeductible impairment of the Noa Home tradename, the tax benefit recorded for the capital loss associated with the cumulative investment in Noa Home due to the shutdown of the operations, and the effects of state income taxes and various permanent differences. Our effective tax rate of (27.5%) for 2023 differs from the federal statutory rate of 21.0% due to the non-taxable goodwill impairment and non-taxable gain on revaluation of contingent consideration both of which are associated with the acquisition of Noa Home, increases in the valuation allowance placed on deferred tax assets resulting from pre-tax losses in foreign tax jurisdictions associated with Noa Home, and the effects of state income taxes and various permanent differences.

Previous wording

We have net deferred tax assets of $4,645 as of November 25, 2023, which, upon utilization, are expected to reduce our cash outlays for income taxes in future years. It will require approximately $18,000 of future taxable income to utilize our net deferred tax assets.

Current wording

We have net deferred tax assets of $6,867 as of November 30, 2024, which, upon utilization, are expected to reduce our cash outlays for income taxes in future years. It will require approximately $31,700 of future taxable income to utilize our net deferred tax assets.

Previous wording

During the year ended November 25, 2023, we spent $17,489 on purchases of property and equipment primarily consisting of expenditures related to our digital transformation project, upfit of the new Tampa, Florida store that opened January 12, 2024, the opening of the Inwood Village store in Dallas, Texas, the remodel of the Austin, Texas store and the remodeling of two other stores in the Dallas, Texas market. We also paid $5,982 in dividends during the year, a $14,180 decrease from 2022 as the prior year included a $1.50 per share special dividend. Finally, we repurchased 252,054 shares spending $4,176 during the current year, a $10,946 decrease compared to the prior period. As of November 25, 2023, $21,823 remains available for future purchases under our stock repurchase plan. With cash and cash equivalents and short-term investments totaling $70,182 on hand at November 25, 2023, 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.

Current wording

Our overall cash position declined $12,993 during fiscal 2024. During fiscal 2024, we spent $5,211 on purchases of property and equipment primarily consisting of the upfit of the new Tampa, Florida and Houston, Texas stores that opened in the first quarter of 2024, final payments on the Austin, Texas store remodel, update of the façade of the Greensboro, North Carolina store location and expenditures related to various information technology and manufacturing plant projects. During the fourth quarter of fiscal 2024 ,we purchased a $2,500 CD which has been pledged as collateral against our merchant services agreement with a bank. We also paid $6,654 in dividends during fiscal 2024. During 2024, we spent $1,420 to repurchase shares under our existing stock repurchase program as compared to $4,176 in 2023. As of November 30, 2024, $20,403 remains available for future purchases under our stock repurchase plan. With cash and cash equivalents and short-term investments totaling $59,911 on hand at November 30, 2024, 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.

Previous wording

Our bank credit facility provides for a line of credit of up to $25,000. At November 25, 2023, 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:

Current wording

On May 15, 2024, we entered into the Eighth Amended and Restated Credit Agreement with our bank (the “Credit Facility”). This Credit Facility provides for a line of credit of up to $25,000. At November 30, 2024, we had $6,013 outstanding under standby letters of credit against our line. The line bears interest at the One-Month Term Secured Overnight Financing Rate (“One-Month Term SOFR”) plus 1.75% and is secured by our accounts receivable and inventory. Our bank charges a fee of 0.25% on the daily unused balance of the line, payable quarterly. Under the terms of the Credit Facility, Consolidated Minimum Tangible Net Worth (as defined in the Credit Facility) shall at no time be less than $120,000. In addition, we must maintain the following financial covenants, measured quarterly on a rolling twelve-month basis and commencing as of the end of the first fiscal quarter after the first date that the used commitment (the sum of any outstanding advances plus standby letters of credit) equals or exceeds $8,250:

Previous wording

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 warehouse space used in our retail segment. We also lease local delivery trucks used in our retail segment. The total future minimum lease payments for leases with terms in excess of one year at November 25, 2023 is $140,405 the present value of which is $116,529 and is included in our accompanying consolidated balance sheet at November 25, 2023. We were contingently liable under licensee lease obligation guarantees in the amount of $1,845 at November 25, 2023. The remaining terms under these lease guarantees range from approximately one to five years. See Note 15 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.

Current wording

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 warehouse space used in our retail segment. We also lease local delivery trucks used in our retail segment. The total future minimum lease payments for leases with terms in excess of one year at November 30, 2024 is $128,530 the present value of which is $106,445 and is included in our accompanying consolidated balance sheet at November 30, 2024. We were contingently liable under licensee lease obligation guarantees in the amount of $5,131 at November 30, 2024. The remaining terms under these lease guarantees range from approximately one to five years. See Note 15 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.

Previous wording

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 $6,979 at November 25, 2023. See Note 10 to our consolidated financial statements for a projection of future benefit payments under these plans from 2024 through 2033. We also have deferred compensation plans with a total liability of $4,316 at November 25, 2023, the current portion of which is $329. See Note 10 to our consolidated financial statements for additional information regarding these plans.

Current wording

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 $6,917 at November 30, 2024. See Note 10 to our consolidated financial statements for a projection of future benefit payments under these plans from 2025 through 2034. We also have deferred compensation plans with a total liability of $5,055 at November 30, 2024, the current portion of which is $330. See Note 10 to our consolidated financial statements for additional information regarding these plans.

Previous wording

During fiscal 2023, we declared and paid four quarterly dividends totaling $5,982, or $0.68 per share. During fiscal 2023, we repurchased 252,054 shares of our stock for $4,176 under our share repurchase program. The weighted-average effect of these share repurchases on basic earnings per share from continuing operations was approximately $0.01 per share. On March 9, 2022, our Board of Directors increased the remaining limit of the repurchase plan to $40,000. The approximate dollar value that may yet be purchased pursuant to our stock repurchase program as of November 25, 2023 was $21,283.

Current wording

During fiscal 2024, we declared and paid four quarterly dividends totaling $6,654, or $0.76 per share. During fiscal 2024, we repurchased 101,305 shares of our stock for $1,420 under our share repurchase program. The weighted-average effect of these share repurchases on basic earnings per share from continuing operations was less than $0.01 per share. On March 9, 2022, our Board of Directors increased the remaining limit of the repurchase plan to $40,000. The approximate dollar value that may yet be purchased pursuant to our stock repurchase program as of November 30, 2024 was $20,403.

Previous wording

We currently anticipate that total capital expenditures for fiscal 2024 will be between $12 million and $14 million, which will be used for the for remodeling various retail stores and additional investments in information technology, including enhancements to our new website. 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.

Current wording

We currently anticipate that total capital expenditures for fiscal 2025 will be between $8 million and $12 million, which will be used for remodeling various retail stores and additional investments in information technology, including enhancements to our website. 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.

Previous wording

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 $22,788 and $35,963 as of November 25, 2023 and November 26, 2022, respectively. Substantially all of the customer deposits held at November 26, 2022 related to performance obligations satisfied during fiscal 2023 and have therefore been recognized in revenue for the year ended November 25, 2023. 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.

Current wording

At retail, transfer occurs and revenue is recognized upon delivery of goods to the customer. We typically collect a significant portion of the purchase price as a customer deposit upon order, with the balance typically collected upon delivery. These deposits are carried on our balance sheet as a current liability until delivery is fulfilled and amounted to $25,742 and $22,788 as of November 30, 2024 and November 25, 2023, respectively. Substantially all of the customer deposits held at November 25, 2023 related to performance obligations satisfied during fiscal 2024 and have therefore been recognized in revenue for the year ended November 30, 2024. 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.

Previous wording

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 $535 and $1,261 at November 25, 2023 and November 26, 2022, respectively, representing 3.7% and 6.6% 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.

Current wording

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 $1,097 and $535 at November 30, 2024 and November 25, 2023, respectively, representing 7.7% and 3.7% 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.

Previous wording

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, domestic outdoor furniture products and Noa Home product inventories 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 $5,183 and $5,167 at November 25, 2023 and November 26, 2022, respectively, representing 7.6% and 5.8%, 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.

Current wording

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, domestic outdoor furniture products and Noa Home product inventories 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 $5,395 and $5,183 at November 30, 2024 and November 25, 2023, respectively, representing 8.9% 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.

Previous wording

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*). 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. For the annual test of goodwill performed as of the beginning of the fourth quarter of fiscal 2023, we performed the qualitative assessment as described above with respect to our upholstery reporting unit and concluded that there was no impairment of the goodwill allocated to that reporting unit as of November 25, 2023. For the annual test of the goodwill performed as of the beginning of the fourth quarter of fiscal 2023 with respect to our Noa Home reporting unit, we proceeded to the quantitative test and concluded that the goodwill allocated to that reporting unit as of November 25, 2023 was fully impaired as the difficult environment for companies selling furniture on the web resulted in Noa Home performing well below initial projections and expectations. For the annual test of goodwill performed as of the beginning of the fourth fiscal quarter of 2022, we performed the qualitative assessment as described above and concluded that there was no impairment of our goodwill as of November 26, 2022.

Current wording

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*). 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. For the annual test of goodwill performed as of the beginning of the fourth quarter of fiscal 2024, we performed the qualitative assessment as described above with respect to our upholstery reporting unit and concluded that there was no impairment of the goodwill allocated to that reporting unit as of November 30, 2024. For the annual test of the goodwill performed as of the beginning of the fourth quarter of fiscal 2023, we concluded that there was no impairment of the goodwill allocated to our upholstery reporting unit, however with respect to our Noa Home reporting unit, we proceeded to the quantitative test and concluded that the goodwill allocated to that reporting unit as of November 25, 2023 was fully impaired as the difficult environment for companies selling furniture on the web resulted in Noa Home performing well below initial projections and expectations. For the annual test of goodwill performed as of the beginning of the fourth fiscal quarter of 2022, we performed the qualitative assessment as described above and concluded that there was no impairment of our goodwill as of November 26, 2022.

Previous wording

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 25, 2023, our indefinite-lived intangible assets other than goodwill consist of trade names acquired in the acquisitions of Lane Venture and Noa Home and have a carrying value of $8,675.

Current wording

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. During fiscal 2024, as a result of our decision to cease operations at Noa Home, we recognized a charge of $1,827 to fully impair the Noa Home trade name intangible asset. At November 30, 2024, our indefinite-lived intangible asset other than goodwill consisted of the trade name acquired in the acquisition of Lane Venture and had a carrying value of $6,848.

Previous wording

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 25, 2023 our definite-lived intangible assets consist of customer relationships acquired in the acquisition of Lane Venture with a carrying value of $175.

Current wording

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 30, 2024 our definite-lived intangible assets consist of customer relationships acquired in the acquisition of Lane Venture with a carrying value of $120.