1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 24, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to _______________________
Commission File No. 0-209
BASSETT FURNITURE INDUSTRIES, INCORPORATED
(Exact name of Registrant as specified in its charter)
Virginia 54-0135270
------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3525 Fairystone Park Highway
Bassett, Virginia 24055
-----------------------
(Address of principal executive offices)
(Zip Code)
(540) 629-6000
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes _______No ___X____
Form 10-K(A) for the fiscal year ended November 25, 2000, will be filed
subsequent to the April 2, 2001, required filing date. The Registrant's 10-K
filed on February 22, 2001, will be amended to include the audited financial
statements of the Bassett Industries Alternative Asset Fund, LP (BIAAF), a
significant affiliate of the company, which has a fiscal year end of December
31, which is different than the Company's fiscal year end. No other changes
will be made to the 10-K.
At April 9, 2001, 11,731,021 shares of common stock of the Registrant were
outstanding.
2
PART I - FINANCIAL INFORMATION
BASSETT FURNITURE INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE 13 WEEKS ENDED FEBRUARY 24, 2001 AND FEBRUARY 26, 2000 - UNAUDITED
(Dollars in thousands except per share data)
2001 2000
--------------- -----------------
Net Sales $ 82,553 $ 94,981
Cost of sales 67,994 76,408
--------------- -----------------
Gross profit 14,559 18,573
Selling, general and administrative 13,201 15,293
Gain on sale of property and equipment (3,028) -
Restructuring and impaired fixed asset charges 1,847 -
--------------- -----------------
Operating income 2,539 3,280
Other income, net 678 3,658
--------------- -----------------
Income before income taxes and cumulative
effect of accounting change 3,217 6,938
Income taxes 965 2,220
--------------- -----------------
Income before cumulative effect of accounting change 2,252 4,718
Cumulative effect of accounting change (net of income
taxes of $171) - (364)
--------------- -----------------
Net income 2,252 4,354
Retained earnings-beginning of period 185,293 187,973
Cash dividends (2,346) (2,393)
Purchase and retirement of common stock, net (171) (1,894)
--------------- -----------------
Retained earnings-end of period $ 185,028 $ 188,040
=============== =================
Basic earnings per share:
Income before cumulative effect of accounting change $ 0.19 $ 0.39
Cumulative effect of accounting change - (0.03)
--------------- -----------------
Net income per share $ 0.19 $ 0.36
=============== =================
Diluted earnings per share:
Income before cumulative effect of accounting change $ 0.19 $ 0.39
Cumulative effect of accounting change - (0.03)
--------------- -----------------
Net income per share $ 0.19 $ 0.36
=============== =================
Dividends per share $ 0.20 $ 0.20
=============== =================
The accompanying notes to condensed consolidated financial statements are an
integral part of the condensed consolidated financial statements.
2 of 13
3
PART I - FINANCIAL INFORMATION - CONTINUED
BASSETT FURNITURE INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
FEBRUARY 24, 2001 AND NOVEMBER 25, 2000
(In thousands)
(Unaudited)
Assets February 24, 2001 November 25, 2000
----------------- -----------------
Current assets
Cash and cash equivalents $ 4,041 $ 3,259
Trade accounts receivable, net 66,349 70,309
Inventories, net 45,231 50,201
Other current assets 6,559 6,069
Refundable income taxes 580 580
Deferred income taxes 6,457 6,457
----------------- -----------------
Total current assets 129,217 136,875
----------------- -----------------
Property & equipment
Cost 228,931 230,043
Less accumulated depreciation 134,746 136,071
----------------- -----------------
Total property & equipment 94,185 93,972
----------------- -----------------
Other long-term assets
Investment securities 14,115 15,043
Investment in affiliated companies 46,148 69,972
Deferred income taxes 2,133 2,061
Other 29,167 28,757
----------------- -----------------
Total other long-term assets 91,563 115,833
----------------- -----------------
Total assets $ 314,965 $ 346,680
================= =================
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 16,906 $ 20,310
Accrued liabilities 20,314 21,583
----------------- -----------------
Total current liabilities 37,220 41,893
----------------- -----------------
Long-term liabilities
Employee benefits 10,580 10,647
Notes Payable 19,000 45,000
----------------- -----------------
Total long-term liabilities 29,580 55,647
----------------- -----------------
Commitments and Contingencies (Notes E and H)
Stockholders' Equity
Common stock 58,664 58,824
Additional paid-in capital - -
Retained earnings 185,028 185,293
Accumulated other comprehensive income -
unrealized holding gains, net of income tax effect 4,824 5,418
Unamortized stock compensation (351) (395)
----------------- -----------------
Total stockholders' equity 248,165 249,140
----------------- -----------------
Total liabilities and stockholders' equity $ 314,965 $ 346,680
================= =================
The accompanying notes to condensed consolidated financial statements are an
integral part of the condensed consolidated financial statements.
3 of 13
4
PART I - FINANCIAL INFORMATION - CONTINUED
BASSETT FURNITURE INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 13 WEEKS ENDED FEBRUARY 24, 2001 AND FEBRUARY 26, 2000 - UNAUDITED
(in thousands)
2001 2000
------------- --------------
Net income $ 2,252 $ 4,354
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization 2,786 2,677
Equity in undistributed income of affiliated companies (956) (2,961)
Provision for deferred income taxes (72) 2,277
Provision for writedown of property and equipment 1,600 -
Net gain from sales of property and equipment (3,028) -
Net gain on financial instrument (350) (1,366)
Compensation earned under restricted stock plan 44 60
Changes in operating assets and liabilities:
Trade accounts receivable 3,960 (5,054)
Inventory 4,970 (5,386)
Other current assets 47 2,147
Accounts payable and accrued liabilities (4,323) 627
Long-term liabilities (67) (79)
------------- --------------
Net cash provided by (used in) operating activities 6,863 (2,704)
------------- --------------
Investing activities:
Purchases of property and equipment (5,344) (7,979)
Proceeds from sales of property and equipment 3,828 -
Dividends from affiliated companies 25,059 -
Investments in affiliated companies - (4,200)
Other (946) (1,995)
------------- --------------
Net cash provided by (used in) investing activities 22,597 (14,174)
------------- --------------
Financing activities:
Borrowings (repayments) under notes payable (26,000) 19,000
Issuance of common stock 52 12
Repurchase of common stock (384) (2,882)
Cash dividends (2,346) (2,393)
------------- --------------
Net cash provided by (used in) financing activities (28,678) 13,737
------------- --------------
Net change in cash and cash equivalents 782 (3,141)
Cash and cash equivalents, beginning of period 3,259 5,740
------------- --------------
Cash and cash equivalents, end of period $ 4,041 $ 2,599
============= ==============
The accompanying notes to condensed consolidated financial statements are an
integral part of the condensed consolidated financial statements.
4 of 13
5
BASSETT FURNITURE INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
FEBRUARY 24, 2001 (Dollars in thousands except share and per share data)
Note A. 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 generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
The condensed consolidated financial statements include the accounts of
Bassett Furniture Industries, Incorporated (the "Company") and its wholly
owned subsidiaries. The equity method of accounting is used for the Company's
investment in affiliated companies in which the Company exercises significant
influence but does not maintain control.
Note B. Reclassifications:
For comparative purposes certain amounts for fiscal 2000 have been
reclassified to conform to fiscal 2001 presentation.
Note C. Cumulative Effect of Accounting Change:
In 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-up
Activities," which requires start-up costs, as defined, to be expensed as
incurred. In accordance with this SOP, any previously capitalized start-up
costs are required to be written-off as a cumulative effect of a change in
accounting principle. The Company, upon adoption of this SOP in the first
quarter of fiscal 2000, has written off the unamortized balance of such
previously capitalized start-up costs as of November 28, 1999, of $535 ($364
after tax) or $.03 per diluted share as a cumulative effect of an accounting
change.
Note D. Inventories:
Inventories are carried at last-in, first-out (LIFO) cost, which is not in
excess of market. Inventories at February 24, 2001 and November 25, 2000
consisted of the following:
February 24, November 25,
2001 2000
----------------- ---------------------
Finished goods $ 46,317 $ 50,563
Work in process 6,954 8,708
Raw materials and supplies 19,623 18,368
----------------- ---------------------
Total inventories on first-in, first-out cost method 72,894 77,639
LIFO adjustment (27,663) (27,438)
----------------- ---------------------
Total inventories, net $ 45,231 $ 50,201
================= =====================
Note E. Investment in Affiliated Companies:
Summarized combined income statement information for the Company's equity
method investments for the thirteen weeks ended February 24, 2001 and February
26, 2000 are as follows:
2001 2000
------------ ------------
Revenues $ 27,550 $ 28,496
Income from operations 4,596 7,593
Net income 85 2,745
LRG Furniture, LLC (LRG), an affiliated company, incurred start-up related
losses in fiscal 2000 and expects improved profitability, yet has incurred
additional losses in 2001. In addition, the Company has outstanding accounts
and notes receivable from LRG and has leases and loan guarantees with LRG. The
Company has committed to provide financial support to LRG, as needed, over the
next two years.
5 of 13
6
BASSETT FURNTURE INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
FEBRUARY 24, 2001(Dollars in thousands except share and per share data)
Note F. Comprehensive income:
For the thirteen weeks ended February 24, 2001, and February 26, 2000, total
comprehensive income was $1,658 and $3,797, respectively. Included in total
comprehensive income for the first quarter was net income of $2,252 and
$4,354, respectively, and unrealized holding losses arising during the period,
net of tax of $594 and $557, respectively.
Note G. Restructuring, Impaired Fixed Assets and Other Unusual and
Nonrecurring Charges:
During fiscal year 2000, a decision was made to consolidate wood manufacturing
operations at two of the Company's facilities in Bassett, VA. These
restructuring activities continued in the first quarter of 2001 and included
moving production from one facility to another. One manufacturing facility in
the Wood Division will be closed in the second quarter of 2001, and all
operations will be absorbed by one of the remaining facilities. All of these
reorganization actions will result in the elimination of approximately 400
positions. The following summarizes first quarter restructuring:
Nov. 25, Feb. 24,
2000 First Fixed 2001
reserve quarter asset Reserves reserve
balance charges write- downs utilized balance
----------- ----------- --------------- ------------- ------------
Non-cash writedown
of property and
equipment to
net realizable value $ - $ 1,600 $ 1,600 $ - $ -
Severance and related
employee benefit
costs 492 247 - 502 237
----------- ----------- --------------- ------------- ------------
$ 492 $ 1,847 $ 1,600 $ 502 $ 237
=========== =========== =============== ============= ============
The writedown was entirely related to closing one facility in Bassett,
Virginia. Production and many of the employees from this facility will be
transferred to another manufacturing facility in Bassett, Virginia. The
Company expects to have additional charges in the second quarter of 2001, as a
result of these first quarter consolidations, of approximately $700. These
charges will include severance and other employee benefit costs.
Note H. Contingencies:
Legislation has phased out interest deductions on certain policy loans related
to Company owned life insurance (COLI) as of January 1, 1999. The Company has
recorded cumulative reductions to income tax expense of approximately $8,000
as the result of COLI interest deductions through 1998. The Internal Revenue
Service, on a national level, has pursued an adverse position regarding the
deductibility of COLI policy loan interest for years prior to January 1, 1999.
The IRS has received favorable rulings on the non-deductibility of COLI loan
interest. Management understands that these rulings and the adverse position
taken by the IRS will be subjected to extensive challenges in court. In the
event that the IRS prevails, the outcome could result in potential income tax
and interest payments which could be material to the Company's future results
of operations.
The Company is also involved in various other 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
management's opinion that the final resolution of these matters will not have
a material adverse effect on the Company's financial position or future
results of operations.
Note I. Financial Instruments:
In 1999, the company entered into an equity collar arrangement in order to
reduce its exposure to fluctuations in its investment portfolio. In the first
quarter of 2000, the Company terminated this particular financial instrument
and recognized a gain of $1,366, which is included in other income in the
accompany consolidated statements of income, and entered into a new financial
instrument which more clearly correlates to its equity portfolio. Subsequent
to the end of the first quarter 2001, the Company terminated this equity
collar arrangement, at a cost of approximately $150.
6 of 13
7
PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES INC. AND SUBSIDIARIES
FEBRUARY 24, 2001 (Dollars in thousands except share and per share data)
The Company had adopted the provisions of SFAS No. 133, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities," in 2001 and
has determined that the impact of adopting this statement is immaterial.
Note J. Earnings per share:
The following reconciles basic and diluted earnings per share after cumulative
effect of accounting change:
Weighted Earnings per
Net Income Average Shares share
-----------------------------------------------------
For the thirteen weeks ended February 24, 2001
- ----------------------------------------------
Net income available to common stockholders $ 2,252 11,709,648 $ 0.19
Add effect of dilutive securities:
Options and restricted stock - 3,593 -
-----------------------------------------------------
Diluted earnings per share $ 2,252 11,713,241 $ 0.19
=====================================================
For the thirteen weeks ended February 26, 2000
- ----------------------------------------------
Net income available to common stockholders $ 4,354 11,971,965 $ 0.36
Add effect of dilutive securities:
Options and restricted stock - 818 -
-----------------------------------------------------
Diluted earnings per share $ 4,354 11,972,783 $ 0.36
=====================================================
Options to purchase 1.7 and 1.4 million shares of common stock were
outstanding during the first quarters of 2001 and 2000, respectively that
could potentially dilute basic EPS in the future.
Note K. Segment Information:
Segment information for the periods ended February 24, 2001 and February 26,
2000 was as follows:
For the period ended February 24, 2001
Wood Imports Upholstery Other Consolidated
---------------------------------------------------------------------------------------------
Net sales $ 48,575 $ 8,646 $ 22,242 $ 3,090 $ 82,553
Operating income (loss) 5,731 1,958 2,160 (7,310) 2,539
Depreciation and amortization 1,091 - 277 1,418 2,786
Capital expenditures 552 - 112 4,680 5,344
For the period ended February 26, 2000
Wood Imports Upholstery Other Consolidated
-------------------------------------------------------------------------------------------
Net sales $ 59,864 $ 7,615 $ 24,440 $ 3,062 $ 94,981
Operating income (loss) 8,675 1,998 1,914 (9,307) 3,280
Depreciation and amortization 1,268 - 237 1,172 2,677
Capital expenditures 1,692 - 1,176 5,111 7,979
The Company's other businesses consist of a contemporary furniture business
(Weiman), showroom, real estate, gain on sale of property and equipment,
restructuring and corporate operations, all included to reconcile segment
information to the Condensed Consolidated Financial Statements. Corporate
operations include overhead spending for accounting, marketing, information
technologies, selling and general expenses. Operating income by business
segment is defined as sales less direct operating costs and expenses.
Beginning in the first quarter of 2001, the results of the Import Division are
listed separately in the segment information. For prior reporting, the results
of the Import Division were included in the Wood Division.
7 of 13
8
PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES INC. AND SUBSIDIARIES
February 24,2001
(Dollars in thousands except share and per share data)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of Operations - First quarter 2001 compared with first quarter 2000
In the first quarter of 2001 the Company reported $82,553 in net sales, a
decline of 13.1% from the $94,981 reported for the first quarter of 2000. The
decline in sales is primarily the result of a continued soft retail sector and
the loss of a major customer to bankruptcy in late 2000. In response to these
current business conditions, the Company is focused on four key issues which
include expanding the Bassett Furniture Direct (BFD) and @Home with Bassett
(@Home) programs, providing better service levels, reducing working capital
and improving operating margins.
Sales to the BFD and @Home channels increased by 8.6% in the first quarter of
2001 compared to the first quarter of 2000. During the first quarter 2001,
three BFD stores were opened, bringing the total BFD's open at the end of the
quarter to 59. Also in the first quarter, seven @Home's were opened or
converted from existing galleries, bringing the total @Home's to 173 by the
end of the quarter.
Gross margin; selling, general and administrative (S,G&A) expenses; and
operating income as a percentage of net sales were as follows for the quarters
ended February 24, 2001 and February 26, 2000:
2001 2000
--------- --------
Gross margin 17.6% 19.6%
Gain on sale of property and equipment -3.7% 0.0%
Restructuring and impaired fixed asset charges 2.2% 0.0%
S,G&A 16.0% 16.1%
Operating income 3.1% 3.5%
The decrease in gross margin for the first quarter 2001 compared to the prior
year was primarily a result of reduced production levels and the related labor
inefficiencies and under absorbed fixed costs associated with these levels. In
response, the Company continues to aggressively reduce costs across the
company, and restructure manufacturing capacities through consolidations in
all divisions. The consolidation of the J.D. Bassett plant in the Wood
Division and the closing of the Claremont plant in the Upholstery Division
were completed during the first quarter of 2001.
Included in operating income, the Company recognized a one-time gain of $3,028
on the sale of its former showroom in Thomasville, North Carolina, during the
first quarter of 2001.
In late 2000, the Company made a decision to consolidate production in the
Wood Division. As a result of this decision, the Company incurred $247 in
related restructuring expenses during the first quarter of 2001 in addition to
those charged in fiscal year 2000. Also during the first quarter of 2001,
additional restructuring activities, which include further consolidation
within the Wood Division, resulted in a charge of $1,600 related to the
writedown of property and equipment. This writedown was entirely related to
closing one facility in Bassett, Virginia. Production and many of the
employees from this facility will be transferred to another manufacturing
facility in Bassett, Virginia. The Company expects to incur additional charges
in the second quarter of 2001 as a result of these first quarter
consolidations, of approximately $700. These charges will include severance
and other employee benefit costs.
S,G&A expenses remained relatively flat for the first quarter of 2001 at 16.0%
compared to 16.1% for the first quarter of 2000. However, the Company's total
SG&A spending decreased from $15,293 in the first quarter 2000 to $13,201 for
the first quarter of 2001. The Company continues to closely monitor
discretionary spending and adjust to current sales demands with spending
reductions in corporate overhead and marketing. Management is committed to
reducing costs and has targeted S,G&A spending to approximate 15% of net sales
over the next three years.
8 of 13
9
PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES INC. AND SUBSIDIARIES
FEBRUARY 24,2001
(Dollars in thousands except share and per share data)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
Other income declined significantly in the first quarter of 2001, $678 compared
to $3,658 for the first quarter 2000. This decrease was attributable to three
key components: a large gain on a financial instrument which was recorded in the
first quarter of 2000, and from the Company's investment in a limited
partnership and from affiliated investments in the first quarter of 2001. The
reduced affiliated earnings in 2001 was primarily the result of an affiliates'
recognition of an extraordinary loss related to the early extinguishment of debt
during the quarter. Included in other income are the Company's regular
investment earnings, earnings from its equity in undistributed income of
affiliated companies, and interest expense. Other income is expected to continue
to be an integral component of the Company's future earnings.
The effective tax rate was 30% in the first quarter of 2001 compared to 32% in
the first quarter of 2000. The effective tax rates are lower than the
statutory federal income tax rate due to exclusions for tax exempt income.
For the quarter ended February 24, 2001, net income was $2,252 or $.19 per
diluted share, compared to $4,354 or $.36 per diluted share for the first
quarter ended February 26, 2000.
Segment Information
The following is a discussion of operating results for each of Bassett's
business segments.
Quarter Ended Quarter Ended
Wood Division February 24, 2001 February 26, 2000
--------------------------- ----------------------
Net sales $ 48,575 $ 59,864
Contribution to profit and overhead $ 5,731 $ 8,675
Wood Division net sales decreased 18.9% in the first quarter 2001 compared to
the first quarter 2000 results, due to overall market conditions and the soft
retail furniture environment. Sales and production levels remain at near
breakeven levels for the first quarter of 2001. In an effort to improve sales
and margins in this segment, the Company is introducing new products, opening
more BFD and @Home stores, repositioning the division through cost reduction
initiatives, as well as improving product styling, quality and service.
Contribution to profit and overhead is defined by the Company as gross profit
less direct divisional operating expenses, but excluding any allocation of
corporate overhead expenses, interest expense, or income taxes. Wood Division
contribution to profit and overhead dropped from 14.5% of net sales in the
first quarter of 2000 to 11.8% of net sales in the first quarter of 2001,
primarily as a result of lower sales and production levels and sales of
discontinued inventories at lower margins. In order to improve performance,
the Company has decided to further consolidate production of two manufacturing
facilities in the Wood Division. These changes will decrease the overall cost
structure of the division through improved labor efficiencies and the
elimination of certain fixed costs. These changes will better position the
manufacturing capacity of the division with the current demands of its customers
and provide for future profitability improvement.
Quarter Ended Quarter Ended
Import Divison February 24, 2001 February 26, 2000
----------------------- -----------------------
Net sales $ 8,646 $ 7,615
Contribution to profit and overhead $ 1,958 $ 1,998
Beginning in the first quarter of 2001, the results of the Import Division are
listed separately in the segment information. For prior reporting, the results
of the Import Division were included in the Wood Division.
9 of 13
10
PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES INC. AND SUBSIDIARIES
FEBRUARY 24,2001
(Dollars in thousands except share and per share data)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
Net sales for the Import Division increased 13.5% in the first quarter of 2001
compared to the first quarter of 2000. The Company expects the sales of this
segment to continue to increase, which should, in turn, increase the Company's
overall margin position. The products of the Import Division will continue to
supplement the product offerings of the other divisions, as well as include
complete suites of bedroom and dining room furniture.
Import Division contribution to profit and overhead decreased from 26.2% of net
sales in the first quarter of 2000 to 22.6% of net sales in 2001. The decrease
was a result of an increase in freight, handling and related overhead costs
for the division. The expected sales growth of this segment requires the
Company to focus more attention on forecasting and purchasing practices,
inventory management, logistics and quality.
Quarter Ended Quarter Ended
Upholstery Division February 24, 2001 February 26, 2000
----------------------- -----------------------
Net sales $ 22,242 $ 24,440
Contribution to profit and overhead $ 2,160 $ 1,914
Net sales for the Upholstery Division have declined by 9.0% for the first
quarter 2001 compared to the first quarter 2000, primarily due to the loss of
a major customer to bankruptcy in late 2000. Management also decided to exit
certain distribution channels, which were incompatible with the Bassett brand
image and the Company's current primary channels of distribution. The Company
is focusing upholstery distribution on its BFD stores, its @ Home with Bassett
galleries, and several of its major customers.
Contribution to profit and overhead increased from 7.8% of net sales for the
first quarter of 2000 to 9.7% of net sales for the first quarter of 2001.
Increases were due to the consolidation of several manufacturing facilities
over the last two years, continuation of efforts to control labor and overhead
spending, the decision to exit certain distribution channels, introduction of
new products and the implementation of several operational initiatives. These
include cellular manufacturing and investments in new cutting and sewing
equipment. The Company plans additional profit improvements for the Upholstery
Division through sales growth of new products at higher margins and the related
absorption efficiencies resulting from increased sales and production levels.
Liquidity and Capital Resources
Cash provided by operating activities was $6,863 for the first quarter ended
February 24, 2001, compared to cash used in operating activities of $2,704 for
the quarter ended February 26, 2000. The improvement in 2001 was attributable
to the Company's initiatives to lower working capital levels, especially its
inventories and receivables. Some of these initiatives include better planning
and forecasting, improved purchasing practices, discounting of slow-moving
inventories, and more effective collection efforts.
The Company invested $5,344 in property and equipment in the first quarter
2001 for retail real estate, the build out of its new leased showroom, and
computer related equipment for information systems. During the first quarter
of 2001, the Company realized proceeds of $3,828 on the sale of its former
showroom in Thomasville, North Carolina. The Company also received a special
dividend from an affiliated company of $25,059, which was primarily utilized
to reduce the Company's overall debt position.
During 2000, the Company entered into a three-year $70,000 revolving credit
facility with a new lender and three other participants. During the first
quarter of 2001, the Company repaid $26,000 of this facility, principally by
applying the special dividend from an affiliate, bringing the balance at the
end of the quarter to $19,000. The Company does not expect to substantially
increase its level of borrowings in fiscal year 2001.
10 of 13
11
PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES INC. AND SUBSIDIARIES
FEBRUARY 24,2001
(Dollars in thousands except share and per share data)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
The Company purchased and retired 37,500 shares of its Common Stock for $384
during the first quarter of 2001. These purchases were part of the Company's
stock repurchase program, approved in fiscal 1998, which allows the Company to
repurchase up to $40,000 in Company stock. Also the Company paid a dividend
during the first quarter of 2001 of $2,346.
The current ratio as of February 24, 2001, and November 25, 2000,
respectively, was 3.47 to 1 and 3.27 to 1. Working capital at February 24,
2001, was $91,997 compared to $94,982 at November 25, 2000. The Company's
consolidated financial statements are prepared on the basis of historical cost
and are not intended to show the impact of inflation or changing prices.
Neither inflation nor changing prices have had a material effect on the
Company's consolidated financial position and results of operations in prior
years.
Market Risk:
The Company is exposed to market risk for changes in market prices of its
various types of investments. The Company's investments include equity
securities, a financial instrument entered into in order to hedge its equity
securities, and an investment partnership included in its investments in
affiliated companies. The Company does not use these securities for trading
purposes and is not party to any leveraged derivatives.
The Company's equity securities portfolio, which totaled $14,115 at February 24,
2001, is diversified among over twenty different medium to large capitalization
interests. The Company entered into an equity collar in 1999 to reduce its
exposure to fluctuations in the market value of these securities. In the first
quarter of 2000, management decided to liquidate this financial instrument and
enter into a new financial instrument that more clearly correlates to its equity
portfolio. The new financial instrument had a notional value of approximately
$10,100 and expired quarterly in varying amounts. This financial instrument was
terminated in March of 2001 at a cost of $150. Although there are no maturity
dates for the Company's equity investments, management has plans to liquidate
its current equity portfolio on a scheduled basis over the next four years.
The Company's investment in a limited partnership, which totaled $59,069 at
February 24, 2001, invests in various other private limited partnerships,
which contain contractual commitments with elements of market risk. These
contractual commitments, which include fixed-income securities and
derivatives, may involve future settlements, which give rise to both market
and credit risk. The investment partnership's exposure to market risk is
determined by a number of factors, including the size, composition, and
diversification of positions held, volatility of interest, market currency
rates, and liquidity.
Safe-harbor, forward-looking statements:
This discussion contains certain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995 with respect to the
financial condition, results of operations and business of Bassett Furniture
Industries, Incorporated and subsidiaries. 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:
- - competitive conditions in the home furnishings industry
- - general economic conditions that are less favorable than expected
- - overall consumer demand for home furnishings
- - timing and number of new BFD openings and closings
- - not fully realizing cost reductions through restructurings
- - cost and availability of raw materials and labor
- - effectiveness of marketing and advertising campaigns
- - future tax legislation, or regulatory or judicial positions related
to COLI
11 of 13
12
PART II - OTHER INFORMATION
BASSETT FURNITURE INDUSTRIES INC. AND SUBSIDIARIES
FEBRUARY 24, 2001
Item 4. Submission of matters to a vote of security holders
The stockholders were asked to vote on two proposals at the Annual Meeting of
Stockholders held on March 27, 2001; (1) election of nine directors, (2)
ratification of selection of Arthur Andersen LLP as independent public
accountants.
The results of the votes by the stockholders were as follows:
(1) Election of Directors:
Voted For Withheld
--------------- ---------------
Paul Fulton 10,207,920 330,557
Amy W. Brinkley 10,308,058 230,439
Peter W. Brown M.D. 10,297,398 241,099
Willie D. Davis 10,280,858 257,639
Alan T. Dickson 10,287,400 251,097
Howard H. Haworth 10,287,258 251,239
Michael E. Murphy 10,280,554 257,943
Robert H. Spilman Jr. 10,288,617 249,880
David A. Stonecipher 10,287,899 250,598
(2) Ratification of Arthur Andersen LLP as independent public accountants:
Voted for - 10,449,054; against - 79,932; abstained and broker non
votes - 9,511
Item 6.
a. Exhibits: None
b. Reports on Form 8-K:
No Form 8-K reports were filed during the quarter
12 of 13
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BASSETT FURNITURE INDUSTRIES, INCORPORATED
/s/ BARRY C. SAFRIT
- -----------------------------------------------------------------
Barry C. Safrit, Vice President, Chief Financial Officer
April 10, 2001
13 of 13