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 MARCH 02, 2002
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)
(276) 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
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Form 10-K(A) for the fiscal year ended November 24, 2001, will be filed
subsequent to the March 24, 2002, required filing date. The Registrant's 10-K
filed on February 21, 2002, 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 15, 2002, 11,743,514 shares of common stock of the Registrant were
outstanding.
1 of 13
PART I - FINANCIAL INFORMATION
BASSETT FURNITURE INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE 14 WEEKS ENDED MARCH 2, 2002 AND
13 WEEKS ENDED FEBRUARY 24, 2001 - UNAUDITED
(Dollars in thousands except per share data)
2002 2001
(14 weeks) (13 weeks)
----------------- ------------------
Net Sales $ 84,788 $ 82,553
Cost of sales 68,060 67,994
----------------- ------------------
Gross profit 16,728 14,559
Selling, general and administrative 13,728 13,201
Gain on sale of property and equipment - (3,028)
Restructuring and impaired fixed asset charges - 1,847
----------------- ------------------
Operating income 3,000 2,539
Other income, net 1,221 678
----------------- ------------------
Income before income taxes 4,221 3,217
Income taxes 1,309 965
----------------- ------------------
Net income 2,912 2,252
Retained earnings-beginning of period 173,011 185,293
Cash dividends (2,341) (2,346)
Purchase and retirement of common stock, net 19 (171)
----------------- ------------------
Retained earnings-end of period $ 173,601 $ 185,028
================= ==================
Basic earnings per share $ 0.25 $ 0.19
================= ==================
Diluted earnings per share $ 0.25 $ 0.19
================= ==================
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
PART I - FINANCIAL INFORMATION - CONTINUED
BASSETT FURNITURE INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 2, 2002 AND NOVEMBER 24, 2001
(In thousands)
(UNAUDITED)
ASSETS MARCH 2, 2002 NOVEMBER 24, 2001
------------------------- -----------------
Current assets
Cash and cash equivalents $ 1,266 $ 5,347
Accounts receivable, net 53,882 51,487
Inventories, net 29,782 32,244
Other current assets 2,949 2,955
Refundable income taxes 2,728 2,728
Deferred income taxes 3,841 3,841
------------------------- -----------------
Total current assets 94,448 98,602
------------------------- -----------------
Property & equipment
Cost 226,138 225,632
Less accumulated depreciation 136,126 135,225
------------------------- -----------------
Total property & equipment 90,012 90,407
------------------------- -----------------
Other long-term assets
Investment securities 8,002 9,116
Investment in affiliated companies 62,459 62,636
Deferred income taxes 5,492 6,528
Notes receivable, net 14,928 14,551
Other 15,767 19,563
------------------------- -----------------
Total other long-term assets 106,648 112,394
------------------------- -----------------
Total assets $ 291,108 $ 301,403
========================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 16,493 $ 15,010
Accrued liabilities 13,899 18,250
------------------------- -----------------
Total current liabilities 30,392 33,260
------------------------- -----------------
Long-term liabilities
Employee benefits 10,538 10,596
Long-term debt 2,466 7,482
Deferred revenue from affiliate 13,070 15,593
------------------------- -----------------
Total long-term liabilities 26,074 33,671
------------------------- -----------------
Commitments and Contingencies (Notes C and F)
Stockholders' Equity
Common stock 58,651 58,636
Retained earnings 173,601 173,011
Accumulated other comprehensive income -
unrealized holding gains, net of income tax effect 2,567 3,047
Unamortized stock compensation (177) (222)
------------------------- -----------------
Total stockholders' equity 234,642 234,472
------------------------- -----------------
Total liabilities and stockholders' equity $ 291,108 $ 301,403
========================= =================
The accompanying notes to condensed consolidated financial statements are an
integral part of the condensed consolidated financial statements.
3 of 13
PART I - FINANCIAL INFORMATION - CONTINUED
BASSETT FURNITURE INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 14 WEEKS ENDED MARCH 2, 2002 AND
13 WEEKS ENDED FEBRUARY 24, 2001 - UNAUDITED
(in thousands)
2002 2001
----------------- ----------------
Net income $ 2,912 $ 2,252
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 2,611 2,786
Equity in undistributed income of affiliated companies (1,644) (956)
Provision for deferred income taxes 1,309 (72)
Provision for writedown of property and equipment - 1,600
Net gain from sale of property and equipment - (3,028)
Net gain on financial instrument - (350)
Net gain from sales of investment securtities (302) -
Compensation earned under restricted stock plan 45 44
Changes in long-term liabilities (58) (67)
Changes in operating assets and liabilities:
Accounts receivable (309) 3,960
Inventories 2,533 4,970
Other current assets 22 47
Accounts payable and accrued liabilities (1,233) (4,323)
----------------- ----------------
Net cash provided by operating activities 5,886 6,863
----------------- ----------------
Investing activities:
Purchases of property and equipment (1,196) (5,344)
Proceeds from sales of property and equipment - 3,828
Dividends from affiliated companies 1,750 25,059
Proceeds from sales of investment securities 665 -
Investments in affiliated companies (2,118) -
Other 598 (946)
----------------- ----------------
Net cash provided by (used in) investing activities (301) 22,597
----------------- ----------------
Financing activities:
Repayments of long-term debt (5,016) (26,000)
Issuance of common stock 34 52
Repurchase of common stock - (384)
Cash dividends (4,684) (2,346)
----------------- ----------------
Net cash used in financing activities (9,666) (28,678)
----------------- ----------------
Net change in cash and cash equivalents (4,081) 782
Cash and cash equivalents, beginning of period 5,347 3,259
----------------- ----------------
Cash and cash equivalents, end of period $ 1,266 $ 4,041
================= ================
The accompanying notes to condensed consolidated financial statements are an
integral part of the condensed consolidated financial statements.
4 of 13
BASSETT FURNITURE INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
MARCH 2, 2002 (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 accounting principles generally
accepted in the United States 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. Inventories:
Inventories are carried at last-in, first-out (LIFO) cost, which is not in
excess of market. Inventories at March 2, 2002 and November 24, 2001 consisted
of the following:
March 2, November 24,
2002 2001
--------------- -----------------
Finished goods $ 25,575 $ 29,289
Work in process 4,104 4,084
Raw materials and supplies 16,983 16,046
Retail merchandise 445 441
--------------- -----------------
Total inventories on first-in, first-out cost method 47,107 49,860
LIFO adjustment (17,325) (17,616)
--------------- -----------------
Total inventories, net $ 29,782 $ 32,244
=============== =================
Note C. Investment in Affiliated Companies:
Summarized combined income statement information for the Company's equity method
investments, excluding LRG Furniture, LLC (LRG), for the fourteen weeks ended
March 2, 2002 and thirteen weeks ended February 24, 2001 are as follows:
2002 2001
------------ ------------
Revenues $ 10,621 $ 13,801
Income from operations 5,891 6,279
Net income 3,118 2,379
The Accessory Group, LP, (AG) an affilitate of the Company, was reorganized in
the first quarter of 2002 and Bassett effectively took operational control of
AG. As such, the Company consolidated the results of operations into the
consolidated financial statements of Bassett Furniture Industries for the first
quarter of 2002. This investment was previously accounted for as an equity
method investment.
LRG Furniture, LLC (LRG), an affiliated company, incurred significant losses in
fiscal 2001 but expects improved results in 2002. Losses for the first quarter
of 2002 were well below losses reported in any other previous quarter. The
Company had outstanding accounts and notes receivable from LRG totaling $18,231
at the end of the first quarter of 2002. Additionally, the Company has leases
and loan guarantees with LRG. Subsequent to the close of the first quarter of
2002, the Company completed its previously announced acquisition of five stores
from LRG for net book value. The Company has committed to provide financial
support to LRG, as needed, over the next two years. Summarized combined income
statement information for LRG for the fourteen weeks ended March 2, 2002 and
thirteen weeks ended February 24, 2001 is as follows:
2002 2001
------------ ------------
Revenues $16,062 $13,749
Loss from operations (86) (1,683)
Net loss (595) (2,294)
5 of 13
BASSETT FURNTURE INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
MARCH 2, 2002(Dollars in thousands except share and per share data)
Note D. Comprehensive income:
For the fourteen weeks ended March 2, 2002 and the thirteen weeks ended February
24, 2001, total comprehensive income was $2,432 and $1,658, respectively.
Included in total comprehensive income for the first quarter was net income of
$2,912 and $2,252, respectively, and unrealized holding losses arising during
the period, net of tax of $480 and $594, respectively.
Note E. Restructuring, Impaired Fixed Assets and Other Unusual and Nonrecurring
Charges:
There were no restructuring, fixed asset impairments or other non-recurring
charges incurred during the first quarter of 2002. However, $2,402 of severance
and related employee benefit costs were expensed in 2001, $1,847 in the first
quarter of 2001, associated with fiscal 2001 restructuring. $1,820 was expended
during fiscal 2001 and $345 of the remaining $582 was expended during the first
quarter of 2002.
Note F. 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 should not 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 G. Recent Accounting Pronouncements
The Company adopted SFAS No. 142 "Goodwill and Other Intangible Assets" in the
first quarter of fiscal 2002. Instead of amortizing goodwill over a fixed period
of time, the Company will instead measure the fair value of acquired businesses
annually to determine if goodwill has been impaired. Goodwill amortization,
related to investments in affiliates, which was recorded during the first
quarter of 2001 and that will no longer be recorded, was $312.
6 of 13
PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES INC. AND SUBSIDIARIES
MARCH 2, 2002 (Dollars in thousands except share and per share data)
Note H. Earnings per share:
The following reconciles basic and diluted earnings per share after cumulative
effect of accounting change:
Weighted
Average Earnings
Net Income Shares per share
------------------------------------------------
For the fourteen weeks ended March 2, 2002
- --------------------------------------------------
Net income available to common stockholders $ 2,912 11,698,691 $ 0.25
Add effect of dilutive securities:
Options and restricted stock - 35,230 -
------------------------------------------------
Diluted earnings per share $ 2,912 11,733,921 $ 0.25
================================================
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
================================================
Options to purchase 2.0 million and 1.7 million shares of common stock were
outstanding during the first quarters of 2002 and 2001, respectively, that could
potentially dilute basic EPS in the future.
Note I. Segment Information:
Segment information for the fourteen weeks ended March 2, 2002 and thirteen
weeks ended February 24, 2001 was as follows:
For the fourteen weeks ended March 2, 2002
Wood Imports Upholstery Other Consolidated
-----------------------------------------------------------------------------------
Net sales $ 44,512 $ 9,355 $ 28,320 $ 2,601 $ 84,788
Operating income (loss) 5,202 2,008 3,779 (7,989) 3,000
Depreciation and amortization 968 - 238 1,405 2,611
Capital expenditures 563 - 179 454 1,196
For the thirteen weeks 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
The Company's other business segment consists of a contemporary furniture
business and corporate operations, including certain selling, general and
administrative expenses, all included to reconcile segment information to the
consolidated financial statements. Operating income by business segment is
defined as sales less direct operating costs and expenses.
7 of 13
PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES INC. AND SUBSIDIARIES
MARCH 2, 2002
(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 2002 compared with first quarter 2001
In the first quarter of 2002 the Company reported $84,788 in net sales, an
increase of 2.7% from $82,553 reported for the first quarter of 2001. This
increase is due to strong performances in the Bassett Furniture Direct (BFD)
retail stores and increasing success with independent dealers through the Five
Star program, which generated greater demand for the Company's products,
especially in upholstered furniture and by an additional week of sales in the
first quarter of 2002, related to the Company's 53 week year for fiscal 2002.
Sales to the BFD and @Home channels increased by 25% in the first quarter of
2002 compared to the first quarter of 2001. During the first quarter 2002, four
BFD stores were opened, bringing the total BFD's open at the end of the quarter
to 71. There were a total of 180 @Home galleries at the end of the first quarter
2002.
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 March 2, 2002 and February 24, 2001:
2002 2001
----------------- -----------------
Gross margin 19.7% 17.6%
Gain on sale of property and equipment 0.0% -3.7%
Restructuring and impaired fixed asset charges 0.0% 2.2%
S,G&A 16.2% 16.0%
Operating income 3.5% 3.1%
The increase in gross margin for the first quarter 2002 compared to the prior
year was a result of improved earnings from the Upholstery Division and
restructuring activities in the Wood Division completed in fiscal 2001. The
overall improvement in the Company's operating margins was due in part to the
2001 reductions in the Company's fixed cost structure.
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 which
is included in operating income.
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. 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 have been transferred to other manufacturing
facilities.
S,G&A expenses were 16.2% of sales for the first quarter of 2002 compared to
16.0% of sales for the first quarter of 2001. The Company's total S,G&A spending
increased from $13,201 in the first quarter 2001 to $13,728 for the first
quarter of 2002 due in part to the variable nature of some S,G&A expenses such
as commissions. The Company continues to closely monitor discretionary spending
and adjusts expenses 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.
Other income increased significantly in the first quarter of 2002, $1,221
compared to $678 for the first quarter 2001. This increase was attributable to a
reduction in losses from the Company's investment in LRG as well as an
improvement in earnings from the Company's IHFC investment. These improvements
were partially offset by lower earnings from the Company's investment in the
Bassett Industries Alternative Asset Fund, LP in 2002. 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.
8 of 13
PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES INC. AND SUBSIDIARIES
MARCH 2, 2002
(Dollars in thousands except share and per share data)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
The effective tax rate was 31% in the first quarter of 2002 compared to 30% in
the first quarter of 2001. The effective tax rates are lower than the statutory
federal income tax rate due to exclusions for tax exempt income.
For the quarter ended March 2, 2002, net income was $2,912 or $.25 per diluted
share, compared to $2,252 or $.19 per diluted share for the first quarter ended
February 24, 2001.
Segment Information
The following is a discussion of operating results for each of Bassett's
business segments.
Wood Division March 2, 2002 February 24, 2001
--------------------------- ----------------------
Net sales $ 44,512 $ 48,575
Contribution to profit and overhead $ 5,202 $ 5,731
Wood Division net sales decreased 8.4% in the first quarter of 2002 from levels
attained in the first quarter of 2001 due to continued erosion of department
store sales, the bankrupticies of two major customers and a strategic decision
by management to import certain product offerings based on competitive
pressures. The decline in shipments to the department store channel was
partially offset by an increase in shipments to the BFD stores. 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 remained relatively constant between
quarters (11.7% of sales for 2002 as compared to 11.8% of sales for 2001)
despite the 8.4% decline in sales. The Company was able to achieve these results
due to restructuring efforts completed in 2001. Sales improvement, if realized,
and complete implementation of cost cutting initiatives should improve operating
results for this division in subsequent quarters.
Import Divison March 2, 2002 February 24, 2001
----------------------- -----------------------
Net sales $ 9,355 $ 8,646
Contribution to profit and overhead $ 2,008 $ 1,958
Net sales for the Import Division increased 8.2% in the first quarter of 2002
compared to the first quarter of 2001. The Company expects the sales of this
segment to continue to increase, which should, in turn, increase the Company's
overall margin position. The division has benefited from the Company's decision
to outsource certain wood furniture previously manufactured domestically.
Notable among the wood furniture now imported are occasional tables and cribs.
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 22.6% of net
sales in the first quarter of 2001 to 21.5% of net sales in 2002. The decrease
was a result of an increase in freight, handling and related overhead costs for
the division. Additionally, the Company has had to price more competitively the
product offerings of the Import 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.
9 of 13
PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES INC. AND SUBSIDIARIES
MARCH 2, 2002
(Dollars in thousands except share and per share data)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
Upholstery Division March 2, 2002 February 24, 2001
----------------------- -----------------------
Net sales $ 28,320 $ 22,242
Contribution to profit and overhead $ 3,779 $ 2,160
Net sales for the Upholstery Division have increased by 27.3% for the first
quarter 2002 compared to the first quarter 2001, due to sales increases through
the BFD channel. The Division's product offerings have been bolstered by
products with more contemporary styling at better price points than those that
were offered in the first quarter of 2001. Additionally, the Company has
implemented a quick ship delivery program for certain dealers that guarantees
delivery of furniture to the customer within thirty days. Management also
decided, during 2001, 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 9.7% of net sales for the
first quarter of 2001 to 13.4% of net sales for the first quarter of 2002.
Increases were due to a 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 $5,886 for the first quarter ended
March 2, 2002, compared to cash provided by operating activities of $6,863 for
the quarter ended February 24, 2001. The Company continued to reduce inventory
levels in the first quarter of 2002, though not at the same pace established in
the first quarter of 2001. Accounts receivable remained relatively flat for the
first quarter of 2002 after a large reduction for the first quarter of 2001. The
Company continues its efforts to efficiently manage working capital. 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 $1,196 in property and equipment in the first quarter 2002
for retail real estate, computer related equipment for information systems, and
various manufacturing equipment. The Company invested $5,344 during the first
quarter of 2001 for retail real estate, the build out of its leased showroom and
computer related equipment for information systems. During the first quarter of
2001, the Company realized proceeds of $3,028 on the sale of its former showroom
in Thomasville, North Carolina and received a special dividend from an
affiliated company of $25,059, which was utilized to reduce the Company's
overall debt position. During the first quarter of 2002 the Company expended
$2,118 to increase its ownership interest in the International Home Furnishings
Center (IHFC) and to take an equity interest in a licensee operator developing
stores in New England.
During 2000, the Company entered into a three-year $70,000 revolving credit
facility with a new lender and three other participants. The facility was
amended in 2001 to address restrictive covenants and to reduce the total
facility to $60,000. The Company repaid $5,000 toward this facility in the first
quarter of 2002, to bring the balance of long-term debt outstanding at the end
of the first quarter to $2,466. During the first quarter of 2001, the Company
repaid $26,000 of this facility, principally by applying the special dividend
from an affiliate. The Company does not expect to substantially increase its
level of borrowings in fiscal year 2002.
10 of 13
PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES INC. AND SUBSIDIARIES
MARCH 2, 2002
(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. The Company made no share repurchases
in the first quarter of 2002. Also the Company paid the fourth quarter 2001
dividend and the first quarter 2002 dividend during the first quarter of 2002
for a total of $4,684. The extra dividend paid during the quarter relates
entirely to the fact that the first quarter of 2002 contained fourteen weeks in
the unusual 53 week year.
The current ratio as of March 2, 2002, and November 24, 2001, respectively, was
3.11 to 1 and 2.96 to 1. Working capital at March 2, 2002, was $64,056 compared
to $65,342 at November 24, 2001. 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 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 $8,002 at March 2,
2002, is diversified among over twenty different medium to large capitalization
interests. 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 $57,876 at
March 2, 2002, 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
- - the profitability of BFD licensees
- - 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
- - information and technology advances
- - success of marketing and advertising compaigns
- - the profitability of Company owned BFD's
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PART II - OTHER INFORMATION
BASSETT FURNITURE INDUSTRIES INC. AND SUBSIDIARIES
MARCH 2, 2002
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 26, 2002; (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 10,578,320 118,047
Peter W. Brown M.D. 10,592,116 104,251
Willie D. Davis 10,579,233 117,134
Alan T. Dickson 10,592,633 103,734
Howard H. Haworth 10,565,697 130,669
Michael E. Murphy 10,591,443 104,924
Robert H. Spilman Jr. 10,590,973 105,394
David A. Stonecipher 10,593,928 102,439
Dale C. Pond 10,593,728 102,639
(2) Ratification of Arthur Andersen, LLP as independent public accountants:
Voted for - 9,319,050; against - 430,401; abstained and broker non
votes - 946,916
Note: During the meeting, the Chairman noted that the
management of the Company had begun a process to evaluate its options
for its independent public accountants in light of the recent events
surrounding Arthur Andersen, LLP. This process is expected to take
about two months.
Item 6.
a. Exhibits: None
b. Reports on Form 8-K:
No Form 8-K reports were filed during the quarter
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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 15, 2002
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