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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MAY 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 0-209
BASSETT FURNITURE INDUSTRIES, INCORPORATED
(Exact name of Registrant as specified in its charter)
Virginia 54-0135270
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Bassett, Virginia 24055
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(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 X No
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At May 31, 1997, 13,017,883 shares of common stock of the Registrant were
outstanding.
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PART I - FINANCIAL INFORMATION - CONTINUED
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS - UNAUDITED
SIX MONTHS ENDED MAY 31, THREE MONTHS ENDED MAY 31,
------------------------ --------------------------
1997 1996 1997 1996
---- ---- ---- ----
Net sales $223,004,435 $223,224,174 $113,198,157 $111,273,154
Costs and expenses
Cost of sales 192,930,860 187,741,206 101,358,067 93,558,086
Selling, general and administrative 41,478,856 31,323,263 25,630,285 15,836,130
Non-recurring charges 13,929,000 -0- 13,929,000 -0-
------------ ------------ ------------ ------------
248,338,716 219,064,469 140,917,352 109,394,216
------------ ------------ ------------ ------------
(Loss) income from operations (25,334,281) 4,159,705 (27,719,195) 1,878,938
Other income, net 5,441,365 8,321,465 3,362,814 4,278,271
------------ ------------ ------------ ------------
(Loss) income before income taxes (19,892,916) 12,481,170 (24,356,381) 6,157,209
Income taxes 9,301,000 (2,775,000) 10,331,000 (1,165,000)
------------ ------------ ------------ ------------
NET (LOSS) INCOME (10,591,916) 9,706,170 (14,025,381) 4,992,209
Retained earnings - beginning of period 222,417,127 225,718,704 220,620,354 226,287,719
------------ ------------ ------------ ------------
211,825,211 235,424,874 206,594,973 231,279,928
Cash dividends (7,833,815) (5,394,558) (2,603,577) (2,678,008)
Purchase and retirement of common stock (1,005,959) (6,357,974) (1,005,959) (4,929,578)
------------ ------------ ------------ ------------
Retained earnings - end of period $202,985,437 $223,672,342 $202,985,437 $223,672,342
============ ============ ============ ============
NET (LOSS) INCOME PER SHARE $ (.81) $ .72 $ (1.07) $ .37
======= ===== ======== =====
DIVIDENDS PER SHARE $ .60 $ .40 $ .20 $ .20
====== ===== ====== =====
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The accompanying notes are an integral part of the condensed consolidated
financial statements.
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PART I - FINANCIAL INFORMATION - CONTINUED
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET - UNAUDITED
ASSETS MAY 31, 1997 NOVEMBER 30, 1996
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Current Assets
Cash and cash equivalents $ 51,620,077 $ 57,285,005
Trade accounts receivable, less allowances
for doubtful accounts 56,178,497 65,416,910
Inventories:
Finished goods 37,297,060 42,593,966
Work in process 11,505,725 14,008,754
Raw materials and supplies 34,353,182 38,275,770
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83,155,967 94,878,490
Less LIFO adjustment 23,766,000 27,796,000
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59,389,967 67,082,490
Prepaid expenses 564,803 1,492,506
Prepaid income taxes 638,217 844,737
Deferred income taxes 9,718,000 2,597,000
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178,109,561 194,718,648
Property, Plant and Equipment
Cost 173,118,683 218,528,425
Less allowances for depreciation 128,712,816 162,149,761
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44,405,867 56,378,664
Other Assets
Investment in securities 31,280,504 29,625,435
Investment in affiliated companies 48,030,731 45,820,750
Assets to be disposed of 5,311,477 -0-
Other 9,464,320 8,621,947
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94,087,032 84,068,132
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$316,602,460 $335,165,444
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current Liabilities
Accounts payable $ 16,598,225 $ 20,541,014
Accrued compensation 4,939,056 3,716,206
Other accrued liabilities 10,951,820 6,088,381
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32,489,101 30,345,601
Deferrals
Deferred liabilities 10,891,507 10,834,741
Deferred income taxes 153,000 2,504,000
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11,044,507 13,338,741
Stockholders' Equity
Common stock 65,089,415 65,377,975
Retained earnings 202,985,437 222,417,127
Unrealized holding gains, net of tax 4,994,000 3,686,000
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273,068,852 291,481,102
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$316,602,460 $335,165,444
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The accompanying notes are an integral part of the condensed financial
statements.
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PART I - FINANCIAL INFORMATION - CONTINUED
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS - UNAUDITED
SIX MONTHS ENDED MAY 31,
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1997 1996
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NET CASH PROVIDED BY OPERATING ACTIVITIES $ 6,368,874 $ 22,885,290
INVESTING ACTIVITIES
Net change in cost of investment securities 688,716 11,618,801
Purchases of property, plant and equipment (5,700,311) (3,084,172)
Proceeds from sale of property, plant and equipment 1,147,140 76,635
Dividends from affiliated company 544,752 -0-
Other 414,235 218,513
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(2,905,468) 8,829,777
FINANCING ACTIVITIES
Issuance of common stock 55,481 25,364
Purchase and retirement of common stock (1,350,000) (7,990,413)
Cash dividends (7,833,815) (5,394,558)
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(9,128,334) (13,359,607)
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CHANGE IN CASH AND CASH EQUIVALENTS (5,664,928) 18,355,460
CASH AND CASH EQUIVALENTS - beginning of period 57,285,005 51,331,119
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CASH AND CASH EQUIVALENTS - end of period $ 51,620,077 $ 69,686,579
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The accompanying notes are an integral part of the condensed consolidated
financial statements.
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PART I - FINANCIAL INFORMATION - CONTINUED
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
Note A. NON-RECURRING AND OTHER CHARGES (thousands)
On May 21, 1997, the Company announced that it would record pre-tax charges
totaling $30,479 ($18,897 net of taxes, or $1.45 per share). These charges
relate to the elimination of the Impact product line and the closing of the
Impact plants, discontinuance of certain National/Mt. Airy products and
assimilation of the Mt. Airy plant into the Bassett Casegoods Division, closing
of the W.M. Bassett plant and redeployment of products within the other
Bassett Casegoods plants, and other related costs.
These charges relate to the Company's recently announced strategy to focus on
its core business marketed under the Bassett brand name (Wood Products,
Upholstery and Bedding). Further, it enables the Company to rationalize its
manufacturing capacity by retaining and utilizing its most efficient
facilities.
The components of the pre-tax charges are:
2nd Quarter Remainder of
1997 1997 Total
----------- ----- -----
Charges included in cost of sales
- Inventory write-downs $ 6,195 $ -0- $ 6,195
Charges included in SG&A
- Accounts receivable write-downs 2,250 -0- 2,250
Non-recurring charges
- Impairment of assets 11,180 -0- 11,180
- Restructuring and other charges 2,749 8,105 10,854
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Total $22,374 $8,105 $30,479
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The write-downs of inventories and accounts receivable are related primarily to
the elimination of the Impact product line and discontinuance of certain
National/Mt. Airy products. The asset impairment losses of $11,180 consist of
the write-downs of operating assets at the W. M. Bassett plant and at both of
the Impact Division's plants, and result from the evaluation of the Company's
ability to recover asset costs given current market conditions. The
restructuring and other charges of $10,854 consist of additional costs expected
to be incurred to redeploy product lines and manufacturing and employee
resources.
Note B. SUBSEQUENT EVENT
Subsequent to May 31, (on July 7, 1997) a major customer of the Company filed
for protection from creditors under Chapter 11 of the U. S. Bankruptcy Code.
As a result of this action, the Company has taken a pre-tax charge as of May
31, 1997 of $6.0 million, $3.7 million after-tax ( $ .28 per share).
Note C. CONTINGENCY
In June, 1997, the Company announced that it had recently learned that
mattresses and box springs that were sold to two major retail customers were of
lesser specifications than those originally manufactured for sale by the
retailers.
Despite the changes in specifications, the mattresses in questions are of
quality equal to nationally sold products. Each of the mattresses and box
springs in issue is covered by the original warranty, and the Company continues
to stand behind each of the products. Neither of the two affected retailers
has experienced increased complaints regarding these products. The Company
will offer gift certificates, redeemable at the retailers' stores, to customers
who purchased the products in question.
A reasonable estimate of the possible costs or range of costs related to this
matter cannot be made at this time.
Note D. EARNINGS PER SHARE
Per share amounts are based on 13,062,736 and 13,519,393 weighted average
number of shares outstanding at May 31, 1997 and 1996 respectively.
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PART I - FINANCIAL INFORMATION - CONTINUED
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
ALL DISCUSSION OF RESULTS OF OPERATIONS THAT FOLLOWS IS PRESENTED EXCLUDING THE
AFFECTS OF (i) THE NON-RECURRING AND OTHER CHARGES DISCUSSED IN NOTE A AND (ii)
THE SUBSEQUENT EVENT CHARGE DISCUSSED IN NOTE B OF THE NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS INCLUDED HEREIN.
RESULTS OF OPERATIONS:
Major components of net income expressed as a percentage of net sales:
Six Months Ended May 31, Three Months Ended May 31,
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1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
Cost of sales 83.74% 84.11% 83.53% 84.07% 84.08% 83.76%
Selling, general and admin. 14.90 14.03 13.40 15.35 14.23 13.86
Income from operations 1.36 1.86 3.07 .58 1.69 2.38
Other income, net 2.44 3.73 2.67 2.97 3.84 3.51
Income before income taxes 3.80 5.59 5.74 3.55 5.53 5.89
Income taxes .66 1.24 1.67 .40 1.05 1.71
Net income 3.14 4.35 4.07 3.15 4.48 4.18
NET SALES
Net sales for the current two periods compared to prior years:
Six Months Ended May 31, Three Months Ended May 31,
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1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
Net sales (thousands) $223,004 $223,224 $242,569 $113,198 $111,273 $119,018
% change from prior year (0.1)% (8.0)% (5.4)% 1.7% (6.5)% (11.6)%
The changes discussed in Note A are expected to reduce annualized net sales
approximately 10%.
COSTS AND EXPENSES
Cost of sales for the second quarter (84.07%) was up 67 basis points from the
1997 first quarter (83.40%), however this was even with the 1996 second
quarter. The gross profit margin for the six month period has improved 37
basis points compared to 1996. As shown below the materials and labor
components of cost of sales have increased in the second quarter.
Six Months Ended May 31, Three Months Ended May 31,
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1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
Materials 49.04% 49.83% 49.36% 49.58% 49.61% 49.34%
Labor 22.82 21.36 21.57 23.15 21.44 21.59
Overhead 11.88 12.92 12.60 11.34 13.03 12.83
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83.74% 84.11% 83.53% 84.07% 84.08% 83.76%
Selling, general and administrative expenses have increased primarily in
categories associated with product promotion, customer service and expansion of
the Bassett Furniture Direct ("BFD") and Bassett Gallery Programs.
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PART I - FINANCIAL INFORMATION - CONTINUED
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - CONTINUED
OTHER INCOME, NET
Components of other income (in thousands):
Six Months Ended May 31, Three Months Ended May 31,
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1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
Equity in unremitted income
of affiliated companies $2,755 $2,519 $2,441 $1,619 $1,418 $1,420
Interest (principally tax exempt) 1,300 1,118 1,123 680 545 573
Dividends 668 901 1,210 316 463 667
Gains from sales of investment securities 234 4,149 1,364 234 2,034 1,394
Gains (loses) from sales of property,
plant and equipment 930 (3) 25 714 (47) (15)
Other (446) (363) 336 (200) (135) 147
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$5,441 $8,321 $6,499 $3,363 $4,278 $4,186
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INCOME TAXES
The effective income tax rate is less than the statutory rates because of the
effect of non-taxable income in each period presented.
OPERATING INCOME
Operating income for the second quarter was up in the core businesses of
Casegoods, Tables and Upholstery. However, operating income was down in the
Bedding Division, and in the discontinued National/Mt. Airy and Impact
Furniture Divisions.
LIQUIDITY AND CAPITAL RESOURCES:
Cash provided by operating activities:
Six Months Ended May 31, Three Months Ended May 31,
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1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
Cash provided by operating activities (thousands) $6,369 $22,885 $16,921 $4,484 $11,653 $11,046
The current ratio was 5.48 to 1 at May 31, 1997 and 6.42 to 1 at November 30,
1996. Working capital was $146 million at May 31, 1997, compared to $164
million at November 30, 1996.
Cash provided by operating activities is expected to be adequate for normal
future operating requirements.
There were no material commitments for capital expenditures at May 31, 1997.
Capital expenditures that will be made in the future for normal expansion or
other operating purposes will be made from funds on hand or those generated
from operations.
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PART II - OTHER INFORMATION
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
(27) Financial Data Schedule
b. Reports on Form 8-K:
A report on Form 8-K was filed on May 27, 1997 reporting the events
discussed in Note A of the Notes To Condensed Consolidated Financial
Statements included in this Form 10-Q for the quarter ended May 31, 1997.
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
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Paul Fulton, Chairman of the Board, and Chief Executive Officer
DATE: July 9, 1997
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- -----------------------------------------------------------------
Philip E. Booker, Vice President, Controller (Chief Accounting Officer)
DATE: July 9, 1997
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
For the quarter ended Commission File Number
May 31, 1997 0-209
BASSETT FURNITURE INDUSTRIES, INCORPORATED
EXHIBIT INDEX
Exhibit No. Exhibit Description Page No.
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27 Financial Data Schedule page 9
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