1
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 30, 1998
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 X No
----------- ----------
At July 7, 1998, 13,075,552 shares of common stock of the Registrant were
outstanding.
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PART I - FINANCIAL INFORMATION
BASSETT FURNITURE INDUSTRIES, INCORPORATED
AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND RETAINED EARNINGS - UNAUDITED
(In thousands except per share data)
Twenty-six weeks ended Thirteen weeks ended
---------------------- --------------------
May 30, 1998 May 31, 1997 1998 1997
------------ ------------ ---- ----
Net Sales $196,668 $223,004 $ 98,335 $113,198
Cost of sales 160,559 192,930 79,808 101,357
-------- -------- -------- --------
Gross profit 36,109 30,074 18,527 11,841
Selling, general and administrative 32,153 41,479 16,374 25,631
Non-recurring charges 0 13,929 0 13,929
-------- -------- -------- --------
Income (loss) from operations 3,956 (25,334) 2,153 (27,719)
Other income, net 5,860 5,441 3,113 3,363
-------- -------- -------- --------
Income (loss) before income taxes 9,816 (19,893) 5,266 (24,356)
Income taxes (2,422) 9,301 (1,307) 10,331
-------- -------- -------- --------
Net income (loss) $ 7,394 $(10,592) $ 3,959 $(14,025)
-------- -------- -------- --------
Retained earnings-beginning of period 188,761 222,417 189,586 220,620
Cash dividends (5,225) (7,834) (2,615) (2,604)
Purchase and retirement of
common stock 0 (1,006) 0 (1,006)
-------- -------- -------- --------
Retained earnings-end of period $190,930 $202,985 $190,930 $202,985
======== ======== ======== ========
Basic earnings per share $ 0.57 $ (0.81) $ 0.30 $ (1.07)
======== ======== ======== ========
Diluted earnings per share $ 0.56 $ (0.81) $ 0.30 $ (1.07)
======== ======== ======== ========
Dividends per share $ 0.40 $ 0.60 $ 0.20 $ 0.20
======== ======== ======== ========
- ------------------------------------------
The accompanying notes to condensed consolidated financial statements are an
intergral 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 SHEETS - UNAUDITED
MAY 30, 1998 AND NOVEMBER 30, 1997
(in thousands except per share data)
Assets 1998 1997
------ ---- ----
Current assets:
Cash & cash quivalents $ 24,038 $ 29,552
Marketable securities 49,796 49,985
Trade accounts receivable,net 50,233 57,327
Inventories 48,019 41,714
Prepaid expenses 657 1,405
Refundable income taxes 4,944 5,025
Deferred income taxes 13,117 15,476
--------- ---------
Total current assets 190,804 200,484
--------- ---------
Property & equipment:
Cost 171,746 168,026
Allowances for depreciation (126,312) (124,547)
--------- ---------
Total property & equipment 45,434 43,479
--------- ---------
Other long-term assets:
Investment securities 33,268 29,922
Investment in affiliated companies 33,288 30,502
Deferred income taxes 1,458 1,866
Assets held for sale 2,837 3,506
Other 10,066 10,566
--------- ---------
Total other long-term assets 80,917 76,362
--------- ---------
Total assets $ 317,155 $ 320,325
========= =========
Liabilities and stockholder's equity
------------------------------------
Current liabilities:
Accounts payable $ 13,934 $ 21,694
Other accrued liabilities 25,556 26,213
--------- ---------
Total current liabilities 39,490 47,907
--------- ---------
Long-term liabilities
Employee benefits 11,624 11,248
Stockholders' equity:
Common stock 65,390 65,256
Additional paid in capital 3,090 2,438
Retained earnings 190,930 188,761
Unrealized holding gains,net of income tax effect 7,929 5,575
Unamorized stock compensation (1,298) (860)
--------- ---------
Total stockholders' equity 266,041 261,170
--------- ---------
Total liabilities and stockholders' equity $ 317,155 $ 320,325
========= =========
------------------------------------------
The accompanying notes to condensed consolidated financial statements are an
integral part of the condensed consolidated financial statements.
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BASSETT FURNITURE INDUSTRIES, INCORPORATED
AND SUBSIDIARIES CONDENSED CONSOLIDATED
SATEMENTS OF CASH FLOWS - UNAUDITED
FOR THE 26 WEEK PERIOD ENDED MAY 30, 1998 AND MAY 31, 1997
(in thousands except per share data)
1998 1997
---- ----
Net income (loss) $ 7,394 ($10,592)
Adjustments to reconcile net income to net cash:
Operating Activities:
Non-recurring charges - 17,592
Depreciation and amortization 3,464 3,538
Equity in undistributed income of affiliated companies (3,331) (2,755)
Provision for losses on trade accounts receivable 210
362
Provision for deferred income taxes 1,114 508
Net gain from sales of investment securities (234)
(206)
Net gain from sales of property & equipment (930)
(349)
Compensation earned under restricted stock plan 105 -
Changes in operating assets & liabilities:
Trade accounts receivable 6,732 778
Inventory (6,305) 1,498
Prepaid expenses 748 928
Refundable income taxes 207
81
Accounts payable and accrued liabilities (8,417) (3,180)
Long-term liabilities 376 56
------- -------
Net cash provided by operating activities 1,768 7,624
------- -------
Investing activities:
Purchases of property and equipment (7,455) (5,700)
Proceeds from sales of property & equipment 3,054 1,147
Purchases of investment securities (476) (1,200)
Dividend from affilate 545 545
Proceeds from sale of investments securities 1,343 1,889
Other assets 500 (1,256)
Proceeds from sale of marketable securities, net 189 -
Other - 414
------- -------
Net cash provided by investing activities (2,300) (4,161)
------- -------
Financing activities:
Issuance of common stock 243 56
Purchase of common stock - (1,350)
Cash dividends (5,225) (7,834)
------- -------
Net cash used in financing activities (4,982) (9,128)
------- -------
Net change in cash and cash equivalents (5,514) (5,665)
Cash and cash equivalents, beginning of period 29,552 57,285
------- -------
Cash and cash equivalents, end of period $24,038 $51,620
======= =======
- -------------------------------------------
The accompanying notes to condensed consolidated financial statements are an
integral part of the condensed consolidated financial statements.
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BASSETT FURNTURE INDUSTRIES, INCORPORATED
AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
MAY 30, 1998 (in thousands except 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.
Note B. Inventories:
Inventories are carried at last-in, first-out (LIFO) cost which is not in
excess of market. Inventories at May 30, 1998 and November 30, 1997 consisted
of the following:
May 30, November 30,
1998 1997
---- ----
Finished goods $35,434 $29,485
Work in process 10,195 9,025
Raw materials and supplies 27,981 28,420
------ ------
Total inventories valued at first-in, first-out 73,610 66,930
(FIFO) cost
LIFO adjustment 25,591 25,216
------ ------
Total inventories $48,019 $41,714
======= -------
Note C. Investment in affiliated companies:
Summarized combined income statement information for the Company's equity
method investments for the twenty-six week period ended May 30,1998 and the six
month period ended May 31, 1997 is as follows:
1998 1997
---- ----
Revenues $20,600 $20,285
Income from operations 11,139 10,743
Net income 6,987 7,106
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BASSETT FURNTURE INDUSTRIES, INCORPORATED
AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
MAY 30, 1998 (in thousands except per share data)
Note D. Restructuring, Impaired Assets and Nonrecurring Charges:
During 1997, the Company commenced the restructuring of certain of its
operations and recorded restructuring and impaired asset charges of $20,646.
Of these charges, $14,397 was utilized during 1997, leaving $6,249 in reserves
to be utilized in future periods as the remaining activities related to the
restructuring charges are completed. The restructuring plans included the
closure of 14 manufacturing facilities and the serverance of approximately
1,000 employees. As of November 30, 1997, five of the 14 facilities were closed
and approximately 600 employees had been severed. During the first quarter of
fiscal 1998, the remaining nine facilities were closed and approximately 400
employees were severed. In the second quarter of 1998, one additional Mattress
Division plant at Chehalis, Washington, was closed. The estimated exit costs
were small and additional one-time charges were not needed.
Activity within the restructuring reserves was as follows:
November 30, Reserves February 28, Reserves May 30, 1998
1997 reserve utilized in 1998 reserve utilized in reserve
balance 1st Qtr 1998 balance 2nd Qtr 1998 balance
-------------------------------------------------------------------------------
Severance &
related employee
benefit costs $4,910 $1,620 $3,290 $832 $2,458
Lease exit costs 614 32 582 34 548
Other 725 0 725 46 679
------ ---- ---- -- ----
Total $6,249 $1,652 $4,597 $912 $3,685
======= ======= ======= ===== =======
The Company projected at November 30, 1997, that it would incur an additional
$10,540 of charges during 1998 as a result of (1) operating inefficiencies at
plants involved in consolidations and (2) costs incurred at idle facilities.
The total of these expenses incurred during the 13 week periods ended May 30,
1998 and February 28, 1998 was $1,537 and $1,469, respectively.
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PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES, INCORPORATED
AND SUBSIDIARIES MAY 30, 1998
(in thousands of dollars)
Note E. Contingencies:
A suit was filed in June, 1997, in the Superior Court of the State of
California for the County of Los Angeles (the "Superior Court") against the
Company, two major retailers and certain current and former employees of the
Company. The suit sought certification of a class consisting of all consumers
who purchased certain mattresses and box springs from the major retailers which
were manufactured by a subsidiary of the Company, E. B. Malone Corporation,
with different specifications than those originally manufactured for sale by
these retailers. The suit alleged various causes of action, including
negligent misrepresentation, breach of warranty, violations of deceptive
practices laws and fraud. Plantiffs sought compensatory damages of $100
million and punitive damages. In September, 1997, the Superior Court sustained
the Company's demurrers to several of plantiffs causes of action, but granted
the plantifffs leave to amend. Plantiffs Second Amended Complaint added
certain independent retailers and consumers as additional plantiffs. In
December, 1997, the Superior Court once again sustained the Company's demurrers
to several of plantiffs causes of action, but also once again granted plantiffs
leave to amend. Plantiffs filed a Third Amended Complaint. In February, 1998,
the Superior Court sustained the Company's demurrers to many of the individual
claims, this time without granting plantiffs leave to amend. The Superior
Court also sustained the Company's demurrer to the class action allegations in
the Third Amended Complaint, without granting leave to amend, and transferred
the entire action out of the class action department. Plantiffs have filed a
notice of appeal from the class action ruling. Plantiffs also filed a petition
for a writ of mandamus or other extraordinary relief seeking immediate review
of the other demurrer rulings, which petition was denied.
The suit has been recently transferred from the Superior Court for the County
of Los Angeles to the Superior Court for Orange County. Although it is
impossible to predict the ultimate outcome of this litigation, the Company
intends to vigorously defend this suit because it believes that the damages
sought are unjustified and because this case is inappropriate for class action
treatment. Because the Company believes that the two major retailers were
unaware of the changes in specifications, the Company has agreed to indemnify
the two major retailers with respect to the above.
The Company is also involved in various other claims and actions, including
environmental matters at certain of its plant facilities, which arise in the
normal course of business. Although the final outcome of these legal and
environmental 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.
The Board of Directors for Bassett Furniture Industries, Inc. has approved a
stock repurchase program for up to 1.3 million shares of its Common Stock for
an aggregate purchase price not to exceed $40 million. Bassett currently has
approximately 13 million shares outstanding. The repurchases may be effected
from time to time in accordance with applicable securities laws, through open
market transactions, in block purchases, in privately negotiated transactions,
or otherwise, and on such terms and conditions, all as may be approved by any
Authorized Officer.
The Board of Directors adopted a Shareholder Rights Plan, which replaces a
similar plan that expired on May 16, 1998. The Plan was not adopted in
response to any specific effort to acquire control of the Company. If a person
or group acquires beneficial ownership of 20% or more of the Common Stock
outstanding, each Right distributed under the Plan will entitle its holder
(other than such person or group) to purchase, at the Right's then-current
exercise price, a number of shares of the Company's Common Stock having a
market value of twice such price. Detailed descriptions of the Rights are
being sent to the Company's shareholders and have been filed with the
Securities and Exchange Commission.
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PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES, INCORPORATED
AND SUBSIDIARIES MAY 30, 1998
(in thousands of dollars)
Note F. Earnings per share:
The Company adopted SFAS No. 128, "Earnings per Share," effective December 1,
1997. As a result, the Company's reported earnings per share for 1997 have been
restated. The effect of this accounting change on previously reported earnings
per share (EPS) data was not material.
Income Shares Per share amount
------------------------------------------------------
For the twenty-six weeks ended May 30, 1998
- -------------------------------------------------------
Net income available to common stockholders $7,394 13,023,627 $0.57
Effect of dilutive securities:
Options issued to directors and employees - 107,271 -
Restricted stock issued to employees - 6,419 -
------------------------------------------------------
Diluted earnings per share $7,394 13,137,317 $0.56
======= =========== ======
For the thirteen weeks ended May 30, 1998
- -------------------------------------------------------
Net income available to common stockholders $3,959 13,027,005 $0.30
Effect of dilutive securities:
Options issued to directors and employees - 120,199 -
Restricted stock issued to employees - 10,885 -
------------------------------------------------------
Diluted earnings per share $3,959 13,158,089 $0.30
======= =========== ======
- ---------------------------------------------------------------------------------------------------------------
For the six months ended May 31, 1997
- -------------------------------------------------------
Net income (loss) available to common stockholders $(10,592) 13,062,736 $(0.81)
Effect of dilutive securities:
Options issued to directors and employees - 30,250 -
------------------------------------------------------
Diluted earnings per share $(10,592) 13,092,986 $(0.81)
========= =========== =======
For the three months ended May 31, 1997
- -------------------------------------------------------
Net income (loss) available to common stockholders $(14,025) 13,050,156 $(1.07)
Effect of dilutive securities:
Options issued to directors and employees - 30,250 -
------------------------------------------------------
Diluted earnings per share $(14,025) 13,080,406 $(1.07)
========= =========== =======
Options to purchase 804,898 shares of common stock at prices ranging from
$32.25 to $37.40 per share were outstanding during the second quarter of 1998
but were not included in the computation of diluted EPS because the options'
exercise prices were greater than the average market price of the common
shares. In 1997, 317,069 shares at prices ranging from $25.75 to $37.40 were
similarly excluded.
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PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES, INCORPORATED
AND SUBSIDIARIES MAY 30,1998
(in thousands of dollars)
Note F. Earnings per share (continued):
Basic earnings per common share was computed by dividing net income by the
weighted average number of shares of common stock outstanding during the
period. Diluted earnings per common share reflect the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of Operations
The major components of net income expressed as a percentage of net sales are
as follows. The proforma data and the following discussions of net sales and
costs and expenses excludes the effect of sales from closed operations and the
effect of nonrecurring charges.
For the thirteen weeks ended May 30, 1998 and May 31, 1997 and 1996
-------------------------------------------------------------------
1998 1998 1997 1997 1996
----
Actual Proforma Actual Proforma Actual
------ -------- ------ -------- ------
Cost of sales 81.2% 79.9% 89.5% 84.1% 84.1%
Gross profit 18.8 20.1 10.5 15.9 15.9
SG&A expenses 16.7 16.3 22.6 15.4 14.2
Income from operations 2.2 3.8 (24.5) .6 1.7
Other income, net 3.2 3.2 2.9 3.0 3.8
Income before income taxes 5.4 7.0 (21.5) 3.6 5.5
Income taxes 1.6 2.3 (9.1) .4 1.0
Net income 4.2 5.0 (12.4) 3.2 4.5
Net Sales
Net sales for the second quarter compared with prior years was as follows:
Second Quarter
--------------
1998 1997 1996
---- ---- ----
Net sales $98,335 $113,198 $111,273
% change from prior year (13.1)% 1.7% (6.5)%
Year-to-date
------------
1998 1997 1996
---- ---- ----
Net sales $196,668 $223,004 $223,224
change from prior year (11.8)% (0.1)% (8.0)%
Wood Division sales were very strong throughout the quarter, increasing 23%
over prior year levels. However, Upholstery Division and Mattress Division
sales decreased significantly below the 1997 second quarter volume. Certain
recently introduced suites produced by the Wood Division, combined with
improvements in overall quality, account for the significant sales increase.
The sales decline in the Upholstery Division is attributable to the
consolidation of motion furniture manufacturing into the Dumas, Arkansas plant,
which resulted in the elimination of numerous SKU's and related sales.
Eliminating the motion furniture consolidation, Upholstery sales were flat to
the prior year. These results are generally attributable to the Company's
strategic efforts to upgrade its upholstery product, improve margins and better
align its customer base with the Company's distribution strategy. Mattress
Division sales are down due to the loss of Levitz Furniture as a customer in
late 1997 but are up if those sales are eliminated from prior year sales.
Overall, the net decrease in sales resulted primarily from the discontinuance
of the National/Mt. Airy and Impact product lines, which accounted for $18,739
of sales in the second quarter of 1997 compared to $766 in 1998.
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PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES, INCORPORATED
AND SUBSIDIARIES MAY 30,1998
(in thousands of dollars)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
Management is optimistic regarding sales volumes. Although the second quarter
is a seasonally slow quarter, in 1998 the sales volume was equal to the first
quarter sales volume. The Company performed just above plan for the second
quarter and is solidly above plan for the year.
Costs and expenses
The Company showed marked improvement in operating efficiencies in the second
quarter as gross profit margin increased to 18.8% of net sales from 10.5% in
1997. This improvement is a direct result of the efficiencies gained through
the Company's restructuring activities of 1997 and early 1998. In addition the
Company has several new plant managers and a new general manager of wood and
upholstery manufacturing operations. Management is aggressively attacking costs
and inefficiencies. Gross profit margins have improved in virtually every
facility compared to a year ago. All of the facilities that were involved in
consolidations have shown improvements in production volumes and operating
margins.
The 1997 cost of sales percentages were to up as the Company took nonrecurring
and restructuring charges totaling $28,374. Of these charges, $6,195 effected
cost of sales, $8,250 effected SG&A expenses and $13,929 were shown as
restructuring charges. These charges were taken as the Company decided to
eliminate two product lines (Impact and National/Mt. Airy) and close one wood
manufacturing plant and consolidate it into an existing facility.
SG&A expenses, excluding the effect of the one-time charges in 1997, decreased
slightly in 1998 compared to 1997. The Company continues to add key management
positions to grow the business, increased expenditures to promote the Bassett
brand name and continued expenditures to grow the Bassett Furniture Direct
("BFD") stores and introduced the @t Home With Bassett Gallery concept.
Expenses related to BFD stores and Gallery stores continue to escalate as the
total number of these stores grows.
SG&A expenses as a percentage of sales for 1997 were up 1.2% over 1996 due to
costs associated with product promotion, BFD and Gallery store programs and the
Company's focus on customer service.
Other income, net
Other income at $3,113 was basically flat to the prior year. In the second
quarter of 1997, other income included a gain on the sale of closed facilities
totaling $700. The increase in cash, cash equivalents and marketable
securities by $22,200 over the prior year allowed the Company to increase its
investment income in 1998. In addition, the change in investment strategy
announced in the fourth quarter of 1997 accounted for increased income for the
quarter.
In the second quarter of 1997, other income was down $915 from the second
quarter of 1996, when the Company generated $2,034 in income from gains on the
sale of investment securities. The 1997 quarter did include a gain on sale of
closed facilities totaling $700.
Income taxes
The effective income tax rate for the second quarter of 1998 was 24.8 %
compared to (42.4) % in 1997. The 1997 rate is a negative rate due to the loss
incurred as a result of the restructuring and
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PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES, INCORPORATED
AND SUBSIDIARIES MAY 30,1998
(in thousands of dollars)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
one-time charges.The 1998 rate is being forced upward as the company continues
to improve in operating income. In addition, many of the items in the current
investment portfolio, under the new investment strategy, have higher tax rates
than investments under the previous strategy. The new portfolio strategy is,
however, generating a higher net income.
Liquidity and Capital Resources
Cash provided by operating activities was $1,768 in 1998 compared to $ 7,624 in
1997.The significant decline in cash provided by operating activities occurred
as the Company reduced its outstanding accounts payable and accrued liabilities
during the second quarter by $8,417 in 1998 compared to $3,180 in 1997; a net
decrease of $5,237. In addition, the sale of a closed facility in 1997 added
to the prior year's cash provided by operating activities.
The Company has decreased its accounts receivable outstanding by $6,732 since
year-end. This is mainly attributable to the decreases in sales resulting from
the closed plants and discontinued divisions.
Inventories have increased $6,305 during 1998. The manufacturing facilities
have produced ahead of projections, resulting in inventory increases. Also the
Company is building inventory in anticipation of the third and forth quarters,
which have traditionally been stronger than the second quarter.
The current ratio as of May 30, 1998 and May 31, 1997, respectively, was 4.83
to 1 and 5.48 to 1. Working capital for 1998 was $151,314 compared to $145,620
in 1997. There are no material commitments for capital expenditures at May 30,
1998. Capital expenditures made in the future for normal expansion are
anticipated to be made from funds generated by operating activities. The
Company has not typically used the debt or equity markets as sources of funds
or capital.
The Company's consolidated financial statements are prepared on the basis of
historical dollars and are not intended to show the impact of inflation or
changing prices. Neither inflation nor changing prices has had a material
effect on the Company's consolidated financial position and results of
operations in prior years.
Contingencies
The Company is involved in various claims and litigation, including a lawsuit
concerning a subsidiary, E. B. Malone Corporation, as well as environmental
matters at certain plant facilities, which arise in the normal course of
business. The details of these matters are described in Note E in the Notes to
Condensed Consolidated Financial Statements. Although the final outcome of
these legal and environmental 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.
The Company's Board of Directors approved a stock repurchase program and
adopted a Shareholders Rights Plan. The details to these matters are described
in Note E in the Notes to Condensed Consolidated Financial Statements.
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PART I-FINANCIAL INFORMATION-CONTINUED
BASSETT FURNITURE INDUSTRIES, INCORPORATED
AND SUBSIDIARIES MAY 30,1998
(in thousands of dollars)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
Year 2000
Over the past few years, the Company has been steadily reengineering its
business processes and information systems to prepare for the conversion to
year 2000. This effort has incorporated an analysis of Year 2000 issues, and
management believes that appropriate and timely action has been taken to
minimize the negative impact of this event. The Year 2000 issue results from
the inability of many computer systems and applications to recognize the year
2000 as the year following 1999. This could cause systems to process critical
information incorrectly. The Company plans to implement new systems and
technologies in 1998 and 1999 that will provide solutions to these issues. The
most significant step in accomplishing this goal was completed in the first
quarter of 1998 when a comprehensive enterprise system (which had been
installed in over 4,400 companies and is Year 2000 compliant) was purchased;
implementation began immediately and should be completed in the third quarter
of 1999. As of the end of the second quarter, the Company has engaged a
consultant, knowledgable of the enterprise system being installed, to advise
and assist in the installation and implementation of the system. The Company
continues to work with its customers, suppliers and third party service
providers to identify external weaknesses and provide solutions which will
prevent the disruption of business activities at that time. The Company does
not expect the cost of implementation to have a material adverse effect on its
future results of operations, liquidity or capital resources.
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. These forward-looking statements involve certain
risks and uncertainties. No assurance can be given that any such matters will
be realized. Factors that may cause actual results to differ materially from
those contemplated by such forward-looking statements include, among others,
the following possibilities: (I) competitive conditions in the industry in
which the Company operates; and (II) general economic conditions that are less
favorable than expected.
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PART II - OTHER INFORMATION
BASSETT FURNITURE INDUSTRIES, INCORPORATED
AND SUBSIDIARIES MAY 30, 1998
Item 4. Submission of matters to a vote of security holders
a. Exhibits
(27) Financial Data Schedule
b. Reports on Form 8-K:
No reports were filed on Form 8-K during the quarter. However, item 5 on this
Form 10-Q contains information not previously reported in a report on Form 8-K,
with respect to which information is not called for by this form.
Item 5. Other information.
The Board of Directors for Bassett Furniture Industries, Inc. has
approved a stock repurchase program for up to 1.3 million shares of its Common
Stock for an aggregate purchase price not to exceed $40 million. Bassett
currently has approximately 13 million shares outstanding. The repurchases may
be effected from time to time in accordance with applicable securities laws,
through open market transactions, in block purchases, in privately negotiated
transactions, or otherwise, and on such terms and conditions, all as may be
approved by any Authorized Officer.
"This share repurchase program reflects our confidence in Bassett s
strategic plan and future opportunities for growth and reinforces management s
commitment to further enhance shareholder value," said Paul Fulton, Chairman
and Chief Executive Officer of the Company. He added, "Management and the
Board of Directors want to be in a position so that anytime it is felt that the
market evaluation our Company does not reflect the strengths and prospects of
our Company, we want to be in a position to repurchase our Common Stock on an
opportunistic basis."
The Board of Directors also approved payment of a cash dividend of
$.20 per share to holders of record on August 17, 1998, payable on September 1,
1998.
The Board of Directors adopted a Shareholder Rights Plan, which
replaces a similar plan that expired on May 16, 1998. The Plan is not being
adopted in response to any specific effort to acquire control of the Company.
If a person or group acquires beneficial ownership of 20% or more of the Common
Stock outstanding, each Right distributed under the Plan will entitle its
holder (other than such person or group) to purchase, at the Rights
then-current exercise price, a number of shares of the Company's Common Stock
having a market value of twice such price. Detailed descriptions of the Rights
will be sent to the Company's shareholders and filed with the Securities and
Exchange Commission.
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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/ DOUGLAS W. MILLER
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Douglas W. Miller, Vice President, Chief Financial Officer
DATE: July 14, 1998
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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 30, 1998 0-209
BASSETT FURNITURE INDUSTRIES, INCORPORATED
EXHIBIT INDEX
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Exhibit No. Exhibit Description Page No.
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27 Financial Data Schedule page 9
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