UNITED STATES
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 28, 2004
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 of incorporation or organization) |
(I.R.S. Employer 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 x No ¨
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
At February 28, 2004, 11,697,418 shares of common stock of the Registrant were outstanding.
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
2 of 29
PART I - FINANCIAL INFORMATION
BASSETT FURNITURE INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE PERIODS ENDED FEBRUARY 28, 2004 AND MARCH 1, 2003 – UNAUDITED
(In thousands except per share data)
| Thirteen Weeks Ended |
||||||||
| February 28, 2004 |
March 1, 2003 |
|||||||
| Net sales |
$ | 76,568 | $ | 77,614 | ||||
| Cost of sales |
56,901 | 57,410 | ||||||
| Gross profit |
19,667 | 20,204 | ||||||
| Selling, general and administrative |
18,496 | 20,298 | ||||||
| Gain on sale of property, net |
(3,890 | ) | — | |||||
| Restructuring and impaired fixed asset charges |
2,840 | 3,200 | ||||||
| Operating income (loss) |
2,221 | (3,294 | ) | |||||
| Other income, net |
1,013 | 1,142 | ||||||
| Income (loss) before income tax (provision) benefit and cumulative effect of accounting change |
3,234 | (2,152 | ) | |||||
| Income tax (provision) benefit |
(906 | ) | 602 | |||||
| Income (loss) before cumulative effect of accounting change |
2,328 | (1,550 | ) | |||||
| Cumulative effect of accounting change, net of income tax of $3,200 |
— | (4,875 | ) | |||||
| Net income (loss) |
$ | 2,328 | $ | (6,425 | ) | |||
| Retained earnings-beginning of period |
159,487 | 169,789 | ||||||
| Cash dividends |
(2,331 | ) | (2,318 | ) | ||||
| Repurchases of common stock |
— | (573 | ) | |||||
| Issuance of common stock |
868 | 22 | ||||||
| Retained earnings-end of period |
$ | 160,352 | $ | 160,495 | ||||
| Basic earnings (loss) per share |
$ | 0.20 | $ | (0.55 | ) | |||
| Diluted earnings (loss) per share |
$ | 0.20 | $ | (0.55 | ) | |||
| 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.
3 of 29
PART I – FINANCIAL INFORMATION – CONTINUED
BASSETT FURNITURE INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
FEBRUARY 28, 2004 AND NOVEMBER 29, 2003
(In thousands)
| (Unaudited) February 28, 2004 |
November 29, 2003 | |||||
| Assets |
||||||
| Current assets |
||||||
| Cash and cash equivalents |
$ | 18,781 | $ | 15,181 | ||
| Accounts receivable, net |
40,313 | 39,230 | ||||
| Inventories |
33,865 | 36,454 | ||||
| Assets held for sale, net |
1,868 | 1,881 | ||||
| Deferred income taxes |
5,351 | 5,307 | ||||
| Other current assets |
1,941 | 4,525 | ||||
| Total current assets |
102,119 | 102,578 | ||||
| Property and equipment |
||||||
| Cost |
167,260 | 167,702 | ||||
| Less accumulated depreciation |
121,383 | 118,902 | ||||
| Total property and equipment |
45,877 | 48,800 | ||||
| Investments |
72,839 | 65,151 | ||||
| Retail real estate, net |
32,922 | 32,930 | ||||
| Notes receivable, net |
15,706 | 15,399 | ||||
| Other, net |
13,241 | 15,522 | ||||
| Total other assets |
134,708 | 129,002 | ||||
| Total assets |
$ | 282,704 | $ | 280,380 | ||
| Liabilities and Stockholders’ Equity |
||||||
| Current liabilities |
||||||
| Accounts payable |
$ | 15,712 | $ | 15,127 | ||
| Accrued liabilities |
20,812 | 22,341 | ||||
| Total current liabilities |
36,524 | 37,468 | ||||
| Long-term liabilities |
||||||
| Employee benefits |
9,766 | 9,824 | ||||
| Distributions in excess of affiliate earnings |
14,352 | 13,070 | ||||
| Total long-term liabilities |
24,118 | 22,894 | ||||
| Stockholders’ Equity |
||||||
| Common stock |
58,487 | 58,000 | ||||
| Retained earnings |
160,352 | 159,487 | ||||
| Accumulated other comprehensive income - unrealized holding gains, net of income tax effect |
3,223 | 2,531 | ||||
| Total stockholders’ equity |
222,062 | 220,018 | ||||
| Total liabilities and stockholders’ equity |
$ | 282,704 | $ | 280,380 | ||
The accompanying notes to condensed consolidated financial statements are an integral part of the condensed consolidated financial statements.
4 of 29
PART I – FINANCIAL INFORMATION – CONTINUED
BASSETT FURNITURE INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED FEBRUARY 28, 2004 AND MARCH 1, 2003 – UNAUDITED
(In thousands)
| Thirteen Weeks Ended |
||||||||
| February 28, 2004 |
March 1, 2003 |
|||||||
| Net income (loss) |
$ | 2,328 | $ | (6,425 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
||||||||
| Depreciation and amortization |
2,519 | 2,773 | ||||||
| Equity in undistributed income of investments |
(1,901 | ) | (1,830 | ) | ||||
| Provision for writedown of property and equipment |
2,103 | 1,530 | ||||||
| Cumulative effect of accounting change, net |
— | 4,875 | ||||||
| Net gain from sale of property and equipment |
(3,890 | ) | (13 | ) | ||||
| Net gain from sales of investments |
(349 | ) | — | |||||
| Provision for losses on trade accounts receivable |
90 | 29 | ||||||
| Deferred income taxes |
838 | (602 | ) | |||||
| Changes in employee benefit liabilities |
(58 | ) | (56 | ) | ||||
| Changes in operating assets and liabilities, exclusive of assets and liabilities acquired in a business combination: |
||||||||
| Trade accounts receivable |
(1,173 | ) | (2,856 | ) | ||||
| Inventories |
2,589 | (4,830 | ) | |||||
| Refundable income taxes |
— | 2,003 | ||||||
| Other current assets |
554 | (539 | ) | |||||
| Accounts payable and accrued liabilities |
(944 | ) | 203 | |||||
| Net cash provided by (used in) operating activities |
2,706 | (5,738 | ) | |||||
| Investing activities: |
||||||||
| Purchases of property and equipment |
(2,190 | ) | (1,836 | ) | ||||
| Proceeds from sales of property and equipment |
6,104 | 183 | ||||||
| Proceeds from sales of investments |
4,414 | 17,000 | ||||||
| Purchases of investments |
(9,414 | ) | (12,000 | ) | ||||
| Dividends from an affiliate |
2,343 | 1,874 | ||||||
| Other, net |
614 | 410 | ||||||
| Net cash provided by investing activities |
1,871 | 5,631 | ||||||
| Financing activities: |
||||||||
| Repayments of long-term debt |
— | 4,000 | ||||||
| Issuance of common stock |
1,354 | 38 | ||||||
| Repurchases of common stock |
— | (914 | ) | |||||
| Cash dividends |
(2,331 | ) | (2,318 | ) | ||||
| Net cash (used in) provided by financing activities |
(977 | ) | 806 | |||||
| Net change in cash and cash equivalents |
3,600 | 699 | ||||||
| Cash and cash equivalents, beginning of period |
15,181 | 2,892 | ||||||
| Cash and cash equivalents, end of period |
$ | 18,781 | $ | 3,591 | ||||
5 of 29
BASSETT FURNITURE INDUSTRIES INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
FEBRUARY 28, 2004
(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 majority owned subsidiaries of which the Company has operating control. In 2003, the Company adopted the Financial Accounting Standards Board (“FASB”) Revised Interpretation No. 46 “Consolidation of Variable Interest Entities,” for LRG Furniture, LLC (“LRG”). (See Note I.) The equity method of accounting is used for the Company’s investments in affiliated companies in which the Company exercises significant influence but does not maintain control.
Note B. Interim Financial Presentation
All intercompany accounts and transactions have been eliminated in the consolidated financial statements. The results of operations for the three months ended February 28, 2004 are not necessarily indicative of results for the fiscal year. It is suggested that the interim consolidated financial statements be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended November 29, 2003.
Certain amounts in the 2003 financial statements have been reclassified to more closely conform with the 2004 presentation.
Note C. Stock-Based Compensation:
The Company has elected to continue to account for stock options granted to employees and directors under APB Opinion No. 25 and is required to provide pro forma disclosures of what net income and earnings per share would have been had the Company adopted the fair value method for recognition purposes under SFAS No. 123.
For the quarters ended February 28, 2004 and March 1, 2003, the effect on earnings (loss) per share would be as follows:
| For the Quarter Ended |
||||||||
| February 28, 2004 |
March 1, 2003 |
|||||||
| Net income (loss): |
||||||||
| As reported |
$ | 2,328 | $ | (6,425 | ) | |||
| Less: pro forma expense, net of tax, related to stock options |
(115 | ) | (119 | ) | ||||
| Pro forma net income (loss) |
$ | 2,213 | $ | (6,544 | ) | |||
| Earnings (loss) per share: |
||||||||
| As reported |
||||||||
| Basic |
$ | 0.20 | $ | (0.55 | ) | |||
| Diluted |
0.20 | (0.55 | ) | |||||
| Pro forma |
||||||||
| Basic |
0.19 | (0.56 | ) | |||||
| Diluted |
0.19 | (0.56 | ) | |||||
The pro forma results reflect amortization of the fair value of stock options over the vesting period.
6 of 29
BASSETT FURNITURE INDUSTRIES INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
FEBRUARY 28, 2004
(Dollars in thousands except share and per share data)
Note D. Inventories:
Inventories are valued at the lower of cost or market. Cost is determined for domestic furniture inventories using the last-in, first-out (LIFO) method. The costs for imported inventories are determined using the first-in, first-out (FIFO) method.
| February 28, 2004 |
November 29, 2003 |
|||||||
| Finished goods |
$ | 21,871 | $ | 25,488 | ||||
| Work in process |
2,710 | 2,922 | ||||||
| Raw materials and supplies |
17,252 | 16,830 | ||||||
| Retail merchandise |
8,896 | 8,146 | ||||||
| Total inventories on FIFO method |
50,729 | |||||||