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 26, 2005
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 26, 2005, 11,753,640 shares of common stock of the Registrant were outstanding.
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
TABLE OF CONTENTS
2 of 26
PART I - FINANCIAL INFORMATION
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE PERIODS ENDED FEBRUARY 26, 2005 AND FEBRUARY 28, 2004 – UNAUDITED
(In thousands except per share data)
| Thirteen Weeks Ended |
||||||||
| February 26, 2005 |
February 28, 2004 |
|||||||
| Net sales |
$ | 80,752 | $ | 76,568 | ||||
| Cost of sales |
59,456 | 56,901 | ||||||
| Gross profit |
21,296 | 19,667 | ||||||
| Selling, general and administrative |
20,028 | 18,496 | ||||||
| Gain on sale of property, net |
— | (3,890 | ) | |||||
| Restructuring and impaired asset charges |
— | 2,840 | ||||||
| Operating income |
1,268 | 2,221 | ||||||
| Other income, net |
1,970 | 1,013 | ||||||
| Income before income tax provision |
3,238 | 3,234 | ||||||
| Income tax provision |
(874 | ) | (906 | ) | ||||
| Net income |
$ | 2,364 | $ | 2,328 | ||||
| Retained earnings-beginning of period |
158,341 | 159,487 | ||||||
| Cash dividends |
(2,350 | ) | (2,331 | ) | ||||
| Retained earnings-end of period |
$ | 158,355 | $ | 159,484 | ||||
| Basic earnings per share |
$ | 0.20 | $ | 0.20 | ||||
| Diluted earnings per share |
$ | 0.20 | $ | 0.20 | ||||
| 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.
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PART I – FINANCIAL INFORMATION – CONTINUED
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
FEBRUARY 26, 2005 AND NOVEMBER 27, 2004
(In thousands)
| (Unaudited) February 26, 2005 |
November 27, 2004 | |||||
| Assets |
||||||
| Current assets |
||||||
| Cash and cash equivalents |
$ | 5,800 | $ | 4,022 | ||
| Accounts receivable, net |
43,382 | 40,507 | ||||
| Inventories, net |
48,208 | 47,285 | ||||
| Assets held for sale, net |
1,145 | 2,753 | ||||
| Deferred income taxes |
3,880 | 4,130 | ||||
| Other current assets |
3,980 | 3,980 | ||||
| Total current assets |
106,395 | 102,677 | ||||
| Property and equipment |
||||||
| Cost |
149,059 | 147,708 | ||||
| Less accumulated depreciation |
109,342 | 107,465 | ||||
| Property and equipment, net |
39,717 | 40,243 | ||||
| Investments |
75,264 | 73,520 | ||||
| Retail real estate, net |
54,190 | 53,085 | ||||
| Notes receivable, net |
14,919 | 14,642 | ||||
| Other, net |
13,236 | 13,199 | ||||
| Total other assets |
157,609 | 154,446 | ||||
| Total assets |
$ | 303,721 | $ | 297,366 | ||
| Liabilities and Stockholders’ Equity |
||||||
| Current liabilities |
||||||
| Accounts payable |
$ | 16,883 | $ | 19,948 | ||
| Accrued liabilities |
21,689 | 18,601 | ||||
| Total current liabilities |
38,572 | 38,549 | ||||
| Long-term liabilities |
||||||
| Employee benefits |
9,354 | 9,423 | ||||
| Long-term debt |
5,000 | — | ||||
| Real estate notes payable |
15,494 | 15,604 | ||||
| Distributions in excess of affiliate earnings |
13,750 | 12,578 | ||||
| Total long-term liabilities |
43,598 | 37,605 | ||||
| Commitments and Contingencies |
||||||
| Stockholders’ equity |
||||||
| Common stock |
58,768 | 58,680 | ||||
| Retained earnings |
158,355 | 158,341 | ||||
| Additional paid-in-capital |
1,546 | 1,373 | ||||
| Accumulated other comprehensive income - unrealized holding gains, net of income tax |
2,882 | 2,818 | ||||
| Total stockholders’ equity |
221,551 | 221,212 | ||||
| Total liabilities and stockholders’ equity |
$ | 303,721 | $ | 297,366 | ||
The accompanying notes to condensed consolidated financial statements 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 STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED FEBRUARY 26, 2005 AND FEBRUARY 28, 2004 – UNAUDITED
(In thousands)
| February 26, 2005 |
February 28, 2004 |
|||||||
| Net income |
$ | 2,364 | $ | 2,328 | ||||
| Adjustments to reconcile net income to net cash (used in) provided by operating activities: |
||||||||
| Depreciation and amortization |
2,467 | 2,519 | ||||||
| Equity in undistributed income of investments and unconsolidated affiliated companies |
(2,772 | ) | (1,901 | ) | ||||
| Provision for write-down of property and equipment |
— | 2,103 | ||||||
| Net gain from sale of property and equipment |
— | (3,890 | ) | |||||
| Net gain from sales of investments |
(587 | ) | (79 | ) | ||||
| Provision for losses on trade accounts receivable |
590 | 310 | ||||||
| Deferred income taxes |
250 | 838 | ||||||
| Changes in employee benefit liabilities |
(69 | ) | (58 | ) | ||||
| Changes in operating assets and liabilities |
||||||||
| Accounts receivable, net |
(3,465 | ) | (1,393 | ) | ||||
| Inventories, net |
(923 | ) | 2,589 | |||||
| Other current assets |
— | 554 | ||||||
| Notes receivable, net |
(277 | ) | (307 | ) | ||||
| Accounts payable and accrued liabilities |
23 | (944 | ) | |||||
| Net cash (used in) provided by operating activities |
(2,399 | ) | 2,669 | |||||
| Investing activities: |
||||||||
| Purchases of property and equipment |
(1,104 | ) | (654 | ) | ||||
| Purchases of retail real estate |
(1,632 | ) | (1,536 | ) | ||||
| Proceeds from sales of property and equipment |
1,367 | 6,104 | ||||||
| Proceeds from sales of investments |
3,513 | 4,414 | ||||||
| Purchases of investments |
(3,088 | ) | (9,414 | ) | ||||
| Dividends from an affiliate |
2,342 | 2,343 | ||||||
| Other, net |
(21 | ) | 651 | |||||
| Net cash provided by investing activities |
1,377 | 1,908 | ||||||
| Financing activities: |
||||||||
| Borrowings under revolving credit arrangement |
5,000 | — | ||||||
| Repayments of real estate notes payable |
(110 | ) | — | |||||
| Issuance of common stock |
260 | 1,354 | ||||||
| Cash dividends |
(2,350 | ) | (2,331 | ) | ||||
| Net cash provided by (used in) financing activities |
2,800 | (977 | ) | |||||
| Net change in cash and cash equivalents |
1,778 | 3,600 | ||||||
| Cash and cash equivalents, beginning of period |
4,022 | 15,181 | ||||||
| Cash and cash equivalents, end of period |
$ | 5,800 | $ | 18,781 | ||||
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
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
FEBRUARY 26, 2005
(Dollars in thousands except share and per share data)
Note 1. 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 our opinion, 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 our majority owned subsidiaries of which we have operating control. The equity method of accounting is used for our investments in affiliated companies in which we exercise significant influence but do not maintain control, unless consolidated pursuant to Financial Accounting Standards Board (“FASB”) Revised Interpretation No. 46 “Consolidation of Variable Interest Entities” (“FIN46R”).
Note 2. 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 26, 2005 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 our Annual Report on Form 10-K for the year ended November 27, 2004.
Certain amounts in the 2004 financial statements have been reclassified to more closely conform with the 2005 presentation.
Note 3. Stock-Based Compensation:
We have elected to continue to account for stock options granted to employees and directors under APB Opinion No. 25 and are required to provide pro forma disclosures of what net income and earnings per share would have been had we adopted the fair value method for recognition purposes under SFAS No. 123.
For the quarters ended February 26, 2005 and February 28, 2004, the effect on earnings per share would be as follows:
| For the Quarter Ended |
||||||||
| February 26, 2005 |
February 28, 2004 |
|||||||
| Net income: |
||||||||
| As reported |
$ | 2,364 | $ | 2,328 | ||||
| Less: pro forma expense, net of tax, related to stock options |
(13 | ) | (73 | ) | ||||
| Pro forma net income |
$ | 2,351 | $ | 2,255 | ||||
| Earnings per share: |
||||||||
| As reported |
||||||||
| Basic |
$ | 0.20 | $ | 0.20 | ||||
| Diluted |
0.20 | 0.20 | ||||||
| Pro forma |
||||||||
| Basic |
0.20 | 0.19 | ||||||
| Diluted |
0.20 | 0.19 | ||||||
The pro forma results reflect amortization of the fair value of stock options over the vesting period.
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BASSETT FURNITURE INDUSTRIES INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
FEBRUARY 26, 2005
(Dollars in thousands except share and per share data)
Note 4. 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 26, 2005 |
November 27, 2004 |
|||||||
| Finished goods |
$ | 34,488 | $ | 35,893 | ||||
| Work in process |
2,077 | 2,171 | ||||||
| Raw materials and supplies |
18,770 | 17,874 | ||||||
| Retail merchandise |
9,553 | 8,285 | ||||||
| Total inventories on FIFO method |
64,888 | 64,223 | ||||||
| LIFO adjustment |
(16,680 | ) | (16,938 | ) | ||||