UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) June 27, 2006
BASSETT FURNITURE INDUSTRIES, INCORPORATED
(Exact name of registrant as specified in its charter)
| VIRGINIA (State or other jurisdiction |
0-209 (Commission |
54-0135270 (I.R.S. Employer |
| 3525 FAIRYSTONE PARK HIGHWAY BASSETT, VIRGINIA |
24055 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code 276/629-6000
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition.
On June 27, 2006, Bassett Furniture Industries issued a news release relating to, among other things, the second quarter and year-to-date financial results for the fiscal year 2006. A copy of the news release announcing this information is attached to this report as Exhibit 99.
Item 9.01. Financial Statements and Exhibits
Exhibit 99 News release issued by Bassett Furniture Industries, Inc. on June 27, 2006.
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 hereunto duly authorized.
| BASSETT FURNITURE INDUSTRIES, INCORPORATED | ||||||
| Date: June 27, 2006 |
By:
|
/s/ Barry C. Safrit
| ||||
| Barry C. Safrit | ||||||
| Title: |
Vice President, Chief Financial Officer | |||||
EXHIBIT INDEX
Description
| Exhibit No. 99 News | release issued by Bassett Furniture Industries on June 27, 2006. |
Exhibit 99
| Bassett Furniture Industries, Inc. |
Barry C. Safrit, V.P., CFO | |||
| P.O. Box 626 |
(276) 629-6757 – Investors | |||
| Bassett, VA 24055 |
(276) 629-6332 – Fax | |||
| Jay S. Moore, Dir. of Communications | ||||
| For Immediate Release |
(276) 629-6450 – Media | |||
| (276) 629-6418 – Fax | ||||
Bassett Furniture News Release
Bassett Announces Second Quarter 2006 Earnings
(Bassett, Va.) – June 27, 2006 – Bassett Furniture Industries Inc. (NASDAQ:BSET) announced today its earnings for its fiscal quarter ended May 27, 2006.
Sales for the second quarter of 2006 were $87.7 million, up 5.5% from second quarter 2005 levels. Gross margins increased 5.2 percentage points in the second quarter of 2006 as compared to the second quarter of 2005. The Company reported net income of $2.9 million or $.24 per share as compared to net income of $1.0 million or $.09 per share in the second quarter of 2005. Net income for the second quarter of 2005 included a $1.5 million or $.13 per share after-tax charge related to the acquisition of the eight Dallas area Bassett Furniture Direct (BFD) stores. (See below and the chart on page 8 for a discussion of the Company’s results by segment.) A reconciliation of net income and earnings per share calculations has been set forth below.
Other income for the second quarter of 2006 was $2.8 million compared to $1.8 million in the second quarter of 2005. For the year, other income was $4.6 million in 2006 compared to $3.8 million in 2005. The Company has continued to experience very solid results from its investment portfolio. During the second quarter of 2006, the Company sold $4.5 million of investments and repositioned a portion of its portfolio yielding realized gains totaling $1.0 million which are included in other income for the quarter.
Year-to-date, sales were $174.2 million, up 6% from the prior year. Gross margins increased 5.5 percentage points as compared to 2005. The Company reported net income of $5.2 million or $.44 per share as compared to net income of $3.4 million or $.29 per share in 2005. This increase in sales and gross margins from 2005 is due to the increase in the number of corporate owned stores and an improved mix of imported product.
The Bassett Furniture Direct retail store program continues to grow with 136 stores (111 licensed and 25 corporately owned) in operation at the end of the second quarter as licensees opened five stores during the quarter. The Company will open one new corporate store and expects licensees to open five new BFD stores in the remainder of fiscal 2006.
“We are pleased with the continued earnings progress of our wholesale segment,” said Robert H. Spilman Jr., president and chief executive officer. “Actions taken over the past several years to restructure our wholesale business have resulted in better returns and we expect continued improvement. Now, we must drive improvement in our retail segment’s results. Amidst an extremely challenging retail environment, we are squarely focused on selling more furniture in our Bassett Furniture Direct stores. This enterprise-wide effort involves every aspect of our Company –
Merchandising, Marketing, Operations, Recruiting, Training and Information Technology. We have developed a financial plan aimed at reducing these retail losses to a breakeven level over the next 12 to 18 months.”
A major marketing initiative for Bassett in August will be the introduction of a direct to consumer catalog. This catalog will better define and enhance Bassett’s brand image while explaining to its consumers its product and service capabilities. This initiative should result in increased traffic to the participating stores.
Wholesale Segment
On a wholesale basis, the Company had net sales of $75.4 million for the second quarter of 2006, basically flat with sales levels attained in the second quarter of 2005. Approximately two-thirds of wholesale shipments were to BFD stores in both the second quarters of 2006 and 2005. Additionally, approximately 43% of wholesale shipments were imported products as compared to 32% in the second quarter of 2005. Overall, the segment’s gross margins increased three percentage points from the second quarter of 2005. This improvement was primarily driven by an improved mix of imported products. Upholstery shipments and operating earnings continued to improve due to the retail acceptance of the Company’s leather program and the new fabrics introduced over the past two years.
Year-to-date, the Company had wholesale sales of $151.7, slightly up over the prior year. For the first six months of 2006, 69% of wholesale shipments were to BFDs compared to 67% in the first six months of 2005. Gross margins for the first six months of 2006 have also increased three percentage points compared to the first six months of 2005 due largely to the increase in sales of imported products.
Retail Segment
Retail sales for the second quarter of 2006 were $20.9 million, which represents an increase of $6.8 million from the second quarter of 2005. For the year, sales were $42.8 million, up $16 million from 2005. This increase in sales for the second quarter and first six months of 2006 is almost entirely due to the 15 stores acquired during 2005.
During the second quarter of 2006, the Company made the decision to close two of its corporate stores, one in Texas and one in Georgia. These stores are currently running clearance events which will continue for the next several months. Bassett’s 25 remaining corporate stores continued to experience relatively soft conditions at retail and incurred an operating loss of $2.5 million for the second quarter of 2006 compared to breakeven for the second quarter of 2005 when Bassett’s retail segment included only 14 stores. This additional loss relates largely to the 15 stores acquired from three licensees in 2005. Net sales and margins were lower than planned primarily due to the overall soft retail conditions, the discounting related to liquidating clearance inventories and because the changes being made to drive more traffic, improve staffing, standardize pricing and streamline operations are taking longer than anticipated to implement. Bassett continues to take steps to merge the 25 corporate stores from five independent operating units into a centrally managed operation. These changes, which include new management talent and standardizing certain functions, have resulted in short term challenges but are expected to lead to improvement in the long-term.
Balance Sheet and Cash Flow
Our May 27, 2006, condensed consolidated balance sheet, with a sizeable investment portfolio, remains strong and continues to bolster our retail growth strategy. Our primary sources of funds have been our investment portfolio and a bank credit facility. The primary uses of cash were increases in working capital, purchases of retail real estate and payment of cash dividends.
The Company’s accounts receivable balance has increased $3.8 million for the year. This increase is related to the overall retail environment and the slower pace of collections from certain BFD licensees. Inventories have increased $4 million for the year related primarily to the increase in the amount of imported products.
The Company borrowed $3 million during the quarter, $8 million year-to-date, and sold $4.5 million of its investment portfolio primarily to fund increases in accounts receivable and inventories. The Company received $1.3 million in proceeds from the sale of its Weiman division during the quarter and paid its regular quarterly dividend to shareholders during the quarter.
Bassett also announced that its Board of Directors has declared a regular quarterly dividend of $.20 per share payable on September 1, 2006, to shareholders of record on August 16, 2006.
Bassett Furniture Industries, Inc. is a leading manufacturer and marketer of high quality, mid-priced home furnishings. With over 130 Bassett Furniture Direct stores, Bassett has leveraged its strong brand name in furniture into a growing network of licensed stores that focus on providing consumers with a friendly and professional environment for buying furniture and accessories. While the Company continues to sell its products to other retailers, the most significant growth vehicle for Bassett continues to be the Company’s dedicated retail store program. Bassett’s retail strategy encompasses affordable custom-built furniture that is ready for delivery in the home within 30 days. The stores also feature the latest on-trend furniture styles, more than 1,000 upholstery fabrics, free in-home design visits, and coordinated decorating accessories. For more information, visit the Company’s website at www.bassettfurniture.com.
Certain of the statements in the immediately preceding paragraphs, particularly those preceded by, followed by or including the words “believes,” “expects,” “anticipates,” “intends,” “should,” “estimates,” “aimed” or similar expressions, or those relating to or anticipating financial results for periods beyond the end of the second quarter of 2006, constitute “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended. For those statements, Bassett claims the protection of the safe harbor for forward looking statements contained in the Private Securities Litigation Reform Act of 1995. In many cases, Bassett cannot predict what factors would cause actual results to differ materially from those indicated in the forward looking statements. Expectations included in the forward-looking statements are based on preliminary information as well as certain assumptions which management believes to be reasonable at this time. The following important factors affect Bassett and could cause those results to differ materially from those expressed in the forward looking statements: economic, competitive, governmental and other factors identified in Bassett’s filings with the Securities and Exchange Commission, and the effects of national and global economic or other conditions and future events on the retail demand for home furnishings.
###
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income - Unaudited
(In thousands, except for per share data)
| 13 Weeks Ended May 27, 2006 |
13 Weeks Ended May 28, 2005 |
|||||||||||||
| Amount | Percent of Net Sales |
Amount | Percent of Net Sales |
|||||||||||
| Net sales |
$ | 87,663 | 100.0 | % | $ | 83,063 | 100.0 | % | ||||||
| Cost of sales |
59,675 | 68.1 | % | 60,913 | 73.3 | % | ||||||||
| Gross profit |
27,988 | 31.9 | % | 22,150 | 26.7 | % | ||||||||
| Selling, general and administrative |
26,833 | 30.6 | % | 20,460 | 24.6 | % | ||||||||
| Impaired asset charge |
— | 0.0 | % | 2,465 | 3.0 | % | ||||||||
| Operating Income (loss) |
1,155 | 1.3 | % | (775 | ) | -0.9 | % | |||||||
| Other income, net |
2,780 | 3.2 | % | 1,838 | 2.2 | % | ||||||||
| Income before income taxes |
3,935 | 4.5 | % | 1,063 | 1.3 | % | ||||||||
| Income tax provision |
(1,050 | ) | -1.2 | % | (16 | ) | 0.0 | % | ||||||
| Net income |
$ | 2,885 | 3.3 | % | $ | 1,047 | 1.3 | % | ||||||
| Basic earnings per share: |
$ | 0.24 | $ | 0.09 | ||||||||||
| Diluted earnings per share: |
$ | 0.24 | $ | 0.09 | ||||||||||
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income - Unaudited
(In thousands, except for per share data)
| 26 Weeks Ended May 27, 2006 |
26 Weeks Ended May 28, 2005 |
|||||||||||||
| Amount | Percent of Net Sales |
Amount | Percent of Net Sales |
|||||||||||
| Net sales |
$ | 174,152 | 100.0 | % | $ | 163,815 | 100.0 | % | ||||||
| Cost of sales |
118,489 | 68.0 | % | 120,369 | 73.5 | % | ||||||||
| Gross profit |
55,663 | 32.0 | % | 43,446 | 26.5 | % | ||||||||
| Selling, general and administrative |
53,093 | 30.5 | % | 40,488 | 24.7 | % | ||||||||
| Impaired asset charge |
— | 0.0 | % | 2,465 | 1.5 | % | ||||||||
| Operating Income |
2,570 | 1.5 | % | 493 | 0.3 | % | ||||||||
| Other income, net |
4,553 | 2.6 | % | 3,808 | 2.3 | % | ||||||||
| Income before income taxes |
7,123 | 4.1 | % | 4,301 | 2.6 | % | ||||||||
| Income tax provision |
(1,928 | ) | -1.1 | % | (890 | ) | -0.5 | % | ||||||
| Net income |
$ | 5,195 | 3.0 | % | $ | 3,411 | 2.1 | % | ||||||
| Basic earnings per share: |
$ | 0.44 | $ | 0.29 | ||||||||||
| Diluted earnings per share: |
$ | 0.44 | $ | 0.29 | ||||||||||
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
| (Unaudited) May 27, 2006 |
November 26, 2005 | |||||
| Assets |
||||||
| Current assets |
||||||
| Cash and cash equivalents |
$ | 5,321 | $ | 7,109 | ||
| Accounts receivable, net |
40,820 | 37,069 | ||||
| Inventories |
52,929 | 48,887 | ||||
| Deferred income taxes |
5,084 | 5,188 | ||||
| Assets held for sale |
1,185 | 1,185 | ||||
| Other current assets |
2,390 | 3,626 | ||||
| Total current assets |
107,729 | 103,064 | ||||
| Property and equipment, net |
61,306 | 64,644 | ||||
| Investments |
76,049 | 76,890 | ||||
| Retail real estate, net |
34,165 | 31,640 | ||||
| Notes receivable, net |
17,945 | 15,768 | ||||
| Other, net |
16,218 | 16,650 | ||||
| 144,377 | 140,948 | |||||
| Total assets |
$ | 313,412 | $ | 308,656 | ||
| Liabilities and Stockholders’ Equity |
||||||
| Current liabilities |
||||||
| Accounts payable |
$ | 21,039 | $ | 19,421 | ||
| Customer deposits |
6,092 | 7,525 | ||||
| Other accrued liabilities |
19,443 | 21,402 | ||||
| Total current liabilities |
46,574 | 48,348 | ||||
| Long-term liabilities |
||||||
| Employee benefits |
8,943 | 9,208 | ||||
| Long-term debt |
11,709 | 3,910 | ||||
| Real estate notes payable |
14,897 | 15,144 | ||||
| Distributions in excess of affiliate earnings |
11,548 | 11,833 | ||||
| 47,097 | 40,095 | |||||
| Commitments and Contingencies |
||||||
| Stockholders’ equity |
||||||
| Common stock, par value $5 a share, 50,000,000 shares authorized, issued and outstanding - 11,792,097 in 2006 and 11,777,505 in 2005 |
58,960 | 59,022 | ||||
| Retained earnings |
156,938 | 156,471 | ||||
| Additional paid-in-capital |
1,712 | 2,068 | ||||
| Accumulated other comprehensive income - unrealized holding gains, net of income tax |
2,131 | 2,652 | ||||
| Total stockholders’ equity |
219,741 | 220,213 | ||||
| Total liabilities and stockholders’ equity |
$ | 313,412 | $ | 308,656 | ||
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - Unaudited
(In thousands)
| 26 Weeks Ended May 27, 2006 |
26 Weeks Ended May 28, 2005 |
|||||||
| Operating Activities |
||||||||
| Net income |
$ | 5,195 | $ | 3,411 | ||||
| Adjustments to reconcile net income to net cash (used in) provided by operating activities: |
||||||||
| Depreciation and amortization |
4,444 | 4,656 | ||||||
| Equity in undistributed income of investments |
(5,404 | ) | (5,533 | ) | ||||
| Provision for write-down of impaired assets |
— | 2,465 | ||||||
| Provision for losses on trade accounts receivable |
1,680 | 1,180 | ||||||
| Net gain from sales of investments |
(1,643 | ) | (393 | ) | ||||
| Deferred income taxes |
278 | (322 | ) | |||||
| Changes in employee benefit liabilities |
(265 | ) | (138 | ) | ||||
| Changes in operating assets and liabilities, exclusive of assets sold in Weiman transaction: |
||||||||
| Trade accounts receivable |
(5,431 | ) | (619 | ) | ||||
| Inventories |
(4,878 | ) | 3,243 | |||||
| Other current assets |
1,231 | (312 | ) | |||||
| Notes receivable, net |
(1,913 | ) | 110 | |||||
| Accounts payable and accrued liabilities |
(1,774 | ) | (2,148 | ) | ||||
| Net cash (used in) provided by operating activities |
(8,480 | ) | 5,600 | |||||
| Investing Activities |
||||||||
| Purchases of property and equipment, net |
(2,284 | ) | (2,139 | ) | ||||
| Purchases of retail real estate |
(3,344 | ) | (3,361 | ) | ||||
| Proceeds from sales of property and equipment |
1,694 | 1,511 | ||||||
| Proceeds from sales of investments |
12,088 | 9,173 | ||||||
| Purchases of investments |
(7,636 | ) | (7,611 | ) | ||||
| Acquisition of retail licensee stores, net of cash acquired |
— | (200 | ) | |||||
| Dividends from an affiliate |
2,811 | 2,342 | ||||||
| Proceeds from sale of certain assets of Weiman Division |
1,300 | — | ||||||
| Other, net |
(248 | ) | (1,231 | ) | ||||
| Net cash provided by (used in) investing activities |
4,381 | (1,516 | ) | |||||
| Financing Activities |
||||||||
| Borrowings under revolving credit arrangement |
8,000 | 4,000 | ||||||
| Repayments of long-term debt |
(201 | ) | — | |||||
| Repayments of real estate notes payable |
(247 | ) | (228 | ) | ||||
| Issuance of common stock, net |
397 | 745 | ||||||
| Repurchases of common stock |
(910 | ) | — | |||||
| Cash dividends |
(4,728 | ) | (4,709 | ) | ||||
| Net cash provided by (used in) financing activities |
2,311 | (192 | ) | |||||
| Net change in cash and cash equivalents |
(1,788 | ) | 3,892 | |||||
| Cash and cash equivalents, beginning of period |
7,109 | 4,022 | ||||||
| Cash and cash equivalents, end of period |
$ | 5,321 | $ | 7,914 | ||||
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Segment Information—Unaudited
(In thousands)
| Quarter Ended | Six Months Ended | |||||||||||||||
| May 27, 2006 | May 28, 2005 | May 27, 2006 | May 28, 2005 | |||||||||||||
| Net Sales |
||||||||||||||||
| Wholesale |
$ | 75,401 | $ | 75,947 | $ | 151,729 | $ | 150,855 | ||||||||
| Retail |
20,927 | 14,085 | 42,803 | 26,762 | ||||||||||||
| Inter-Company Elimination |
(8,665 | ) | (6,969 | ) | (20,380 | ) | (13,802 | ) | ||||||||
| Consolidated |
$ | 87,663 | $ | 83,063 | $ | 174,152 | $ | 163,815 | ||||||||
| Operating Income (loss) |
||||||||||||||||
| Wholesale |
$ | 3,528 | $ | 1,452 | $ | 7,190 | $ | 3,069 | ||||||||
| Retail |
(2,587 | ) | 164 | (4,709 | ) | 129 | ||||||||||
| Inter-Company Elimination |
214 | 74 | 89 | (240 | ) | |||||||||||
| Impaired Asset Charge |
— | (2,465 | ) | — | (2,465 | ) | ||||||||||
| Consolidated |
$ | 1,155 | $ | (775 | ) | $ | 2,570 | $ | 493 | |||||||
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Reconciliation of Net Income as Reported
to Net Income as Adjusted (Unaudited)
(In thousands, except for per share data)
| 26 Weeks Ended May 27, 2006 |
26 Weeks Ended May 28, 2005 | |||||
| Net income as reported |
$ | 5,195 | $ | 3,411 | ||
| Impaired asset charge, net of income taxes (a) |
— | 1,528 | ||||
| Net income as adjusted |
$ | 5,195 | $ | 4,939 | ||
Reconciliation of Earnings Per Share as Reported
to Earnings Per Share as Adjusted (Unaudited)
| 26 Weeks Ended May 27, 2006 |
26 Weeks Ended May 28, 2005 | |||||
| Diluted earnings per share |
$ | 0.44 | $ | 0.29 | ||
| Impaired asset charge, net of income taxes (a) |
— | 0.13 | ||||
| Diluted earnings per share as adjusted |
$ | 0.44 | $ | 0.42 | ||
Reconciliation of Net Income as Reported
to Net Income as Adjusted (Unaudited)
(In thousands, except for per share data)
| 13 Weeks Ended May 27, 2006 |
13 Weeks Ended May 28, 2005 | |||||
| Net income as reported |
$ | 2,885 | $ | 1,047 | ||
| Impaired asset charge, net of income taxes (a) |
— | 1,528 | ||||
| Net income as adjusted |
$ | 2,885 | $ | 2,575 | ||
Reconciliation of Earnings Per Share as Reported
to Earnings Per Share as Adjusted (Unaudited)
| 13 Weeks Ended May 27, 2006 |
13 Weeks Ended May 28, 2005 | |||||
| Diluted earnings per share |
$ | 0.24 | $ | 0.09 | ||
| Impaired asset charge, net of income taxes (a) |
— | 0.13 | ||||
| Diluted earnings per share as adjusted |
$ | 0.24 | $ | 0.22 | ||
| (a) | Adjustments to net income for both years are taxed at a 38% blended rate. |
The Company has included the “as adjusted” information because it uses, and believes that others may use, such information in comparing the Company’s operating results from period to period. However, the items excluded in determining the “as adjusted” information are significant components in understanding and assessing the Company’s overall financial performance for the periods covered.