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) April 2, 2007
BASSETT FURNITURE INDUSTRIES, INCORPORATED
(Exact name of registrant as specified in its charter)
| VIRGINIA | 0-209 | 54-0135270 | ||
| (State or other jurisdiction of incorporation or organization) |
(Commission File No.) | (I.R.S. Employer Identification No.) |
| 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 April 2, 2007, Bassett Furniture Industries, Inc. issued a news release relating to, among other things, the first quarter financial results for the fiscal year 2007. 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 on April 2, 2007.
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: April 4, 2007 | By: | /s/ Barry C. Safrit | ||
| Barry C. Safrit | ||||
| Title: | Senior Vice President, Chief Financial Officer | |||
EXHIBIT INDEX
Description
| Exhibit No. 99 | News release issued by Bassett Furniture Industries on April 2, 2007. |
Exhibit 99
| Bassett Furniture Industries, Inc. | Barry C. Safrit, S.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 First Quarter 2007 Results
(Bassett, Va.) – April 2, 2007 – Bassett Furniture Industries Inc. (Nasdaq:BSET) announced today its results of operations for its fiscal quarter ended February 24, 2007.
Sales for the first quarter of 2007 were $73.4 million down 15% from the $86.5 million reported in the first quarter of 2006. As previously announced, this shortfall is primarily due to continued soft furniture retail conditions which have impacted both retail sales and wholesale shipments. This decrease was also partially due to the sale of the Company’s Weiman operation at the end of April 2006. The Company reported a net loss of $(4.2) million or $(0.35) per share as compared to net income of $2.2 million or $0.18 per share in the first quarter of 2006. Also as previously announced, the net loss for the first quarter of 2007 included a $3.6 million non-cash pre-tax or $0.19 per share after-tax charge related to closing a wood manufacturing plant in Bassett, Va. Excluding the effects of the non-cash asset impairment charge, the Company’s net loss would have been $(2.0) million. A reconciliation of net income and earnings per share calculations has been set forth below.
As noted above, the Company announced on March 5, 2007 plans to cease operations at its wood manufacturing facility in Bassett. The closure of the 323,000 square foot facility is planned to be completed during the third quarter of 2007 and will affect approximately 280 employees or 15 percent of the Company’s workforce. During the last few years, like most of the U.S. furniture industry, Bassett has experienced a shift in demand from domestically produced to imported wood furniture. With the current business levels, it was no longer feasible to continue to operate the large manufacturing facility even with the efficiency improvements and investments made over the last two years. The Company plans to source the majority of the products currently produced at this facility from overseas suppliers, to continue to produce certain custom bedroom products domestically and to discontinue production of slower selling items. The Company also expects to record a charge of approximately $1.0 million in the second quarter of 2007 for severance benefits associated with the plant closure.
The Bassett Furniture retail store program had 133 stores (106 licensed and 27 Company-owned) in operation at the end of the first quarter. No stores were opened during the quarter with one licensee store being closed. The Company expects that four or five new stores will be opened over the remainder of the year.
“This was an extremely difficult quarter for the Company both in terms of our business levels and the announcement made earlier this month related to the closing of our facility in Bassett,” said Robert H. Spilman Jr., president and chief executive officer. “While we are reducing our cost structure to reflect the pace of incoming orders, the Company continues to pursue mid and long-term growth
initiatives on a number of fronts. The reception of our dealers to new sharper value products at the High Point Market last week was very positive. Components of our store presentation improvement program were on display and favorably embraced by our licensees. The debut of our new store prototype this fall and new embellishments to our consumer catalog highlight continued efforts to strengthen store performance.”
Wholesale Segment
Net sales for our wholesale segment were $62.3 million for the first quarter of 2007, 18% below the $76.3 million sales level attained in the first quarter of 2006. For the first quarter of 2007, approximately 74% of wholesale shipments were to Bassett stores compared to 70% in the first quarter of 2006. Additionally, approximately 47% of wholesale shipments in the quarter were imported products as compared to 44% in 2006. The wholesale segment generated an operating loss of $(1.2) million in the first quarter of 2007 as compared to $3.7 million of operating income in 2006. The $4.9 million decrease in operating income was primarily attributable to the reduction in sales volume. The Company also incurred increased selling, general and administrative expenses associated with the development and distribution of the spring catalog, the development of the new store prototype concept, additional television advertising and the addition of new retail management personnel.
With the continued difficult furniture retail environment resulting in the significant drop in the wholesale volume, the Company will continue to assess and adjust its wholesale cost structure to match the associated demand. The Company expects that the closure of the Bassett plant will result in annual improvements beginning in 2008 to operating income of $3.0 to $4.0 million per year after factoring in expected sales reductions.
Retail Segment
Bassett’s 27 corporate stores continued to experience relatively soft conditions at retail with sales of $21.2 million in the first quarter of 2007 as compared to $21.9 million in 2006. The retail segment incurred an operating loss of $(2.4) million for the quarter compared to an operating loss of $(2.2) million in 2006. The Company is beginning to see improvement from stabilizing the operations at these stores and has seen moderately positive trends in sales and margins during February and March of 2007 as compared to 2006.
Balance Sheet and Cash Flow
Inventories decreased $3.8 million due to lower business levels and improved inventory management. Accounts receivable increased $4.3 million during the first quarter of 2007, due to the timing of shipments late in the quarter coupled with the slower pace of collections from certain store licensees related in part to the overall retail environment. The Company believes it has adequate reserves for bad debts as it continues to aggressively work with its dealers to help ensure their long-term profitability and, in turn, improved cash collections for the Company.
The Company used $3.8 million of cash in operations for the first quarter of 2007 and paid $2.4 million in regular quarterly dividends. These cash uses were primarily funded through sales of investments approximating $4.0 million, $2.8 million of dividends received from an affiliate and a $1.0 million increase in the revolving credit facility. With $5.0 million outstanding, the $40 million revolving credit facility matures November 30, 2007 and is presented as a current liability in the consolidated balance sheet. The Company expects to renew the facility or have another facility in place prior to the maturity date.
Board and annual meetings formerly held at the end of February will be held on April 19, 2007.
About Bassett Furniture Industries, Inc.
Bassett Furniture Industries, Inc. (NASDAQ:BSET), is a leading manufacturer and marketer of high quality, mid-priced home furnishings. With more than 130 Bassett Furniture stores, Bassett has leveraged its strong brand name in furniture into a growing network of corporate and licensed stores that focus on providing consumers with a friendly environment for buying furniture and accessories. 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 bassettfurniture.com. (BSET-E)
Certain of the statements in this release, particularly those preceded by, followed by or including the words “believes,” “expects,” “anticipates,” “intends,” “should,” “estimates,” or similar expressions, or those relating to or anticipating financial results for periods beyond the end of the first quarter of fiscal 2007, 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 actual results to differ materially from those indicated 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)
| Quarter Ended February 24, 2007 |
(Restated) Quarter Ended February 25, 2006 |
|||||||||||||
| Amount | Percent of Net Sales |
Amount | Percent of Net Sales |
|||||||||||
| Net sales |
$ | 73,420 | 100.0 | % | $ | 86,489 | 100.0 | % | ||||||
| Cost of sales |
51,109 | 69.6 | % | 59,151 | 68.4 | % | ||||||||
| Gross profit |
22,311 | 30.4 | % | 27,338 | 31.6 | % | ||||||||
| Selling, general and administrative |
25,825 | 35.2 | % | 26,260 | 30.4 | % | ||||||||
| Asset impairment charge |
3,609 | 4.9 | % | — | 0.0 | % | ||||||||
| Income (loss) from operations |
(7,123 | ) | -9.7 | % | 1,078 | 1.2 | % | |||||||
| Other income, net |
910 | 1.2 | % | 1,893 | 2.2 | % | ||||||||
| Income (loss) before income taxes |
(6,213 | ) | -8.5 | % | 2,971 | 3.4 | % | |||||||
| Income tax (provision) benefit |
2,025 | 2.8 | % | (791 | ) | -0.9 | % | |||||||
| Net income (loss) |
$ | (4,188 | ) | -5.7 | % | $ | 2,180 | 2.5 | % | |||||
| Basic earnings (loss) per share: |
$ | (0.35 | ) | $ | 0.18 | |||||||||
| Diluted earnings (loss) per share: |
$ | (0.35 | ) | $ | 0.18 | |||||||||
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
| (Unaudited) February 24, 2007 |
November 25, 2006 | |||||
| Assets |
||||||
| Current assets |
||||||
| Cash and cash equivalents |
$ | 8,456 | $ | 6,051 | ||
| Accounts receivable, net |
42,601 | 38,253 | ||||
| Inventories |
45,111 | 48,880 | ||||
| Deferred income taxes |
6,160 | 6,391 | ||||
| Assets held for sale |
— | 1,091 | ||||
| Other current assets |
6,482 | 5,098 | ||||
| Total current assets |
108,810 | 105,764 | ||||
| Property and equipment, net |
53,790 | 58,925 | ||||
| Investments |
76,287 | 78,617 | ||||
| Retail real estate |
33,031 | 33,501 | ||||
| Notes receivable, net |
14,758 | 15,105 | ||||
| Other |
19,716 | 18,025 | ||||
| 143,792 | 145,248 | |||||
| Total assets |
$ | 306,392 | $ | 309,937 | ||
| Liabilities and Stockholders’ Equity |
||||||
| Current liabilities |
||||||
| Accounts payable |
$ | 16,440 | $ | 16,927 | ||
| Customer deposits |
8,581 | 8,310 | ||||
| Short-term revolving debt |
5,000 | — | ||||
| Other accrued liabilities |
19,207 | 18,323 | ||||
| Total current liabilities |
49,228 | 43,560 | ||||
| Long-term liabilities |
||||||
| Post employment benefit obligations |
15,193 | 15,263 | ||||
| Long-term revolving debt |
— | 4,000 | ||||
| Real estate notes payable |
19,360 | 19,522 | ||||
| Distributions in excess of affiliate earnings |
13,210 | 11,726 | ||||
| 47,763 | 50,511 | |||||
| Commitments and Contingencies |
||||||
| Stockholders’ equity |
||||||
| Common stock |
59,130 | 59,018 | ||||
| Retained earnings |
144,982 | 151,535 | ||||
| Additional paid-in-capital |
2,273 | 1,993 | ||||
| Accumulated other comprehensive income |
3,016 | 3,320 | ||||
| Total stockholders’ equity |
209,401 | 215,866 | ||||
| Total liabilities and stockholders’ equity |
$ | 306,392 | $ | 309,937 | ||
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows—Unaudited
(In thousands)
| Quarter Ended February 24, 2007 |
(Restated) Quarter Ended February 25, 2006 |
|||||||
| Operating Activities |
||||||||
| Net income (loss) |
$ | (4,188 | ) | $ | 2,180 | |||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
2,328 | 2,226 | ||||||
| Equity in undistributed income of investments and unconsolidated affiliated companies |
(1,959 | ) | (2,234 | ) | ||||
| Provision for write-down of impaired assets |
3,609 | — | ||||||
| Provision for losses on trade accounts receivable |
685 | 840 | ||||||
| Realized income from investments |
(434 | ) | (290 | ) | ||||
| Net loss from sales of property and equipment |
33 | — | ||||||
| Deferred income taxes |
(793 | ) | (97 | ) | ||||
| Changes in post employment benefit obligations |
138 | (69 | ) | |||||
| Cash received on licensee notes for operating activities |
16 | 9 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
(5,929 | ) | (4,795 | ) | ||||
| Inventories |
3,518 | (5,111 | ) | |||||
| Other current assets |
(1,384 | ) | 652 | |||||
| Accounts payable and accrued liabilities |
603 | 2,845 | ||||||
| Net cash used in operating activities |
(3,757 | ) | (3,844 | ) | ||||
| Investing Activities |
||||||||
| Purchases of property and equipment |
(218 | ) | (1,369 | ) | ||||
| Purchases of retail real estate |
— | (1,658 | ) | |||||
| Proceeds from sales of property and equipment |
1,028 | 193 | ||||||
| Proceeds from sales of investments |
5,591 | 1,606 | ||||||
| Purchases of investments |
(1,568 | ) | (1,606 | ) | ||||
| Dividends from an affiliate |
2,811 | 2,811 | ||||||
| Net cash received (paid) on licensee notes |
464 | (1,029 | ) | |||||
| Other, net |
(728 | ) | (420 | ) | ||||
| Net cash provided by (used in) investing activities |
7,380 | (1,472 | ) | |||||
| Financing Activities |
||||||||
| Borrowings under revolving credit arrangement |
1,000 | 5,000 | ||||||
| Repayments of long-term debt |
— | (120 | ) | |||||
| Repayments of real estate notes payable |
(162 | ) | (120 | ) | ||||
| Issuance of common stock |
305 | 344 | ||||||
| Repurchases of common stock |
— | (20 | ) | |||||
| Cash dividends |
(2,361 | ) | (2,365 | ) | ||||
| Net cash provided by (used in) financing activities |
(1,218 | ) | 2,719 | |||||
| Net change in cash and cash equivalents |
2,405 | (2,597 | ) | |||||
| Cash and cash equivalents, beginning of period |
6,051 | 7,109 | ||||||
| Cash and cash equivalents, end of period |
$ | 8,456 | $ | 4,512 | ||||
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Segment Information—Unaudited
(In thousands)
| Quarter Ended | ||||||||
| February 24, 2007 | (Restated) February 25, 2006 |
|||||||
| Net Sales |
||||||||
| Wholesale |
$ | 62,346 | $ | 76,328 | ||||
| Retail |
21,183 | 21,876 | ||||||
| Inter-Company Elimination |
(10,109 | ) | (11,715 | ) | ||||
| Consolidated |
$ | 73,420 | $ | 86,489 | ||||
| Operating Income (loss) |
||||||||
| Wholesale |
$ | (1,161 | ) | $ | 3,662 | |||
| Retail |
(2,376 | ) | (2,198 | ) | ||||
| Inter-Company Elimination |
23 | (386 | ) | |||||
| Asset Impairment Charge |
(3,609 | ) | — | |||||
| Consolidated |
$ | (7,123 | ) | $ | 1,078 | |||
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)
| Quarter Ended February 24, 2007 |
(Restated) Quarter Ended | ||||||
| Net income (loss) as reported |
$ | (4,188 | ) | $ | 2,180 | ||
| Impaired asset charge, net of income taxes (a) |
2,201 | — | |||||
| Net income (loss) as adjusted |
$ | (1,987 | ) | $ | 2,180 | ||
Reconciliation of Earnings Per Share as Reported
to Earnings Per Share as Adjusted (Unaudited)
| Quarter Ended February 24, 2007 |
(Restated) Quarter Ended | ||||||
| Diluted earnings (loss) per share |
$ | (0.35 | ) | $ | 0.18 | ||
| Impaired asset charge, net of income taxes (a) |
0.19 | — | |||||
| Diluted earnings (loss) per share as adjusted |
$ | (0.16 | ) | $ | 0.18 | ||
| (a) | Adjustments to net income (loss) for both years are taxed at a 39% 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.
Restatement of Financial Statements
As more fully discussed in the Company’s 2006 Form 10-K, fiscal 2006 quarterly financial information was restated based on the Company’s review of the accounting treatment associated with its acquisition of three retail licensee operations in fiscal 2005 and the classification of certain notes receivable activity in the statement of cash flows. The effects of those restatements on the financial statements for the quarter ended February 25, 2006 included herein are summarized below:
| Increase (Decrease) |
||||
| Gross profit |
$ | (337 | ) | |
| Operating income |
(217 | ) | ||
| Net income |
(130 | ) | ||
| Cash flow from operations |
$ | 1,029 | ||
| Cash flow from investing activities |
(1,029 | ) | ||