1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
WASHINGTON, D.C. 20549
FORM 10-K
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Page 1 of 23
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended November 30, 1995 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 (I.R.S. Employer
incorporation or organization) Identification No.)
BASSETT, VIRGINIA 24055
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 540/629-6000
----------------------------
Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange
Title of each class: on which registered
- -------------------- ----------------------------
Common Stock ($5.00 par value) NASDAQ
----------------------------- ----------------------------
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 at least the past 90 days.
/X/ Yes / / No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. / X /
State the aggregate market value of the voting stock held by non-affiliates of
the registrant as of December 15,1995.
Common Stock, $5.00 par value -- $274,095,000
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.
Common Stock, $5.00 par value -- 13,658,953 at the close of
the period covered by this report.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Bassett Furniture Industries, Incorporated Annual
Report to Stockholders for the year ended November 30, 1995 (the
"Annual Report") are incorporated by reference into Parts I and II of
this Form 10-K.
(2) Portions of the Bassett Furniture Industries, Incorporated definitive
Proxy Statement for its 1996 Annual Meeting of Stockholders held
February 21, 1996, filed with the Securities and Exchange Commission
pursuant to Regulation 14A under the Securities Exchange Act of 1934
(the "Proxy Statement") are incorporated by reference into Part III of
this Form 10-K.
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PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Bassett Furniture Industries, Incorporated was incorporated
under the laws of the Commonwealth of Virginia in 1930. The
executive offices are located in Bassett, Virginia.
In 1995, four manufacturing plants were consolidated into two
plants. The two closed plants will be sold. The closing of
the two plants should have no material effect on the
Company's net sales in the future but should reduce overhead
costs related to the plants.
There have been no material changes in the mode of conducting
business in the fiscal year beginning December 1, 1994.
INDUSTRY SEGMENT
In accordance with the instructions for this item, Bassett
Furniture Industries, Incorporated and its subsidiaries, all
of which are wholly-owned (Company), is deemed to have been
engaged in only one business segment, manufacture and sale of
furniture, for the three years ended November 30, 1995.
DESCRIPTION OF BUSINESS
The Company manufactures and sells a full line of furniture
for the home: bedroom and dining suites and accent pieces;
occasional tables, wall and entertainment units; home office
systems and computer work stations; upholstered sofas, chairs
and love seats (motion and stationary); recliners; and
mattresses and box springs. The Company's products are
distributed through a large number of retailers, principally
in the United States. The retailers selling the Company's
products include mass merchandisers, department stores,
independent furniture stores, chain furniture stores,
decorator showrooms, warehouse showrooms, specialty stores
and rent-to-own stores.
Due to the dramatic changes that took place in the retail
home furnishings distribution network, the Company developed
the Bassett Gallery Program in the mid-1980's. In late 1995,
an effort was undertaken to rejuvenate the Program with a
"quick shipment" inventory stocking system, advertising media
development and new gallery design concepts. In addition,
gallery space requirements were expanded from 5,000 to 8,000
square feet in each store. The Company is currently
reviewing all existing galleries to ensure that they meet the
standards of the Program. This has led to the elimination of
certain galleries and there is the possibility of further
deletions in the future.
In 1994, the Company introduced the Bassett Direct Plus
Program. A Bassett Direct Plus ("BDP") store is a free
standing exclusive Bassett store that will encompass between
18,000 and 25,000 square feet of space in the current
prototype. The stores display, in gallerized settings,
selected offerings from all Bassett product groups. These
stores are independently owned and operated retail
operations, displaying a full range of home fashions and
carry no other furniture manufacturer's products. Bassett
supports its "BDP" stores with a greater, more extensive
level of service and support which includes fully planned
exterior and interior designs, special financing terms,
inventory warehousing
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commitment, priority on cuttings and shipping, and access to
Bassett's EDI link and BassNet. Currently there are eight
"BDP" stores in operation and fifteen are scheduled to be
opened in 1996. "BDP" stores are targeted to become one of
the Company's largest customer segments.
Raw materials used by the Company are generally available
from numerous sources and are obtained principally from
domestic sources. The cost pressures on raw materials
continued to be experienced in 1995. Furthermore, it
continued to be very difficult to pass through the incurred
cost increases to retail dealers in the form of increased
sales prices.
The Company's trademark "Bassett" and the names of its
marketing divisions and product collections are significant
to the conduct of its business. This importance is due to
consumer recognition of the names and identification with the
Company's broad range of products. The Company owns certain
patents and licenses that are important in the conduct of the
Company's business.
The furniture industry is not considered to be a seasonal
industry.
There are no special practices in the furniture industry, or
applicable to the Company, that would have a significant
effect on working capital items.
The Company is not dependent upon a single customer, the loss
of which would have a material adverse effect on the Company.
Sales to one customer (J. C. Penney Company) amounted to
approximately 14% of gross sales in 1995, 13% in 1994 and 12%
in 1993.
The Company's backlog of orders believed to be firm was
$56,000,000 at November 30, 1995 and $66,500,000 at November
30, 1994. It is expected that the November 30, 1995 backlog
will be filled within the 1996 fiscal year.
None of the Company's business involves government contracts.
The furniture industry is very competitive as there are a
large number of manufacturers both within the United States
and offshore who compete in the marketplace on the basis of
quality of the product, price, delivery and service. Based
on annual sales revenue, the Company is one of the largest
furniture manufacturers in the United States. The Company
has been successful in this competitive environment because
its products represent excellent values combining price and
superior quality and styling; prompt delivery; and quality,
courteous service. Competition from foreign manufacturers is
not any more significant in the marketplace today than
competition from domestic manufacturers.
The furniture industry is considered to be a "fashion"
industry subject to constant change to meet the changing
consumer preferences and tastes. As such, the Company is
continuously involved in the development of new designs and
products. Due to the nature of these efforts and the close
relationship to the manufacturing operations, the costs
thereof are considered normal operating costs and are not
segregated.
The Company is not involved in "traditional" research and
development activities. Neither are there any customer -
sponsored research and development activities involving the
Company.
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In management's view, the Company has complied with all
federal, state and local standards in the area of safety,
health and pollution and environmental controls. Compliance
with these standards has not had a material adverse effect on
past earnings, capital expenditures or competitive position.
The Company anticipates increased regulation on the furniture
industry from federal and state agencies particularly in the
areas of emission of fumes from the furniture finishing
processes and emission of particulates into the atmosphere
(saw dust and boiler ash). The Company cannot at this time
estimate the impact of compliance with these new, more
stringent standards on the Company's operations or costs of
compliance.
The Company had approximately 7,400 employees at November 30,
1995.
FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
The Company has no foreign operations, and its export sales
are insignificant.
ITEM 2. PROPERTIES
The Company owns the following facilities:
Plant Name Location Construction
----------------------------------- ------------------------ ----------------------------------------
Bassett Furniture Bassett, VA Brick, frame and concrete
Company (A)
J. D. Bassett Bassett, VA (2
Manufacturing Company plants) Brick, frame and concrete
Bassett Superior Lines Bassett, VA Brick, frame, concrete and steel
Bassett Chair Company Bassett, VA Brick, frame, concrete and steel
Bassett Table Company Bassett, VA Brick and frame
W. M. Bassett Furniture Martinsville, VA Brick, frame, concrete and steel
Company
Bassett Fiberboard Bassett, VA Brick, concrete and steel
Bassett Upholstery Newton, NC (4
Division plants) Brick, concrete and steel
Taylorsville, NC Brick, concrete and steel
Dumas, AR Brick, concrete and steel
Bassett Furniture Industries Statesville, NC Brick, frame, concrete and steel
of North Carolina, Inc.
Bassett of NC - Dublin Dublin, GA Concrete block and steel
Bassett of NC - Macon Macon, GA Brick, concrete and steel
Bassett Wood Products Dumas, AR Brick, concrete and steel
Burkeville Veneer Burkeville, VA Brick and frame
National/Mt. Airy Mt. Airy, NC Brick, concrete and steel
Weiman Division (B) Ramseur, NC Concrete block and steel
Christiansburg, VA Metal frame
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E. B. Malone Corporation Lake Wales, FL
(2 plants) Concrete block and frame
Pottstown, PA Metal frame
West Palm Beach, FL Concrete block and steel
Walworth, WI Concrete block and steel
Fredericksburg, VA Brick and frame
Chehalis, WA Concrete block and metal frame
Los Angeles, CA Concrete block and metal frame
Los Angeles, CA Brick, concrete and steel
Tipton, MO Concrete block and steel
Impact Furniture (B) Hickory, NC (2
plants and
warehouse) Brick, concrete and steel
Bassett Motion Division Saltillo, MS Metal frame
Booneville, MS (2
plants) Metal frame
The Company also owns its general office building in Bassett, Virginia
(brick, concrete and steel), two warehouses in Bassett, Virginia
(brick and concrete) and a showroom in High Point, North Carolina
(brick, concrete and steel).
In general, these facilities are suitable and are considered to be
adequate for the continuing operations involved. All facilities are
in regular use, except the plants noted below.
(A) Plant closed as part of the restructuring program announced
in 1990.
(B) The Weiman-Ramseur plant and a small Impact Furniture plant
are the two aforementioned plants closed in 1995 and
held-for-sale.
ITEM 3. LEGAL PROCEEDINGS
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The information contained in the Annual Report under the caption
"Other Business Data" - "Market and Dividend Information" with respect
to number of stockholders, market prices and dividends paid is
incorporated herein by reference thereto.
ITEM 6. SELECTED FINANCIAL DATA
The information for the five years ended November 30, 1995, contained
in the "Other Business Data" in the Annual Report is incorporated
herein by reference thereto.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information contained in "Other Business Data" in the Annual
Report is incorporated herein by reference thereto.
The change in the level of the Company's net sales has historically
been principally due to the change in the volume of units sold, as
contrasted to changes in unit prices. The Company's net sales have
fluctuated in recent years owing to the discretionary spending habits
of consumers and the consumer confidence level.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the registrant and
its subsidiaries, together with the independent auditors' report
thereon of KPMG Peat Marwick LLP dated December 15, 1995, included in
the annual report of the registrant to its stockholders for the year
ended November 30, 1995 are incorporated herein by reference thereto:
Consolidated Balance Sheet--November 30, 1995 and 1994
Consolidated Statement of Income--Years Ended November 30,
1995, 1994 and 1993
Consolidated Statement of Stockholders' Equity--Years Ended
November 30, 1995, 1994 and 1993
Consolidated Statement of Cash Flows--Years Ended November
30, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
The information contained in "Other Business Data" for "Quarterly
Results of Operations" in the Annual Report is incorporated herein by
reference thereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE
REGISTRANT
The information contained on pages 2 through 5 of the Proxy Statement
under the captions "Principal Stockholders and Holdings of Management"
and "Election of Directors" is incorporated herein by reference
thereto.
ITEM 11. EXECUTIVE COMPENSATION
The information contained on pages 6 through 12 of the Proxy Statement
under the captions "Organization and Compensation Committee Report",
"Stockholder Return Performance Graph", "Executive Compensation", and
"Supplemental Retirement Income Plan" is incorporated herein by
reference thereto.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained on page 2 of the Proxy Statement under the
heading "Principal Stockholders and Holdings of Management" is
incorporated herein by reference thereto.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained on page 6 of the Proxy statement under the
heading OOrganization and Compensation Committee Interlocks and
Insider ParticipationO is incorporated herein by reference thereto.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
(a) (1) The response to this portion of Item 14 is submitted
as a separate section of this report.
(2) All financial statement schedules for which
provision is made in the applicable accounting
regulations of the Securities and Exchange
Commission are not required under the related
instructions or are inapplicable and, therefore,
have been omitted.
(3) Listing of Exhibits
3. Articles of Incorporation as amended and By
Laws are incorporated herein by reference
to Form 10-Q for the fiscal quarter ended
February 28, 1994.
13. The registrant's Annual Report to
Stockholders for the year ended November
30, 1995.*
21. List of subsidiaries of the registrant
23. Consent of experts and counsel
27. Financial Data Schedule (EDGAR filing only)
*With the exception of the information incorporated in this
Form 10-K by reference thereto, the Annual Report shall not
be deemed "filed" as a part of this Form 10-K.
(b) No reports on Form 8-K have been filed during the last
quarter of the registrant's 1995 fiscal year.
(c) Exhibits: The response to this portion of Item 14. is
submitted as a separate section of this report.
(d) Financial Statement Schedules: All financial statement
schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange
Commission are not required under the related instructions or
are inapplicable and, therefore, have been omitted.
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ANNUAL REPORT ON FORM 10-K
ITEM 14(a)(1) AND (c)
LIST OF FINANCIAL STATEMENTS
CERTAIN EXHIBITS
YEAR ENDED NOVEMBER 30, 1995
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
BASSETT, VIRGINIA
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ITEM 14(a)(1)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
The following consolidated financial statements of the registrant and its
subsidiaries, included in the annual report of the registrant to its
stockholders for the year ended November 30, 1995 are incorporated herein by
reference:
Consolidated Balance Sheet--November 30, 1995 and 1994
Consolidated Statement of Income--Years Ended November 30, 1995, 1994
and 1993
Consolidated Statement of Stockholders' Equity--Years Ended November
30, 1995, 1994 and 1993
Consolidated Statement of Cash Flows--Years Ended November 30, 1995,
1994 and 1993
Notes to Consolidated Financial Statements
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 (Registrant)
By: /s/ ROBERT H. SPILMAN Date: February 21, 1996
--------------------------------------------- -----------------
Robert H. Spilman
Chairman of the Board of Directors and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By: /s/ PETER W. BROWN Date: February 21, 1996
--------------------------------------------- -----------------
Peter W. Brown
Director
By: /s/ THOMAS E. CAPPS Date: February 21, 1996
--------------------------------------------- -----------------
Thomas E. Capps
Director
By: /s/ ALAN T. DICKSON Date: February 21, 1996
--------------------------------------------- -----------------
Alan T. Dickson
Director
By: /s/ PAUL FULTON Date: February 21, 1996
--------------------------------------------- -----------------
Paul Fulton
Director
By: /s/ WILLIAM H. GOODWIN, JR. Date: February 21, 1996
--------------------------------------------- -----------------
William H. Goodwin, Jr.
Director
By: /s/ GLENN A. HUNSUCKER Date: February 21, 1996
--------------------------------------------- -----------------
Glenn A. Hunsucker
President and Chief Operating Officer
and Director
By: /s/ JAMES W. MCGLOTHLIN Date: February 21, 1996
--------------------------------------------- -----------------
James W. McGlothlin
Director
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SIGNATURES -- CONTINUED
By: /s/ THOMAS W. MOSS, JR. Date: February 21, 1996
--------------------------------------------- -----------------
Thomas W. Moss, Jr.
Director
By: /s/ ALBERT F. SLOAN Date: February 21, 1996
--------------------------------------------- -----------------
Albert F. Sloan
Director
By: /s/ JOHN W. SNOW Date: February 21, 1996
--------------------------------------------- -----------------
John W. Snow
Director
By: /s/ PHILIP E. BOOKER Date: February 21, 1996
--------------------------------------------- -----------------
Philip E. Booker
Vice President and Controller
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Index to Exhibits
Exhibit
No. Page No.
---- --------
3. Articles of Incorporation as amended and Bylaws -
incorporated by reference to Form 10-Q for the fiscal
quarter ended February 28, 1994 N/A
13. Bassett Furniture Industries, Inc. Annual Report to
Stockholders for the year ended November 30, 1995 13 - 21
21. List of subsidiaries of registrant 22
23. Consent of Independent Auditors 23
27. Financial Data Schedule (EDGAR filing only)
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CONSOLIDATED BALANCE SHEET
Bassett Furniture Industries, Incorporated and Subsidiaries
ASSETS
NOVEMBER 30,
--------------------------------
1995 1994
------------ ------------
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . $ 51,331,119 $ 42,314,957
Trade accounts receivable, less allowances for doubtful
accounts (1995- $1,470,000; 1994 - $1,115,000) and discounts . . . . . 68,591,514 71,936,750
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,226,607 80,074,811
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,757,658 2,206,736
Prepaid income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . -0- 274,675
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 2,008,000 1,823,000
------------ ------------
204,914,898 198,630,929
PROPERTY, PLANT AND EQUIPMENT
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,478,686 71,859,549
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . 133,933,234 130,218,793
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -0- 745,477
------------ ------------
207,411,920 202,823,819
Less allowances for depreciation . . . . . . . . . . . . . . . . . . . . 158,665,871 152,673,335
------------ ------------
48,746,049 50,150,484
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,378,297 4,403,422
------------ ------------
53,124,346 54,553,906
OTHER ASSETS
Investment in securities . . . . . . . . . . . . . . . . . . . . . . . . 39,055,319 43,638,983
Investment in affiliated companies . . . . . . . . . . . . . . . . . . . 40,398,574 35,080,525
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,227,317 8,593,887
------------ ------------
88,681,210 87,313,395
------------ ------------
$346,720,454 $340,498,230
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,710,299 $ 29,786,395
Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . . 4,778,966 5,215,159
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 902,476 -0-
------------ ------------
35,391,741 35,001,554
DEFERRALS
Deferred liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 10,296,244 9,529,784
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 2,129,000 774,000
------------ ------------
12,425,244 10,303,784
STOCKHOLDERS' EQUITY
Common stock, par value $5 a share, 50,000,000 shares authorized . . . . 68,294,765 70,434,075
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225,718,704 221,949,817
Unrealized holding gains, net of tax . . . . . . . . . . . . . . . . . . 4,890,000 2,809,000
------------ ------------
298,903,469 295,192,892
------------ ------------
$346,720,454 $340,498,230
============ ============
The accompanying notes are an integral part of the financial statements.
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CONSOLIDATED STATEMENT OF INCOME
Bassett Furniture Industries, Incorporated and Subsidiaries
YEAR ENDED NOVEMBER 30,
------------------------------------------
1995 1994 1993
------------ ------------ ------------
NET SALES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $490,816,681 $510,560,858 $503,770,060
COSTS AND EXPENSES
COST OF SALES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 407,749,396 419,393,531 413,055,371
SELLING, GENERAL AND ADMINISTRATIVE . . . . . . . . . . . . . . . . . . . 65,938,061 66,044,399 63,472,078
------------ ------------ ------------
473,687,457 485,437,930 476,527,449
------------ ------------ ------------
INCOME FROM OPERATIONS 17,129,224 25,122,928 27,242,611
OTHER INCOME, NET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,999,562 9,657,476 9,270,219
------------ ------------ ------------
Income before income taxes and cumulative
effect of a change in accounting principle 30,128,786 34,780,404 36,512,830
INCOME TAXES
FEDERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,455,000 8,521,000 9,223,000
STATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 879,000 1,361,000 1,077,000
DEFERRED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (108,000) (78,000) 344,000
------------ ------------ ------------
7,226,000 9,804,000 10,644,000
------------ ------------ ------------
Income before cumulative effect of a change in accounting principle 22,902,786 24,976,404 25,868,830
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE . . . . . . . . . . . . . -0- (510,200) -0-
------------ ------------ ------------
NET INCOME $ 22,902,786 $ 24,466,204 $ 25,868,830
============ ============ ============
EARNINGS PER SHARE:
Income before cumulative effect of a change in accounting principle. $1.63 $1.75 $1.79
Cumulative effect of a change in accounting principle . . . . . . . -0- (.04) -0-
------------ ------------ ------------
NET INCOME PER SHARE $1.63 $1.71 $1.79
============ ============ ============
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Bassett Furniture Industries, Incorporated and Subsidiaries
COMMON STOCK
------------------------ ADDITIONAL RETAINED UNREALIZED
SHARES AMOUNT CAPITAL EARNINGS HOLDING GAINS
---------- ----------- -------- ------------ -------------
BALANCE, DECEMBER 1, 1992 . . . . . . . . . . . . . . . . . 11,535,342 $57,676,710 $ -0- $216,144,734 $ -0-
Net income . . . . . . . . . . . . . . . . . . . . . - - - 25,868,830 -
Cash dividends . . . . . . . . . . . . . . . . . . . - - - (11,358,213) -
Exercise of stock options . . . . . . . . . . . . . . 24,124 120,620 422,784 - -
5 for 4 stock split distributed May, 1993 . . . . . . 2,888,735 14,443,675 - (14,443,675) -
---------- ----------- -------- ------------ ----------
BALANCE, NOVEMBER 30, 1993 . . . . . . . . . . . . . . . . 14,448,201 72,241,005 422,784 216,211,676 -0-
Net income . . . . . . . . . . . . . . . . . . . . . - - - 24,466,204 -
Cash dividends . . . . . . . . . . . . . . . . . . . - - - (11,411,357) -
Purchase and retirement of common stock . . . . . . . (361,386) (1,806,930) (422,784) (7,316,706) -
Initial recognition of unrealized holding gains . . . - - - - 2,809,000
---------- ----------- -------- ------------ ----------
BALANCE, NOVEMBER 30, 1994 . . . . . . . . . . . . . . . . 14,086,815 70,434,075 -0- 221,949,817 2,809,000
Net income . . . . . . . . . . . . . . . . . . . . . - - - 22,902,786 -
Cash dividends . . . . . . . . . . . . . . . . . . . - - - (11,196,755) -
Purchase and retirement of common stock . . . . . . . (429,701) (2,148,505) (39,538) (7,937,144) -
Issuance of Common Stock to non-employee directors . 1,839 9,195 39,538 - -
Net change in unrealized holding gains . . . . . . . - - - - 2,081,000
---------- ----------- -------- ------------ ----------
BALANCE, NOVEMBER 30, 1995 . . . . . . . . . . . . . . . . 13,658,953 $68,294,765 $ -0- $225,718,704 $4,890,000
========== =========== ======== ============ ==========
The accompanying notes are an integral part of the financial statements.
3
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CONSOLIDATED STATEMENT OF CASH FLOWS
Bassett Furniture Industries, Incorporated and Subsidiaries
YEAR ENDED NOVEMBER 30,
-----------------------------------------
1995 1994 1993
----------- ----------- -----------
OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $22,902,786 $24,466,204 $25,868,830
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . 8,606,985 8,799,199 8,984,279
Equity in unremitted income of affiliated companies . . . . . . . . . . . (4,986,109) (4,463,683) (3,945,899)
Provision for losses on trade accounts receivable . . . . . . . . . . . . 606,616 844,483 434,450
Net gain from sales of investment securities . . . . . . . . . . . . . (4,141,605) (518,851) (695,247)
Net gain from sales of property,
plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . (815) (25,683) (317,964)
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . (108,000) 432,200 344,000
Changes in deferred liabilities . . . . . . . . . . . . . . . . . . . . . 766,460 917,206 744,216
Changes in operating assets and liabilities:
Trade accounts receivable . . . . . . . . . . . . . . . . . . . . . 2,738,620 2,184,068 (1,041,227)
Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . (31,192) (362,506) 1,610,931
Inventories and prepaid expenses . . . . . . . . . . . . . . . . . . (702,718) (9,832,105) (5,707,633)
Accounts payable and accrued compensation . . . . . . . . . . . . . (512,289) 2,872,754 (2,547,243)
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . 1,177,151 (1,624,711) (1,300,760)
----------- ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 26,315,890 23,688,575 22,430,733
INVESTING ACTIVITIES
Purchases of property, plant and equipment . . . . . . . . . . . . . . . (7,226,110) (9,999,040) (6,235,233)
Proceeds from sales of property, plant and equipment . . . . . . . . . . 49,500 121,011 382,833
Purchases of investment securities . . . . . . . . . . . . . . . . . . . (4,072,445) (9,893,116) (9,866,962)
Proceeds from sales of investment securities . . . . . . . . . . . . . . 16,156,714 7,595,629 7,522,647
Dividends from affiliated company . . . . . . . . . . . . . . . . . . . . 1,089,505 1,089,505 272,376
Additional investment in affiliated company . . . . . . . . . . . . . . . (1,100,000) -0- -0-
Investment in corporate owned life insurance . . . . . . . . . . . . . . (920,260) (2,598,314) (731,672)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,423) 310,928 (187,425)
----------- ----------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 3,973,481 (13,373,397) (8,843,436)
FINANCING ACTIVITIES
Issuance of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . 48,733 -0- 543,404
Purchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . (10,125,187) (9,546,420) -0-
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,196,755) (11,411,357) (11,358,213)
----------- ----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (21,273,209) (20,957,777) (10,814,809)
----------- ----------- -----------
CHANGE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . 9,016,162 (10,642,599) 2,772,488
CASH AND CASH EQUIVALENTS-beginning of year . . . . . . . . . . . . . . . . . 42,314,957 52,957,556 50,185,068
----------- ----------- -----------
CASH AND CASH EQUIVALENTS-end of year . . . . . . . . . . . . . . . . . . . . $51,331,119 $42,314,957 $52,957,556
=========== =========== ===========
- -------------------------
Income tax payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,156,849 $11,506,711 $11,600,760
=========== =========== ===========
Interest payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,135,841 $ 648,923 $ 599,313
=========== =========== ===========
The accompanying notes are an integral part of the financial statements.
4
Page 16 of 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Bassett Furniture Industries, Incorporated and Subsidiaries
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly-owned. All significant intercompany
balances and transactions are eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash Equivalents
The Company considers all temporary, highly liquid investments with a maturity
of three months or less to be cash equivalents. The carrying amount
approximates fair value because of the short maturity of these investments.
Trade Accounts Receivable
The Company has only one business segment, the manufacture and sale of
household furniture. Substantially all of the Company's trade accounts
receivable are due from retailers in this market. The Company performs on-going
evaluations of its customers' credit worthiness and, generally, requires no
collateral.
Inventories
All inventories are valued at last-in, first-out (LIFO) cost which is not in
excess of market.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is computed
generally by accelerated methods.
Investment in Securities
The Company classifies its investment in securities as available-for-sale,
which are reported at fair value. The Company adopted the provisions of
Statement of Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities (Statement 115) at December 1, 1993.
Under Statement 115 unrealized holding gains and losses, net of the related tax
effect, on available-for-sale securities are excluded from income and are
reported as a separate component of stockholders' equity. Realized gains and
losses from securities classified as available-for-sale are included in income
and are determined using the specific identification method for ascertaining
the cost of securities sold.
Investment in Affiliated Companies
The equity method of accounting is used for the investment in affiliated
companies. The carrying amounts approximate the Company's equity in their
underlying net assets.
Investment in Corporate Owned Life Insurance
Investment in corporate owned life insurance policies is recorded net of policy
loans and is included in other assets. The net life insurance expense, which
includes premiums and interest on cash surrender borrowings, net of increases
in cash surrender values, is included in other income.
Revenue Recognition
Revenue from sales is recognized when the goods are shipped to the customer.
Sales to one customer, as a percent of gross sales, amounted to 14% in 1995,
13% in 1994 and 12% in 1993.
Income Taxes
For 1995 and 1994, deferred income taxes were determined based on the
difference between the financial statement and income tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. The Company had previously determined
income tax expense under the deferred method, whereby timing differences were
recorded at the tax rates in effect for the year in which the differences arose
and were not adjusted for tax rate changes.
Earnings Per Share
Earnings per share is calculated using the weighted average number of shares
outstanding. All share and per share data has been adjusted to reflect the 5
for 4 stock split in 1993.
B. INVENTORIES (in millions)
November 30,
---------------------------
1995 1994
------ ------
Finished goods $ 46.5 $ 45.2
Work in process 16.2 15.6
Raw materials and supplies 45.3 44.6
------ ------
Total inventories on FIFO cost method 108.0 105.4
LIFO adjustment 26.8 25.3
------ ------
$ 81.2 $ 80.1
====== ======
C. INVESTMENT IN SECURITIES
Information on investment in securities by major security type: (in millions)
November 30, 1995
-----------------------------------------------------
Gross Gross
Unrealized Unrealized
Holding Holding Fair
Cost Gains Losses Value
------- --------- ---------- -------
Equity securities $21.1 $8.4 $1.0 $28.5
Mutual funds 3.9 0.4 -0- 4.3
Municipal securities 5.1 -0- -0- 5.1
Other 1.1 0.1 -0- 1.2
----- ---- ---- -----
$31.2 $8.9 $1.0 $39.1
===== ==== ==== =====
November 30, 1994
-----------------------------------------------------
Gross Gross
Unrealized Unrealized
Holding Holding Fair
Cost Gains Losses Value
------- --------- ---------- -------
Equity securities $26.5 $6.6 $2.2 $30.9
Mutual funds 5.6 0.4 0.1 5.9
Municipal securities 5.0 -0- 0.1 4.9
Other 2.0 -0- 0.1 1.9
----- ---- ---- -----
$39.1 $7.0 $2.5 $43.6
===== ==== ==== =====
Maturities of the municipal securities are within five years.
5
Page 17 of 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Bassett Furniture Industries, Incorporated and Subsidiaries
D. INVESTMENT IN AFFILIATED COMPANIES
The Company has an equity interest in a company which leases exhibition space
to furniture and accessory manufacturers and an equity interest in a
manufacturer of particleboard for use principally in the furniture industry.
The Company's share of income from operations and net income from these
affiliates is as follows: (in millions)
1995 1994 1993
---- ---- ----
Income from operations $8.3 $7.3 $7.0
Net income 5.0 4.5 3.9
E. INCOME TAXES
Effective December 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes, and has
reported the cumulative effect of the change in the method of accounting for
income taxes in the financial statements for 1994, in the amount of $510,200.
The principal cause of this adjustment was due to the basis difference of an
acquisition made in prior years which was accounted for as a purchase
transaction.
A reconciliation of the statutory federal income tax rate and the effective tax
rate, as a percentage of pretax income, is as follows:
1995 1994 1993
---- ---- ----
Statutory federal income tax rate 35.0% 35.0% 35.0%
Dividends received exclusion (1.7) (1.6) (1.5)
Tax exempt interest (2.4) (1.7) (1.5)
Tax credits (0.2) (0.8) (1.1)
Unremitted affiliate income (4.5) (3.4) (2.9)
State income tax, net of
federal benefit 1.9 2.5 2.0
Corporate owned life insurance (2.7) (1.3) -0-
Other (1.4) (0.5) (0.8)
---- ---- ----
Effective tax rate 24.0% 28.2% 29.2%
==== ==== ====
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at November 30, are
presented below: (in thousands)
1995 1994
---- ----
Deferred tax assets:
Accrued retirement benefits $3,901 $3,584
Provision for doubtful accounts 596 518
Insurance claims and reserves 1,359 1,141
Excess of tax over financial statement
basis of investment securities 603 647
Other 450 756
------ ------
Total gross deferred tax assets 6,909 6,646
Less valuation allowance -0- -0-
------ ------
Net deferred tax assets 6,909 6,646
1995 1994
------ ------
Deferred tax liabilities:
Unremitted affiliate income $2,243 $1,917
Excess of financial statement over tax
basis of property, plant and equipment 1,508 1,534
Unrealized holding gains and losses 3,000 1,722
Other 279 424
------ ------
Total gross deferred tax liabilities 7,030 5,597
------ ------
Net deferred tax (liability) asset $ (121) $1,049
====== ======
Based upon the level of historical taxable income and projections for future
taxable income over the periods which the deferred tax assets are deductible,
management believes it is more likely than not the Company will realize the
benefits of the deferred tax assets.
The provision for deferred income taxes in 1993 is comprised of the following:
(in thousands)
Special credits $190
Unremitted affiliate income 331
Accrued retirement benefits (280)
Depreciation (114)
Other 217
----
$344
====
F. RETIREMENT PLANS
The Company has a qualified defined contribution plan (Employee
Savings/Retirement Plan) which covers all employees, with over one year
service, who elect to participate and have fulfilled the necessary service
requirements. Employee contributions to the Plan are matched by the Company at
the rate of 115% of the first 2% through 5% of the employee's contribution,
based on seniority. The Plan incorporates provisions of Section 401(k) of the
Internal Revenue Code. The expense for the Plan for 1995, 1994 and 1993,
amounted to approximately $2,395,000, $2,444,000 and $2,337,000, respectively.
The Company has a supplemental retirement Income Plan that covers certain
senior executives and provides additional retirement and death benefits. Also,
the Company has a Deferred Compensation Plan for certain senior executives
which provides for voluntary deferral of compensation, otherwise payable. The
unfunded future liability of the Company under these Plans is included in
deferred liabilities.
G. STOCK OPTION PLANS
In 1994, the stockholders approved the 1993 Long Term Incentive Plan for key
employees of the Company. The Company has reserved for issuance 450,000 shares
of common stock pursuant to the Plan. Options granted under the Plan may be for
such terms and exercised at such times as determined at the time of grant by
the Organization and Compensation Committee of the Board of Directors. No
options to purchase shares of Common Stock were granted in 1995. Options to
purchase 68,650 shares of Common Stock were granted in 1994 at $26.25 per
share, the fair market value at date of grant. No options were exercised in
1995 or 1994. Additionally, the Plan includes provisions for the granting of
stock appreciation rights and certain restricted awards. No stock appreciation
rights or restricted stock awards were granted in 1995 or 1994.
6
Page 18 of 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Bassett Furniture Industries, Incorporated and Subsidiaries
G. STOCK OPTION PLANS - CONTINUED
Also in 1994, the stockholders approved the 1993 Stock Plan for Non-Employee
Directors. Pursuant to this Plan, 75,000 shares of Common Stock have been
reserved. Under terms of the Plan, each non-employee director will
automatically be granted an option to purchase 500 shares of Common Stock on
April 1 of each year beginning on April 1, 1994. Options to purchase 4,500
shares of Common Stock were granted in 1995 and 1994 at $26.50 and $27.75 per
share, respectively, the fair market value at date of grant. No options were
exercised in 1995 or 1994.
The Company's 1982 Stock Option Plan terminated in 1993. Stock option activity
during 1993, 1994 and 1995 follows: (adjusted for the stock split in 1993)
Number of Option price
shares per share
--------- ---------------
Outstanding at December 1, 1992 165,937 $28.00
Granted in 1993 174,063 $37.40
Exercised in 1993 (51,783) $28.00
Cancelled in 1993 -0- -
-------
Outstanding at November 30, 1993 288,217 $28.00 - $37.40
Granted in 1994 73,150 $26.25 - $27.75
Exercised in 1994 -0- -
Cancelled in 1994 (16,150) $26.25 - $37.40
-------
Outstanding at November 30, 1994 345,217 $26.25 - $37.40
Granted in 1995 4,500 $26.50
Exercised in 1995 -0- -
Cancelled in 1995 (17,292) $26.25 - $37.40
-------
Outstanding at November 30, 1995 332,425 $26.25 - $37.40
=======
Exercisable at November 30, 1995 251,923 $26.25 - $37.40
Exercisable at November 30, 1994 200,128 $26.25 - $37.40
Exercisable at November 30, 1993 93,743 $28.00 - $37.40
H. OTHER INCOME, NET (in millions)
1995 1994 1993
------ ------ ------
Equity in unremitted income
of affiliated companies $ 5.0 $4.5 $3.9
Dividends 2.2 2.3 2.2
Interest (principally tax exempt) 2.4 1.7 1.6
Net gain from sales of investment
securities 4.1 0.5 0.7
Net gain from sales of property,
plant and equipment -0- -0- 0.3
Corporate owned life insurance,
net of interest expense (1.7) (0.2) (0.4)
Contributions (0.1) (0.2) (0.6)
Other 1.1 1.1 1.6
----- ---- ----
$13.0 $9.7 $9.3
===== ==== ====
Interest expense on corporate owned life insurance policy loans was $3.9
million in 1995, $1.4 million in 1994 and $.6 million in 1993.
7
Page 19 of 23
INDEPENDENT AUDITORS' REPORT
Board of Directors
Bassett Furniture Industries, Incorporated
We have audited the accompanying consolidated balance sheets of Bassett
Furniture Industries, Incorporated and subsidiaries as of November 30, 1995 and
1994, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the years in the three-year period ended November
30, 1995. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Bassett Furniture
Industries, Incorporated and subsidiaries as of November 30, 1995 and 1994, and
the results of their operations and their cash flows for each of the years in
the three-year period ended November 30, 1995 in conformity with generally
accepted accounting principles.
As discussed in notes A and E, the Company adopted the provisions of the
Financial Accounting Standards Board Statement No. 109, "Accounting for Income
Taxes," and Statement No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," in 1994.
/s/ KPMG PEAT MARWICK LLP
Greensboro, North Carolina
December 15, 1995
8
Page 20 of 23
OTHER BUSINESS DATA
Bassett Furniture Industries, Incorporated and Subsidiaries
SELECTED FINANCIAL DATA
1995 1994 1993 1992 1991
Net Sales . . . . . . . . . . . . . . . . . $490,816,681 $510,560,858 $503,770,060 $473,401,341 $401,616,062
Cost of Sales . . . . . . . . . . . . . . . 407,749,396 419,393,531 413,055,371 385,294,583 331,139,815
Income Before Income Taxes . . . . . . . . 30,128,786 34,780,404 36,512,830 39,266,698 26,873,028
Income Taxes . . . . . . . . . . . . . . . 7,226,000 9,804,000 10,644,000 11,774,000 7,030,000
Net Income . . . . . . . . . . . . . . . . 22,902,786 24,466,204 25,868,830 27,492,698 19,843,028
Net Income Per Share . . . . . . . . . . . 1.63 1.71 1.79 1.91 1.37
Cash Dividends Declared . . . . . . . . . . 11,196,755 11,411,357 11,358,213 9,205,978 7,705,563
Cash Dividends Per Share . . . . . . . . . .80 .80 .78 .64 .53
Total Assets . . . . . . . . . . . . . . . 346,720,454 340,498,230 330,677,879 318,583,145 291,259,296
Current Ratio . . . . . . . . . . . . . . . 5.79 to 1 5.67 to 1 6.07 to 1 5.22 to 1 6.95 to 1
Book Value Per Share . . . . . . . . . . . 21.88 20.96 19.99 18.99 17.72
Weighted Average Number of Shares . . . . . 14,052,794 14,294,803 14,440,341 14,416,534 14,450,385
QUARTERLY RESULTS OF OPERATIONS
1995
----------------------------------------------------------
FIRST SECOND THIRD FOURTH
------------ ------------ ------------ ------------
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . $123,550,551 $119,018,005 $119,183,765 $129,064,360
Gross Profit . . . . . . . . . . . . . . . . . . . . . . . 20,621,989 19,321,610 20,711,678 22,412,008
Net Income . . . . . . . . . . . . . . . . . . . . . . . . 4,896,346 4,976,750 5,781,291 7,248,399
Per Share . . . . . . . . . . . . . . . . . . . . . . . .35 .35 .41 .52
1994
----------------------------------------------------------
FIRST SECOND THIRD FOURTH
------------ ------------ ------------ ------------
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . $121,664,291 $134,639,355 $124,967,415 $129,289,797
Gross Profit . . . . . . . . . . . . . . . . . . . . . . . 19,836,837 25,797,650 21,507,700 24,025,140
Income Before Cumulative Effect of Accounting Change . . . 4,730,413 7,679,398 4,589,051 7,977,542
Net Income . . . . . . . . . . . . . . . . . . . . . . . . 4,220,213 7,679,398 4,589,051 7,977,542
Per Share
Before Cumulative Effect of Accounting Change . . . . . . .33 .53 .32 .57
Net Income . . . . . . . . . . . . . . . . . . . . . . . .29 .53 .32 .57
MARKET AND DIVIDEND INFORMATION
The Company's common stock is traded on the over-the-counter market and is
listed on the NASDAQNational Market System.The Company had approximately 2,200
stockholders at November 30, 1995. The range of high and low market prices and
dividends declared for the last two fiscal years are listed below:
Market Prices of Common Stock Dividends Declared
------------------------------------- ------------------
QUARTER 1995 1994 1995 1994
------- ----------------- ---------------- ---- ----
HIGH LOW HIGH LOW
First $30.25 $27.25 $36.75 $28.75 $.20 $.20
Second 29.25 25.50 29.50 25.50 .20 .20
Third 29.25 24.00 29.75 26.63 .20 .20
Fourth 25.75 20.13 30.25 26.06 .20 .20
(All market information and per share data has been restated to reflect the 5
for 4 stock split in 1993 and the 3 for 2 stock split in 1992)
9
Page 21 of 23
OTHER BUSINESS DATA - CONTINUED
Bassett Furniture Industries, Incorporated and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS:
Major components of net income expressed as a percentage of net sales were as
follows:
1995 1994 1993
---- ---- ----
Cost of sales 83.1% 82.2% 82.0%
Gross profit 16.9 17.8 18.0
S G & A expenses 13.4 12.9 12.6
Income from operations 3.5 4.9 5.4
Other income, net 2.6 1.9 1.8
Income before income taxes 6.1 6.8 7.2
Income taxes 1.4 1.9 2.1
Accounting change -0- 0.1 -0-
Net income 4.7 4.8 5.1
NET SALES
Net sales for 1995 compared to 1994 and 1993 were as follows:
1995 1994 1993
---- ---- ----
Net sales (in millions) $490.8 $510.6 $503.8
Percentage change from prior year (3.9)% 1.3% 6.4%
Net sales increased at the Bedding Division in 1995 over 1994 levels, however
this increase was offset by decreased sales in the Motion, National/Mt. Airy
and Impact Divisions. The other Divisions remained level with 1994. The
majority of the sales increase from 1993 to 1994 came from the Table Division
with other Divisions reporting flat sales. The increase from 1992 to 1993 was
evenly spread throughout all Divisions.
COSTS AND EXPENSES
Cost of sales increased approximately 90 basis points in 1995 over 1994
primarily because of increases in the cost of raw materials which could not be
passed through to the retail sector by increasing selling prices. Cost of sales
remained level in 1994 and 1993. During each of the three years ending in
1995, the relationship of each cost component comprising cost of sales remained
relatively constant: materials (50% - 1995; 49% - 1994 and 1993); labor (21%);
production overhead (12%).
Selling, general and administrative costs increased approximately 50 basis
point in 1995 over 1994 principally due to increased costs associated with the
efforts to gain market share (marketing and merchandising costs in general, and
expenses incurred in Bassett Direct Plus and our Bassett Gallery Program).
These costs remained largely steady during 1994 and 1993.
OTHER INCOME, NET
Note H in the Notes to Consolidated Financial Statements discloses the
components of other income.
INCOME TAXES
The effective tax rate for 1995 was 24.0%, down from 28.2% and 29.2% in 1994
and 1993, respectively. The Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," in 1994
and reported the cumulative effect of the change in accounting for income taxes
in the amount of $510,200 in the 1994 financial statements. Note E in the Notes
to Consolidated Financial Statements contains complete disclosure of the
Company's income tax status.
LIQUIDITY AND CAPITAL RESOURCES:
Cash provided by operating activities has increased in the last three years
($26.3 million in 1995, $23.7 million in 1994 and $22.4 million in 1993). The
growth in inventories in 1994 and 1993 barred additional generation of cash.
The increase in inventory levels is closely monitored and controlled by senior
management.
Traditionally, the Company has purchased (rather than leased) its capital
equipment requirements. During 1995, $7.2 million was expended for new
equipment and facilities. A comparison of purchases of property, plant and
equipment and depreciation charges follows:
1995 1994 1993
---- ---- ----
Purchases of property, plant and
equipment (in millions) $7.2 $10.0 $6.2
Depreciation charges (in millions) 8.6 8.8 9.0
The Company continued to repurchase its Common Stock in 1995, purchasing
429,701 shares at an average cost of $23.56 or a total expenditure of $10.1
million. This follows the repurchase of 361,386 shares in 1994 at an average
cost of $26.42 or a total expenditure of $9.5 million.
The current ratio was 5.79 to 1 and 5.67 to 1 at November 30, 1995 and 1994,
respectively. Working capital was $170 million and $164 million at November 30,
1995 and 1994, respectively.
Cash provided by operating activities is expected to be adequate for normal
future cash requirements.
There were no material commitments for capital expenditures at November 30,
1995. Capital expenditures made in the future for normal expansion are
anticipated to be made from funds generated by operating activities.
The Company has never 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.
1
Page 22 of 23
EXHIBIT 21 - LIST OF SUBSIDIARIES
(a) Bassett Furniture Industries of North Carolina Inc.
(North Carolina corporation)
(b) E.B. Malone Corporation (Delaware corporation)
1
Page 23 of 23
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
Board of Directors
Bassett Furniture Industries, Incorporated
Bassett, Virginia
We consent to incorporation by reference in the Registration Statements (Nos.
33-52405 and 33-52407) on FormES-8 of Bassett Furniture Industries,
Incorporated and subsidiaries of our report dated December 15, 1995, relating
to the consolidated balance sheets of Bassett Furniture Industries,
Incorporated and subsidiaries as of November 30, 1995 and 1994 and the related
consolidated statements of income, stockholdersG equity and cash flows for each
of the years in the three-year period ended November 30, 1995 which report is
incorporated by reference in the November 30, 1995 annual report on the Form
10-K of Bassett Furniture Industries, Incorporated and subsidiaries.
As discussed in notes A and E to the consolidated financial statements, the
Company adopted the provisions of the Financial Accounting Standards Board
Statement No. 109, OAccounting for Income Taxes,O and Statement No. 115,
OAccounting for Certain Investments in Debt and Equity Securities,O in 1994.
KPMG Peat Marwick LLP
Greensboro, North Carolina
February 21, 1996
5
1,000
YEAR
NOV-30-1995
DEC-01-1994
NOV-30-1995
51,331
39,055
70,062
1,470
81,227
204,915
211,790
158,666
346,720
35,392
0
0
0
68,295
230,609
346,720
490,817
503,816
407,749
473,687
0
607
3,900
30,129
7,226
22,903
0
0
0
22,903
1.63
0
