1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
WASHINGTON, D.C.
FORM 10-K
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Page 1 of 27
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended November 30, 1996 Commision 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 13, 1996.
Common Stock, $5.00 par value -- $270,250,000
---------------------------------------------
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 -- 13,075,595 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, 1996 (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 1997 Annual Meeting of
Stockholders held February 19, 1997, 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 1996, the Company recorded a one-time, pre-tax charge of
approximately $2.7 million to recognize the effect on costs and
expenses related to the consolidation of operations in the Motion
Division, a write-down of certain inventories and adjustment in
fixed asset carrying values. The charge amounted to an after-tax
cost of $.12 per share. The consolidation of the operations in the
Motion Division will have no material effect on net sales in the
future and should improve operating margins in that Division.
There have been no material changes in the mode of conducting
business in the fiscal year beginning December 1, 1995.
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, 1996.
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.
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 1996.
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
15% of gross sales in 1996, 14% in 1995 and 13% in 1994.
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The Company's backlog of orders believed to be firm was
$48,000,000 at November 30, 1996 and $56,000,000 at November 30,
1995. It is expected that the November 30, 1996 backlog will be
filled within the 1997 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.
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). It is not possible at this time to estimate the impact of
compliance with these new, more stringent standards on the
Company's operations or costs.
The Company had approximately 6,900 employees at November 30, 1996.
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 operating facilities:
Plant Name Location Construction
---------- -------- ------------
J. D. Bassett Manufacturing Company Bassett, VA (2 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 Company Martinsville, VA Brick, frame, concrete and steel
Bassett Fiberboard Bassett, VA Brick, concrete and steel
Bassett Upholstery Division Newton, NC (4 plants) Brick, concrete and steel
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Taylorsville, NC Brick, concrete and steel
Dumas, AR Brick, concrete and steel
Bassett Furniture Industries of North Statesville, NC Brick, frame, concrete and steel
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 Christiansburg, VA Metal frame
E. B. Malone Corporation Lake Wales, FL Concrete block and frame
(2 plants)
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 Hickory, NC (1 plant Brick, concrete and steel
and warehouse)
Bassett Motion Division Booneville, MS Metal frame
(2 plants)
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.
ITEM 3. LEGAL PROCEEDINGS
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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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, 1996,
contained in the "Other Business Data" in the Annual Report is
incorporated herein by reference thereto.
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 17, 1996,
included in the annual report of the registrant to its
stockholders for the year ended November 30, 1996 are incorporated
herein by reference thereto:
Consolidated Balance Sheet--November 30, 1996 and 1995
Consolidated Statement of Income--Years Ended November 30,
1996, 1995 and 1994
Consolidated Statement of Stockholders' Equity--Years Ended
November 30, 1996, 1995 and 1994
Consolidated Statement of Cash Flows--Years Ended November 30,
1996, 1995 and 1994
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
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE
REGISTRANT
The information contained on pages 2 through 6 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 7 through 14 of the Proxy
Statement under the captions "Organization, Compensation and
Nominating Committee Report", "Stockholder Return Performance
Graph", "Executive Compensation", and "Supplemental Retirement
Income Plan" is incorporated herein by reference thereto.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information contained on pages 2 and 3 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 7 of the Proxy statement under
the heading "Organization and Compensation Committee Interlocks
and Insider Participation" 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, 1996.*
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.
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(b) No reports on Form 8-K have been filed during the last quarter
of the registrant's 1996 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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Page 8 of 27
ANNUAL REPORT ON FORM 10-K
ITEM 14(a)(1) AND (c)
LIST OF FINANCIAL STATEMENTS
CERTAIN EXHIBITS
YEAR ENDED NOVEMBER 30, 1996
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
BASSETT, VIRGINIA
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Page 9 of 27
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, 1996 are incorporated herein by
reference:
Consolidated Balance Sheet--November 30, 1996 and 1995
Consolidated Statement of Income--Years Ended November 30, 1996, 1995 and
1994
Consolidated Statement of Stockholders' Equity--Years Ended November 30,
1996, 1995 and 1994
Consolidated Statement of Cash Flows--Years Ended November 30, 1996, 1995
and 1994
Notes to Consolidated Financial Statements
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Page 10 of 27
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 19, 1997
-------------------------------------------- -----------------
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 19, 1997
-------------------------------------------- -----------------
Peter W. Brown
Director
By: /s/THOMAS E. CAPPS Date: February 19, 1997
-------------------------------------------- -----------------
Thomas E. Capps
Director
By: /s/ALAN T. DICKSON Date: February 19, 1997
-------------------------------------------- -----------------
Alan T. Dickson
Director
By: /s/PAUL FULTON Date: February 19, 1997
-------------------------------------------- -----------------
Paul Fulton
Director
By: /s/WILLIAM H. GOODWIN, JR. Date: February 19, 1997
-------------------------------------------- -----------------
William H. Goodwin, Jr.
Director
By: /s/GLENN A. HUNSUCKER Date: February 19, 1997
-------------------------------------------- -----------------
Glenn A. Hunsucker
President and Chief Operating Officer and
Director
By: /s/JAMES W. MCGLOTHLIN Date: February 19, 1997
-------------------------------------------- -----------------
James W. McGlothlin
Director
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SIGNATURES, Continued
By: Date:
-------------------------------------------- -----------------
Thomas W. Moss, Jr.
Director
By: /s/ALBERT F. SLOAN Date: February 19, 1997
-------------------------------------------- -----------------
Albert F. Sloan
Director
By: /s/JOHN W. SNOW Date: February 19, 1997
-------------------------------------------- -----------------
John W. Snow
Director
By: /s/PHILIP E. BOOKER Date: February 19, 1997
-------------------------------------------- -----------------
Philip E. Booker
Vice President and Controller
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Page 12 of 27
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
13 Bassett Furniture Industries, Inc. Annual Report to
Stockholders for the year ended November 30, 1996
21 List of subsidiaries of registrant
23 Consent of Independent Auditors
27 Financial Data Schedule (EDGAR filing only)
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CONSOLIDATED BALANCE SHEET
Bassett Furniture Industries, Incorporated and Subsidiaries
ASSETS
NOVEMBER 30,
---------------------------
1996 1995
------------ ------------
CURRENT ASSETS
Cash and cash equivalents ....................................... $ 57,285,005 $ 51,331,119
Trade accounts receivable, less allowances for doubtful
accounts (1996- $1,355,000; 1995 - $1,470,000) ................ 65,416,910 68,591,514
Inventories ..................................................... 67,082,490 81,226,607
Prepaid expenses ................................................ 1,492,506 1,757,658
Prepaid income taxes ............................................ 844,737 -0-
Deferred income taxes ........................................... 2,597,000 2,008,000
------------ ------------
194,718,648 204,914,898
PROPERTY, PLANT AND EQUIPMENT
Buildings ....................................................... 74,596,633 73,478,686
Machinery and equipment ......................................... 139,556,776 133,933,234
------------ ------------
214,153,409 207,411,920
Less allowances for depreciation ................................ 162,149,761 158,665,871
------------ ------------
52,003,648 48,746,049
Land ............................................................ 4,375,016 4,378,297
------------ ------------
56,378,664 53,124,346
OTHER ASSETS
Investment in securities ........................................ 29,625,435 39,055,319
Investment in affiliated companies .............................. 45,820,750 40,398,574
Other ........................................................... 8,621,947 9,227,317
------------ ------------
84,068,132 88,681,210
------------ ------------
$335,165,444 $346,720,454
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable ................................................ $ 20,541,014 $ 23,425,858
Accrued compensation ............................................ 3,716,206 4,778,966
Other accrued liabilities ....................................... 6,088,381 6,284,441
Income taxes .................................................... -0- 902,476
------------ ------------
30,345,601 35,391,741
DEFERRALS
Deferred liabilities ............................................ 10,834,741 10,296,244
Deferred income taxes ........................................... 2,504,000 2,129,000
------------ ------------
13,338,741 12,425,244
STOCKHOLDERS' EQUITY
Common stock, par value $5 a share, 50,000,000 shares authorized 65,377,975 68,294,765
Retained earnings ............................................... 222,417,127 225,718,704
Unrealized holding gains, net of tax ............................ 3,686,000 4,890,000
------------ ------------
291,481,102 298,903,469
------------ ------------
$335,165,444 $346,720,454
============ ============
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,
---------------------------------------------------
1996 1995 1994
------------ ----------- ------------
NET SALES.................................................................. $450,717,494 $490,816,681 $510,560,858
COSTS AND EXPENSES
COST OF SALES......................................................... 379,258,894 407,749,396 419,393,531
SELLING, GENERAL AND ADMINISTRATIVE................................... 64,151,836 65,938,061 66,044,399
------------ ------------ ------------
443,410,730 473,687,457 485,437,930
------------ ------------ ------------
INCOME FROM OPERATIONS 7,306,764 17,129,224 25,122,928
OTHER INCOME, NET.......................................................... 14,981,716 12,999,562 9,657,476
------------ ------------ ------------
Income before income taxes and cumulative effect of a change in accounting 22,288,480 30,128,786 34,780,404
principle
INCOME TAXES
FEDERAL............................................................... 3,140,000 6,455,000 8,521,000
STATE................................................................. 268,000 879,000 1,361,000
DEFERRED.............................................................. 379,000 (108,000) (78,000)
------------ ------------ ------------
3,787,000 7,226,000 9,804,000
------------ ------------ ------------
Income before cumulative effect of a change in accounting principle 18,501,480 22,902,786 24,976,404
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE...................... -0- -0- (510,200)
------------ ------------ ------------
NET INCOME $ 18,501,480 $ 22,902,786 $ 24,466,204
============ ============ ============
EARNINGS PER SHARE:
Income before cumulative effect of a change in accounting principle $1.39 $1.63 $1.75
Cumulative effect of a change in accounting principle............ -0- -0- (.04)
------------ ------------ ------------
NET INCOME PER SHARE $1.39 $1.63 $1.71
============ ============ ============
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, 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) -
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
Net income............................................ - - - 18,501,480 -
Cash dividends........................................ - - - (10,625,730) -
Purchase and retirement of Common Stock............... (584,343) (2,921,715) (20,439) (11,177,327) -
Issuance of Common Stock to non-employee directors.... 985 4,925 20,439 - -
Net change in unrealized holding gains................ - - - - (1,204,000)
----------- ----------- -------- ------------ -----------
BALANCE, NOVEMBER 30, 1996................................. 13,075,595 $65,377,975 $ -0- $222,417,127 $3,686,000
=========== =========== ======== ============ ==========
The accompanying notes are an integral part of the financial statements.
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CONSOLIDATED STATEMENT OF CASH FLOWS
Bassett Furniture Industries, Incorporated and Subsidiaries
YEAR ENDED NOVEMBER 30,
-------------------------------------------------
1996 1995 1994
----------- ----------- ------------
OPERATING ACTIVITIES
Net income............................................................ $18,501,480 $22,902,786 $24,466,204
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization...................................... 6,311,537 8,606,985 8,799,199
Equity in unremitted income of affiliated companies................ (5,422,176) (4,986,109) (4,463,683)
Provision for losses on trade accounts receivable.................. 240,672 606,616 844,483
Net gain from sales of investment securities ...................... (6,720,325) (4,141,605) (518,851)
Net gain from sales of property, plant and equipment............... (29,137) (815) (25,683)
Deferred income taxes.............................................. 527,000 (108,000) 432,200
Changes in deferred liabilities.................................... 538,497 766,460 917,206
Changes in operating assets and liabilities:
Trade accounts receivable....................................... 2,933,932 2,738,620 2,184,068
Other receivables............................................... 127,450 (31,192) (362,506)
Inventories and prepaid expenses................................ 14,409,269 (702,718) (9,832,105)
Accounts payable, accrued compensation and other accrued
liabilities................................................... (4,143,664) (512,289) 2,872,754
Income taxes.................................................... (1,747,213) 1,177,151 (1,624,711)
----------- ----------- ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 25,527,322 26,315,890 23,688,575
INVESTING ACTIVITIES
Purchases of property, plant and equipment............................ (9,627,370) (7,226,110) (9,999,040)
Proceeds from sales of property, plant and equipment.................. 90,652 49,500 121,011
Purchases of investment securities.................................... (6,587,762) (4,072,445) (9,893,116)
Proceeds from sales of investment securities.......................... 20,792,971 16,156,714 7,595,629
Dividends from affiliated company..................................... -0- 1,089,505 1,089,505
Additional investment in affiliated company........................... -0- (1,100,000) -0-
Change in investment in corporate owned life insurance................ 737,756 (920,260) (2,598,314)
Other................................................................. (259,836) (3,423) 310,928
----------- ----------- ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 5,146,411 3,973,481 (13,373,397)
FINANCING ACTIVITIES
Issuance of Common Stock.............................................. 25,364 48,733 -0-
Purchase of Common Stock.............................................. (14,119,481) (10,125,187) (9,546,420)
Cash dividends........................................................ (10,625,730) (11,196,755) (11,411,357)
----------- ----------- ------------
NET CASH USED IN FINANCING ACTIVITIES (24,719,847) (21,273,209) (20,957,777)
----------- ----------- ------------
CHANGE IN CASH AND CASH EQUIVALENTS........................................ 5,953,886 9,016,162 (10,642,599)
CASH AND CASH EQUIVALENTS-beginning of year................................ 51,331,119 42,314,957 52,957,556
----------- ----------- ------------
CASH AND CASH EQUIVALENTS-end of year...................................... $57,285,005 $51,331,119 $42,314,957
=========== =========== ===========
- -----------------
Income tax payments........................................................ $ 5,007,213 $ 6,156,849 $11,506,711
=========== =========== ===========
Interest payments.......................................................... $ 5,494,540 $ 3,135,841 $ 648,923
=========== =========== ===========
The accompanying notes are an integral part of the financial statements.
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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 over
the estimated useful lives of the respective assets utilizing straight-line and
accelerated methods.
Investment in Securities
The Company classifies its investment in securities as available-for-sale, which
is reported at fair value. 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 for investments in common stock is used for the
Company's investment in affiliated companies. The carrying amounts approximate
the Company's equity in their underlying net assets.
Investment in Corporate Owned Life Insurance
The Company's 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 policy loans, net of increases
in cash surrender values and death benefits received, 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 15% in 1996, 14%
in 1995 and 13% in 1994.
Income Taxes
Deferred income taxes are 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.
Earnings Per Share
Earnings per share is calculated using the weighted average number of shares
outstanding.
New Accounting Standards
The Company is required to adopt Statement of Financial Accounting Standards
("SFAS") No. 121, Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed Of, and SFAS No. 123, Accounting for Stock
Based Compensation, no later than its fiscal year ending November 30, 1997. The
Company has determined that implementation of SFASNo. 121 will not have a
material impact on the Company's consolidated financial statements. The Company
expects to disclose the fair value of options granted in a footnote to its
consolidated financial statements, as permitted by SFASNo. 123.
B. INVENTORIES (in millions)
November 30,
--------------------------
1996 1995
------ ------
Finished goods $ 42.6 $ 46.5
Work in process 14.0 16.2
Raw materials and supplies 38.3 45.3
------ ------
Total inventories on FIFO cost method 94.9 108.0
LIFO adjustment 27.8 26.8
------ ------
$ 67.1 $ 81.2
====== ======
C. INVESTMENT IN SECURITIES
Information on investment in securities by major security type: (in millions)
November 30, 1996
----------------------------------------------
Gross Gross
Unrealized Unrealized
Holding Holding Fair
Cost Gains Losses Value
--------- ---------- ---------- -------
Equity securities $15.0 $6.0 $0.6 $20.4
Mutual funds 3.2 0.6 0.1 3.7
Municipal securities 5.5 -0- -0- 5.5
--------- ---------- ---------- -------
$23.7 $6.6 $0.7 $29.6
========= ========== ========== =======
5
17 of 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Bassett Furniture Industries, Incorporated and Subsidiaries
C. INVESTMENT IN SECURITIES - CONTINUED
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
======== ========== ========== ========
Maturities of the municipal securities are within five years.
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)
1996 1995 1994
-------- -------- --------
Income from operations $8.7 $8.3 $7.3
Net income 5.4 5.0 4.5
E. INCOME TAXES
Effective December 1, 1993, the Company adopted 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:
1996 1995 1994
---- ---- ----
Statutory federal income tax rate 35.0% 35.0% 35.0%
Dividends received exclusion (1.6) (1.7) (1.6)
Tax exempt interest (3.4) (2.4) (1.7)
Unremitted affiliate income (6.5) (4.5) (3.4)
Corporate owned life insurance (7.0) (2.7) (1.3)
State income tax, net of
federal benefit 0.9 1.9 2.5
Tax credits -0- (0.2) (0.8)
Other (0.4) (1.4) (0.5)
---- ---- ----
Effective tax rate 17.0% 24.0% 28.2%
==== ==== ====
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 as
follows:(in thousands)
1996 1995
------- ------
Deferred tax assets:
Trade accounts receivable $ 515 $ 596
Inventories 840 -0-
Investment in securities 333 603
Retirement benefits 4,105 3,901
Other liabilities and reserves 1,769 1,809
------- ------
Total gross deferred tax assets 7,562 6,909
Less valuation allowance -0- -0-
------- ------
Net deferred tax assets 7,562 6,909
Deferred tax liabilities:
Property, plant and equipment 2,334 1,508
Unremitted affiliate income 2,697 2,243
Prepaid expenses 179 279
Holding gains 2,259 3,000
------- ------
Total gross deferred tax liabilities 7,469 7,030
------- ------
Net deferred tax asset (liability) $ 93 $ (121)
======= ======
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.
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 1996, 1995 and 1994, amounted to
approximately $2,379,000, $2,395,000 and $2,444,000, 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
Under the 1993 Long Term Incentive Plan, the Company has reserved for issuance
450,000 shares of Common Stock. 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, Compensation and Nominating Committee of the Board of Directors.
No options to purchase shares of Common Stock
6
18 of 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Bassett Furniture Industries, Incorporated and Subsidiaries
G. STOCK OPTION PLANS - Continued
were granted in 1996 or 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 1996, 1995 or 1994. Additionally, the Plan
includes provisions for the granting of stock appreciation rights and certain
stock awards. No stock appreciation rights or restricted stock awards were
granted in 1996, 1995 or 1994.
Under the 1993 Stock Plan for Non-Employee Directors, the Company has reserved
for issuance 75,000 shares of Common Stock. 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. Options to purchase 4,500 shares
of Common Stock were granted in 1996, 1995 and 1994 at $25.75, $26.50, and
$27.75 per share, respectively, the fair market value at date of grant. No
options were exercised in 1996, 1995 or 1994.
Stock option activity during 1994, 1995 and 1996 follows:
Number of Option price
shares per share
--------- ---------
Outstanding at December 1, 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
Granted in 1996 4,500 $25.75
Exercised in 1996 -0- -
Cancelled in 1996 (15,300) $26.25 - $37.40
---------
Outstanding at November 30, 1996 321,625 $25.75 - $37.40
=========
Exercisable at November 30, 1996 267,770 $25.75 - $37.40
Exercisable at November 30, 1995 251,923 $26.25 - $37.40
Exercisable at November 30, 1994 200,128 $26.25 - $37.40
H. OTHER INCOME, NET (in millions)
1996 1995 1994
----- ----- ----
Dividends $ 1.5 $ 2.2 $2.3
Interest (principally tax exempt) 2.4 2.4 1.7
Equity in unremitted income
of affiliated companies 5.4 5.0 4.5
Net gain from sales of investment
securities 6.7 4.1 0.5
Corporate owned life insurance,
net of interest expense (2.1) (1.7) (0.2)
Other 1.1 1.0 0.9
----- ----- ----
$15.0 $13.0 $9.7
===== ===== ====
Interest expense on corporate owned life insurance policy loans was $6.4 million
in 1996, $3.9 million in 1995 and $1.4 million in 1994.
7
19 of 27
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, 1996 and
1995, 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,
1996. 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, 1996 and 1995, and
the results of their operations and their cash flows for each of the years in
the three-year period ended November 30, 1996 in conformity with generally
accepted accounting principles.
As discussed in note E, the Company adopted Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes, in 1994.
KPMG Peat Marwick LLP
Greensboro, North Carolina
December 17, 1996
8
20 of 27
OTHER BUSINESS DATA
Bassett Furniture Industries, Incorporated and Subsidiaries
SELECTED FINANCIAL DATA
1996 1995 1994 1993 1992
Net Sales................................. $450,717,494 $490,816,681 $510,560,858 $503,770,060 $473,401,341
Cost of Sales............................. 379,258,894 407,749,396 419,393,531 413,055,371 385,294,583
Income Before Income Taxes................ 22,288,480 30,128,786 34,780,404 36,512,830 39,266,698
Income Taxes.............................. 3,787,000 7,226,000 9,804,000 10,644,000 11,774,000
Net Income................................ 18,501,480 22,902,786 24,466,204 25,868,830 27,492,698
Net Income Per Share...................... 1.39 1.63 1.71 1.79 1.91
Cash Dividends Declared................... 10,625,730 11,196,755 11,411,357 11,358,213 9,205,978
Cash Dividends Per Share.................. .80 .80 .80 .78 .64
Total Assets.............................. 335,165,444 346,720,454 340,498,230 330,677,879 318,583,145
Current Ratio............................. 6.42 to 1 5.79 to 1 5.67 to 1 6.07 to 1 5.22 to 1
Book Value Per Share...................... 22.29 21.88 20.96 19.99 18.99
Weighted Average Number of Shares......... 13,351,585 14,052,794 14,294,803 14,440,341 14,416,534
QUARTERLY RESULTS OF OPERATIONS
1996
------------------------------------------------------------------
FIRST SECOND THIRD FOURTH
------------ ------------ ------------ ------------
Net Sales................................................. $111,951,020 $111,273,154 $109,007,706 $118,485,614
Gross Profit.............................................. 17,767,900 17,715,068 17,782,282 18,193,350
Net Income................................................ 4,713,961 4,992,209 4,825,731 3,969,579
Per Share............................................. .35 .37 .36 .31
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
MARKET AND DIVIDEND INFORMATION
The Company's Common Stock trades on The Nasdaq Stock Market under the symbol
"BSET."The Company had approximately 2,100 registered stockholders at November
30, 1996. 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 1996 1995 1996 1995
------- ------------------ ----------------- ---- ----
High Low High Low
First $25.75 $22.38 $30.25 $27.25 $.20 $.20
Second 26.38 24.25 29.25 25.50 .20 .20
Third 27.00 22.00 29.25 24.00 .20 .20
Fourth 24.88 22.13 25.75 20.13 .20 .20
9
21 of 27
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:
NET SALES
Net sales for 1996 compared to prior years:
1996 1995 1994
---- ---- ----
Net sales (in millions) $450.7 $490.8 $510.6
Percentage change from prior year (8.2)% (3.9)% 1.3%
The most significant decline in net sales during the past two years was in the
Upholstery Division (stationary and motion) and the Impact Division which
together accounted for a total reduction of $46 million.
Net sales in the Bedding Division in 1996 were flat compared to 1995 while all
other Divisions were down. Comparing 1995 to 1994, the increase in net sales in
the Bedding Division in 1995 was offset by decreases in the Motion, National/Mt.
Airy and Impact Divisions, with all other Divisions reporting no significant
change. The majority of the increase from 1993 to 1994 came from the Table
Division with all other Divisions reporting no significant change.
COSTS AND EXPENSES
In the fourth quarter of 1996, a one-time pre-tax charge of $2,675,000 was
recorded to recognize the effect on costs and expenses related to the
consolidation of the operations in the Motion Division, a write-down of certain
inventories and adjustments in fixed asset carrying values.
Excluding the effects of the abovementioned one-time charge, cost of sales
increased approximately 50 basis points in 1996 over 1995. This follows an
increase of approximately 90 basis points in 1995 over 1994. There was no
significant change between 1993 and 1994. The decline in margins in the past two
years has occurred in the material cost component, as shown below by a
comparison of the cost components comprising cost of sales as a percentage of
net sales:
1996 1995 1994
----- ----- -----
Materials 50.14% 49.76% 48.79%
Labor 21.24 21.39 21.48
Overhead 12.17 11.93 11.87
----- ----- -----
83.55% 83.08% 82.14%
The increase in the overhead component percentage in the last two years is a
result of decreased sales volume. Total overhead dollar costs decreased $3.7
million in 1996 from 1995, and $2.1 million in 1995 from 1994.
The increase in SG&A expenses as a percentage of net sales since 1993 is chiefly
the result of the decline in net sales. Total dollars, including variable costs
(primarily sales commissions), declined in 1996 and 1995 compared to prior
years. The fixed cost elements of the category decreased slightly in 1996
compared to 1995. These fixed costs increased in 1995 from 1994 mainly in
marketing and merchandising costs related to the Bassett Direct Plus and Bassett
Gallery Programs.
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 1996 was 17.0%, down from 24.0% and 28.2% in 1995 and
1994, respectively. 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 remained level in the last three years
($25.5 million in 1996, $26.3 million in 1995 and $23.7 million in 1994).
Traditionally, the Company has purchased (rather than leased) its capital
equipment requirements. During 1996, $9.6 million was expended for new equipment
and facilities. A comparison of purchases of property, plant and equipment and
depreciation charges is shown below:
1996 1995 1994
---- ---- ----
Purchases of property, plant and
equipment (in millions) $9.6 $7.2 $10.0
Depreciation charges (in millions) 6.3 8.6 8.8
The Company continued to repurchase its Common Stock in 1996, purchasing 584,343
shares at an average cost of $24.16 or a total expenditure of $14.1 million.
This follows the repurchase of 791,087 shares in 1995 and 1994 for a total
expenditure of $19.7 million.
The current ratio was 6.42 to 1 and 5.79 to 1 at November 30, 1996 and 1995,
respectively. Working capital was $164 million and $170 million at November 30,
1996 and 1995, 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,
1996. 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
EXHIBIT 21 - LIST OF SUBSIDIARIES
(a) Bassett Furniture Industries of North Carolina Inc. (North Carolina
corporation)
(b) E.B. Malone Corporation (Delaware corporation)
1
[KPMG PEAT MARWICK LLP LETTERHEAD]
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 Form S-8 of Bassett Furniture Industries,
Incorporated and subsidiaries of our report dated December 17, 1996, relating
to the consolidated balance sheets of Bassett Furniture Industries,
Incorporated and subsidiaries as of November 30, 1996 and 1995 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, 1996 which
report is incorporated by reference in the November 30, 1996 annual report on
the Form 10-K of Bassett Furniture Industries, Incorporated and subsidiaries.
As discussed in note E to the consolidated financial statements, the Company
adopted the provisions of the Financial Accounting Standards Board Statement
No. 109, "Accounting for Income Taxes," in 1994.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Greensboro, North Carolina
February 21, 1997
5
1,000
YEAR
NOV-30-1996
DEC-01-1995
NOV-30-1996
57,285
29,625
66,772
1,355
67,082
194,719
218,528
162,150
335,165
30,345
0
0
0
65,378
226,103
335,165
450,717
465,699
379,259
443,411
0
241
6,400
22,288
3,787
18,501
0
0
0
18,501
1.39
0
