Item 1A.
Risk Factors
6
Item 1B.
Unresolved Staff Comments
8
Item 2.
Properties
8
Item 3.
Legal Proceedings
9
Item 4B
Executive Officers of the Registrant
10
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
11
Item 6.
Selected Financial Data
12
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
13
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
31
Item 8.
Financial Statements and Supplementary Data
32
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
72
Item 9A.
Controls and Procedures
72
Item 9B.
Other Information
74
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
74
Item 11.
Executive Compensation
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.
Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accountant Fees and Services
PART IV
Item 15.
Exhibits
75
SIGNATURES
77
As used herein, unless the context otherwise requires, “Bassett,” the “Company,” “we,” “us” and “our” refer to Bassett Furniture Industries, Incorporated and its subsidiaries. References to 2011, 2010, 2009, 2008 and 2007 mean the fiscal years ended November 26, 2011, November 27, 2010, November 28, 2009, November 29, 2008 and November 24, 2007. Please note that fiscal 2008 contained 53 weeks.
SAFE-HARBOR, FORWARD-LOOKING STATEMENTS
This discussion contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations and business of Bassett Furniture Industries, Incorporated and subsidiaries. Such forward-looking statements are identified by use of forward-looking words such as “anticipates”, “believes”, “plans”, “estimates”, “expects”, “aimed” and “intends” or words or phrases of similar expression. These forward-looking statements involve certain risks and uncertainties. No assurance can be given that any such matters will be realized. Important factors, which should be read in conjunction with Item 1A “Risk Factors”, that could cause actual results to differ materially from those contemplated by such forward-looking statements include:
·
competitive conditions in the home furnishings industry
general economic conditions
overall retail traffic levels and consumer demand for home furnishings
ability of our customers and consumers to obtain credit
Bassett store openings
store closings and the profitability of the stores (independent licensees and Company-owned retail stores)
ability to implement our Company-owned retail strategies and realize the benefits from such strategies as they are implemented
fluctuations in the cost and availability of raw materials, labor and sourced products
results of marketing and advertising campaigns
information and technology advances
ability to execute global sourcing strategies
future tax legislation, or regulatory or judicial positions
ability to efficiently manage the import supply chain to minimize business interruption
1
ITEM 1. BUSINESS
(dollar amounts in thousands except per share data)
General
Bassett is a leading vertically integrated manufacturer, importer and retailer of high quality, mid-priced home furnishings. With 88 Bassett Home Furnishings (“BHF”) stores at November 26, 2011, we have leveraged our strong brand name in furniture into a network of licensed and corporate stores that focus on providing consumers with a friendly environment for buying furniture and accessories. On December 26, 2011, we opened a new Company-owned store in Torrance, California bringing the total network to 89 stores. We created our store program in 1997 to provide a single source home furnishings retail store that provides a unique combination of stylish, quality furniture and accessories with a high level of customer service. The store features custom order furniture ready for delivery in less than 30 days, more than 750 upholstery fabrics, free in-home design visits and perfectly coordinated decorating accessories. We believe that our capabilities in custom furniture have become unmatched in recent years. Our manufacturing team takes great pride in the breadth of its options, the precision of its craftsmanship, and the speed of its delivery. The selling philosophy in the stores is based on building strong long term relationships with each customer. Sales people are referred to as Design Consultants and are trained to evaluate customer needs and provide comprehensive solutions for their home decor.
In order to reach markets that cannot be effectively served by our retail store network, we also distribute our products through other multi-line furniture stores, many of which feature Bassett galleries or design centers, specialty stores and mass merchants. We believe this blended strategy provides us the greatest ability to effectively distribute our products throughout the United States and ultimately gain market share. During 2010, our sales through these channels increased for the first time in several years. During 2011, sales through these channels increased by over 10%.
Operating Segments
We have strategically aligned our business into three reportable segments: Wholesale, Retail and Investments/Real Estate.
The wholesale home furnishings segment is involved principally in the design, manufacture, sourcing, sale and distribution of furniture products to a network of BHF stores (independently-owned stores and Company-owned retail stores) and independent furniture retailers. The wholesale segment accounted for 55%, 59% and 63% of net sales during fiscal 2011, 2010, and 2009, respectively.
Our retail segment consisted of 49 Company-owned stores and accounted for 45%, 41% and 37% of total net sales in fiscal 2011, 2010 and 2009, respectively. The following table shows the number of Company-owned stores by state as of November 26, 2011:
State
Number of
Arizona
2
Missouri
1
Arkansas
Nevada
California
New Jersey
Connecticut
3
New York
Delaware
North Carolina
4
Florida
Ohio
Georgia
South Carolina
Kentucky
Tennessee
Maryland
Texas
12
Massachusetts
Virginia
Mississippi
Total
49
Our investments/real estate business segment consists of our holdings of retail real estate related to licensee stores, the equity investment in Zenith Freight Lines, LLC (“Zenith”), which hauls freight and warehouses inventory for the Company, International Home Furnishings Center, Inc. ("IHFC") until sold on May 2, 2011 and our investments in the Fortress Value Recovery Fund I, LLC (“Fortress”) and marketable securities.
2
Wholesale Segment Overview
The wholesale furniture industry is very competitive and there are a large number of manufacturers both within and outside the United States who compete in the market on the basis of product quality, price, style, delivery and service. Additionally, many retailers source imported product directly, thus bypassing domestic furniture manufacturers. We believe that we can be successful in the current competitive environment because our products represent excellent value combining attractive prices, quality and styling; prompt delivery; and courteous service.
Wholesale shipments by category for the last three fiscal years are summarized below:
2011
2010
2009
Wood
Upholstery
Other
Approximately 52% of our 2011 wholesale sales were of imported product compared to 53% in 2010. We define imported product as fully finished product that is sourced. Our domestic product includes certain products that contain components which were also sourced. We continue to believe that a blended strategy including domestically produced products primarily of a custom-order nature combined with sourcing of major collections provides the best value and quality of products to our customers.