Pet owners will understand the import of the above headline. When your dog or cat leaves you an unwanted "present," you know it's something you'd rather had remained outside. And right now, I'm betting that's how Bassett Furniture (Nasdaq: BSET ) investors feel.
CEO Robert Spilman characterized the mess thusly: "These are truly difficult times for our industry ..." For its fiscal Q2, Bassett reported a 14% decline in sales, and a $0.20-per-share loss -- quite a reversal from the $0.24 per share in profit that Bassett fetched this time last year.
Then again, much of the loss was explained by one-time charges, which -- if they truly prove to be one-time -- should not affect the company's prospects going forward. Bassett recorded charges for severance costs from closing its namesake wood furniture factory, fees for breaking its leases on three shuttered storefronts, and expenses for downsizing the firm's wholesale showroom.
No fair peeking
Now, I know what you're thinking. This is the point in the story where I tell you that Bassett is doomed to follow in the footsteps of fellow furniture-industry victims Furniture Brands (NYSE: FBN ) , La-Z-Boy (NYSE: LZB ) , Stanley (Nasdaq: STLY ) , and Hooker (Nasdaq: HOFT ) . More plant closings and layoffs are in the offing, right?
Well, actually, yes. But I want to add a new dimension to the story today, one specific to Bassett -- and the investors who still hold the stock for its 5.9% dividend. That dividend is in jeopardy. Management didn't come out and say this, but consider the facts:
- Bassett has burned through about $2 million in cash over the last 18 months.
- Despite the absence of cash being generated from operations, it's paying out $2.35 million in dividends every quarter. A total of $14.1 million has been paid out over the last 18 months.
- Cash and accounts receivable are getting perilously close to equaling short-term liabilities.
- Accounts receivable are rising "due to the slower pace of collections from certain store licensees related in part to the overall retail environment."
- The "$5.0 million outstanding" on Bassett's "$40 million revolving credit facility matures November 30, 2007 ... The Company expects to renew the facility or have another facility in place prior to the maturity date."
I wouldn't be at all surprised if, when Bassett's bankers examine the facts laid out above, they politely suggest that Bassett suspend or slash its dividend in the interests of being better able to pay ... the bankers. I can't say for sure that this will happen. But I know that if I were the one holding Bassett's note, that's what I would do.
Like horror movies? Are you a fan of Shakespeare's tragedies? Do you rubberneck at car crashes? Then you'll love reading about the U.S. furniture industry's travails. Gorge yourself on punishment with:
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Fool contributor Rich Smith does not own shares of, nor is he short, any company named above.
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