SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Bassett Furniture Industries, Incorporated
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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BASSETT FURNITURE INDUSTRIES, INCORPORATED
BASSETT, VIRGINIA
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 25, 2003
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Bassett
Furniture Industries, Incorporated (the "Company"), will be held at the
Company's headquarters at 3525 Fairystone Park Highway, Bassett, Virginia, on
Tuesday, March 25, 2003, at 11:00 a.m., local time, for the purpose of
considering and acting upon the following:
1. The election of nine Directors.
2. A proposal to ratify the selection of Ernst & Young, LLP as
independent public accountants for the fiscal year ending November 29,
2003.
3. Any and all other matters that may properly come before the meeting or
any adjournment thereof.
The Board of Directors has fixed the close of business on February 12, 2003
as the record date for determining the stockholders entitled to notice of and to
vote at the meeting and any adjournment thereof, and only holders of Common
Stock of the Company of record at such date will be entitled to notice of or to
vote at the meeting.
THE BOARD OF DIRECTORS WILL APPRECIATE THE PROMPT RETURN OF THE ENCLOSED
PROXY, DATED AND SIGNED. THE PROXY MAY BE REVOKED BY YOU AT ANY TIME BEFORE IT
IS EXERCISED AND WILL NOT BE EXERCISED IF YOU ATTEND THE MEETING AND VOTE IN
PERSON.
By Order of the Board of Directors
Robert H. Spilman, Jr.
Chief Executive Officer and President
Bassett, Virginia
February 21, 2003
BASSETT FURNITURE INDUSTRIES, INCORPORATED
POST OFFICE BOX 626, BASSETT, VIRGINIA 24055
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of proxies to be used at the Annual Meeting of
Stockholders of Bassett Furniture Industries, Incorporated (the "Company") to be
held at the Company's headquarters at 3525 Fairystone Park Highway, Bassett,
Virginia, at 11:00 a.m., local time, on Tuesday, March 25, 2003. This Proxy
Statement and accompanying proxy are being sent to the stockholders of the
Company on or about February 21, 2003.
Solicitation other than by mail may be made personally and by telephone by
regularly employed officers and employees of the Company who will not be
additionally compensated therefor. The Company will request brokers, dealers,
banks or voting trustees, or their nominees, who hold stock in their names for
others or hold stock for others who have the right to give voting instructions,
to forward proxy materials to their principals and request authority for the
execution of the proxy and will reimburse such institutions for their reasonable
expenses in so doing. The total cost of soliciting proxies will be borne by the
Company.
Any proxy delivered in the accompanying form may be revoked by the person
executing the proxy at any time before the authority thereby granted is
exercised, by written request addressed to Barry C. Safrit, Chief Financial
Officer, Bassett Furniture Industries, Incorporated, Post Office Box 626,
Bassett, Virginia 24055 or by attending the meeting and electing to vote in
person. Proxies received in such form will be voted as therein set forth at the
meeting or any adjournment thereof.
The only matters to be considered at the meeting, so far as known to the
Board of Directors, are the matters set forth in the Notice of Annual Meeting of
Stockholders, and routine matters incidental to the conduct of the meeting.
However, if any other matters should come before the meeting or any adjournment
thereof, it is the intention of the persons named in the accompanying form of
proxy, or their substitutes, to vote said proxy in accordance with their
judgment on such matters.
Stockholders present or represented and entitled to vote on a matter at the
meeting or any adjournment thereof will be entitled to one vote on such matter
for each share of Common Stock, par value $5.00 per share, of the Company (the
"Common Stock") held by them of record at the close of business on February 12,
2003, which is the record date for determining the stockholders entitled to
notice of and to vote at such meeting or any adjournment thereof. Voting on all
matters, including the election of Directors, will be by voice vote or by show
of hands. The number of shares of Common Stock of the Company outstanding on
February 12, 2003 was 11,614,105.
Presence in person or by proxy of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the meeting will
constitute a quorum. If a quorum is present, Directors will be elected by a
plurality of the votes cast and action on other matters submitted to the
stockholders will be approved if the votes cast in favor of the action exceed
the votes cast opposing the action. Shares for which the holder has elected to
abstain or to withhold the proxies' authority to vote (including broker
non-votes) on a matter will count toward a quorum but will have no effect on the
action taken with respect to such matter.
PRINCIPAL STOCKHOLDERS AND HOLDINGS OF MANAGEMENT
The table below presents certain information as to the only persons known
to the Company to be the beneficial owners of more than 5% of the Common Stock
of the Company as of February 12, 2003. Except as otherwise noted, each of the
beneficial owners listed below has sole voting and investment power with respect
to the shares listed.
1
AMOUNT AND
NAME AND ADDRESS OF NATURE OF PERCENT OF COMMON
BENEFICIAL OWNER BENEFICIAL OWNERSHIP STOCK OUTSTANDING
------------------- -------------------- -----------------
Dimensional Fund Advisors, Inc.
1299 Ocean Avenue 936,440(1) 8.06%
11th Floor
Santa Monica, CA 90401
Bassett Employee Savings/
Retirement Plan 673,594(2) 5.80%
Barry C. Safrit, Trustee
Bassett, VA 24055
Grace & White, Inc.
515 Madison Avenue 650,400(3) 5.60%
New York, NY 10022
-------------------
(1) Dimensional Fund Advisors, Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of these shares which are
held by certain investment companies, trusts and other investment vehicles
for which Dimensional serves as investment advisor or manager. Dimensional
has sole investment and voting power with respect to all of these shares.
Dimensional disclaims beneficial ownership of all such shares. The
information provided is based upon a Schedule 13-G dated December 31, 2002,
filed by Dimensional.
(2) In his capacity as Trustee, Barry C. Safrit, Vice President and Chief
Financial Officer of the Company, has sole voting and dispositive power
over these shares. Mr. Safrit disclaims beneficial ownership of these
shares.
(3) Grace & White, Inc. ("Grace"), a registered investment advisor, has sole
voting and investment power with respect to all of these shares, which it
holds on behalf of its clients. The information provided is based upon a
Schedule 13-G dated January 27, 2003, filed by Grace.
The following table sets forth, as of February 12, 2003, information as to
the beneficial ownership of the Common Stock by all Directors and executive
officers of the Company as a group and by the named Executive Officers who are
not also nominees for Directors. Information with respect to the beneficial
ownership of the Common Stock by the nominees for Directors is contained in the
table under "Election of Directors."
2
NAME AND ADDRESS OF NATURE OF PERCENT OF COMMON
BENEFICIAL OWNER BENEFICIAL OWNERSHIP STOCK OUTSTANDING
------------------- -------------------- -----------------
Directors and executive
officers as a group 1,646,424(2,3) 13.28%
(17 persons)
Barry C. Safrit, individually and as 706,128(3,4) 6.06%
Trustee of the Bassett Employee
Savings/Retirement Plan
Keith R. Sanders 64,000(4) 1
Thomas Swanston 15,000(4) 1
-------------------
(1) Less than 1% of the outstanding Common Stock.
(2) Includes 781,819 shares subject to options held by Directors and executive
officers that are currently exercisable or that are exercisable within 60
days.
(3) Includes 673,594 shares held by the Company's Employee Savings/Retirement
Plan, for which Barry C. Safrit, Vice President of the Company, has sole
voting and dispositive power in his capacity as Trustee. Mr. Safrit
disclaims beneficial ownership of these shares.
(4) Includes shares subject to options that are currently exercisable or that
are exercisable within 60 days as follows: Mr. Safrit 30,000, Mr. Sanders
60,000, and Mr. Swanston 15,000.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Bylaws of the Company provide for nine Directors. At the meeting, nine
Directors will be elected to serve, subject to the provisions of the Bylaws,
until the 2004 Annual Meeting of Stockholders and until their successors are
duly elected and qualified. It is the intention of the persons named in the
accompanying proxy to vote all proxies solicited by the Board of Directors FOR
the nine nominees listed below unless authority to vote for the nominees or any
individual nominee is withheld by a stockholder in such stockholder's proxy. If
for any reason any nominee shall not become a candidate for election as a
Director at the meeting, an event not now anticipated, the proxies will be voted
for the nine nominees including such substitutes as shall be designated by the
Board of Directors.
The nine nominees for election as Directors are listed below. All of the
nominees are currently members of the Board of Directors. All were elected to
their current terms, which expire in 2003, at the Annual Meeting of Stockholders
held on March 26, 2002.
3
AMOUNT AND PERCENT OF
NATURE OF COMMON
NAME AND OFFICES WITH THE COMPANY OR OTHER OCCUPATION COMMON STOCK STOCK
DIRECTOR SINCE AGE DURING PAST FIVE YEARS AND DIRECTORSHIP OWNERSHIP OUTSTANDING
-------------- --- -------------------------------------------- ------------ -----------
Peter W. Brown, M.D.
1993 60 Partner, Virginia Surgical Associates of 14,273(2) 1
Richmond (general surgery). Director,
Dominion Resources.
Willie D. Davis
1997 68 President of All Pro Broadcasting, Inc. 11,870(2) 1
(radio broadcasting) since 1976.
Director of Sara Lee Corporation, K-Mart
Corporation, Dow Chemical Company, MGM
Grand, Inc., Alliance Bank, Wisconsin
Energy, Johnson Controls, Inc.,
Checkers, Inc., MGM, Inc. and Manpower,
Inc.
Alan T. Dickson
1989 71 Chairman of the Board since 1994 and 14,861(2) 1
President from 1968 to 1994 of Ruddick
Corporation (diversified holding
company). Director of Sonoco Products
and Lance, Inc.
Paul Fulton
1993 68 Chairman of the Board of the Company 279,724(2) 2.35%
since 1997; Chief Executive Officer of
the Company from 1997 to 2000; Dean of
the Kenan-Flagler Business School of the
University of North Carolina at Chapel
Hill from 1994 to 1997. Director of Bank
of America Corporation, Lowe's
Companies, Inc., Sonoco Products, and
William Carter Company.
Howard H. Haworth
1997 68 President, The Haworth Group (personal 12,961(2) 1
and family investment group); Chief
Executive Officer from 1973 to 1982 and
Chairman and Chief Executive Officer from
1982 to 1985 of Drexel Heritage Home
Furnishings; Chairman Emeritus, North
Carolina State Board of Education since
1995; Secretary of Commerce of the State of
North Carolina from 1985 to 1987; Emeritus
Member, Board of Directors, Wachovia
Corporation.
Michael E. Murphy
1997 66 Private investor. Vice Chairman and 12,967(2) 1
Chief Administrative Officer of Sara Lee
Corporation from 1994 to 1997. Director
of GATX Corporation, Payless ShoeSource,
Inc., CNH Global, NV, and Coach, Inc.
Robert H. Spilman, Jr.
1997 46 President and Chief Executive Officer of 309,886(2,3) 2.62%
the Company since 2000; President and
Chief Operating Officer of the Company
since 1997. Director, Ruddick
Corporation.
Dale C. Pond
2002 57 Executive Vice President, Merchandising/ 4,702(2) 1
Marketing, Lowe's Companies, Inc. since
1998; Senior Vice President, Marketing &
Advertising from 1993 to 1997.
David A. Stonecipher
2001 61 Chairman of the Board since 1998 and 12,247(2) 1
Chief Executive Officer since 1993 and
President from 1993 to 2001 of
Jefferson-Pilot Corporation.
-------------------
(1) Less than 1% of the outstanding Common Stock.
(2) Includes shares subject to options that are currently exercisable or
exercisable within 60 days as follows: Peter W. Brown 9,500; Willie D.
Davis 7,500; Alan T. Dickson 9,500; Paul Fulton 265,000; Howard H. Haworth
7,500; Michael E. Murphy 7,500; Dale C. Pond 3,500; Robert H. Spilman, Jr.
208,668; and David A. Stonecipher 4,500.
(3) Includes 17,217 shares held by Mr. Spilman's wife, 35,140 shares held by
his children and 6,515 shares held in trusts of which Mr. Spilman is the
beneficiary.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met five times during the 2002 fiscal year. Each
Director attended at least 75% of the meetings of the Board of Directors and
Committees on which such Director served. The Board of Directors' committees
include an Audit Committee and an Organization, Compensation and Nominating
Committee.
The Audit Committee is composed of Messrs. Murphy, Dickson and
Stonecipher. Among other things, the Audit Committee monitors the performance of
the independent auditors for the Company; recommends their engagement or
dismissal to the Board of Directors; approves all audit and related fees; and
reviews and evaluates audit activities. The Audit Committee met five times
during the fiscal year.
The Organization, Compensation and Nominating Committee is composed of
Dr. Brown and Messrs. Davis, Haworth and Pond. The Organization, Compensation
and Nominating Committee reviews and makes recommendations to the Board of
Directors with respect to executive compensation; establishes, reviews and
recommends changes to the organizational structure of the Company so as to
utilize the management resources to best respond to the changing demands of the
marketplace; reviews the individual performance of each Director in terms of
overall contribution to the betterment of the Company, including meeting
attendance and participation; reviews the composition of the Board; and
recommends a slate of Directors for nomination to the Board. The Organization,
Compensation and Nominating Committee met four times during the fiscal year.
The Organization, Compensation and Nominating Committee will consider
recommendations by stockholders as to nominees for Directors. Such
recommendations should be submitted in writing addressed to Jay R. Hervey,
Secretary, Bassett Furniture Industries, Incorporated, Post Office Box 626,
Bassett, Virginia 24055.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors (the "Audit Committee")
is composed of three directors and operates under a written charter adopted by
the Board of Directors on June 25, 2002, attached as Exhibit A, and annually
reassessed and updated, as needed, in accordance with applicable rules of the
Securities and Exchange Commission and Nasdaq. Each of the members of the Audit
Committee is independent, as defined by Nasdaq.
Management is responsible for the Company's internal controls and the
financial reporting process. The independent auditors are responsible for
performing an independent audit of the Company's financial statements in
accordance with auditing standards generally accepted in the United States and
issuing a report thereon. The Audit Committee's primary responsibility is to
monitor and oversee these processes. The Audit Committee also recommends to the
Board of Directors the selection of the Company's independent auditors.
In this context, the Audit Committee has reviewed and discussed the
Company's financial statements with both management and the independent
auditors. The Audit Committee also discussed with the independent auditors
matters required of auditors to be discussed by auditing standards generally
accepted in the United States. The Company's independent auditors also provided
to the Audit Committee the written disclosures required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit Committees),
and the Audit Committee discussed with the independent auditors their
independence.
Based on the foregoing, the Audit Committee recommends to the Board of
Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-K for the fiscal year ended November 30, 2002 for
filing with the Securities and Exchange Commission. The Audit Committee also
recommends that Ernst & Young, LLP be retained as the Company's independent
auditors for the fiscal year ending November 29, 2003.
5
Audit Committee:
Michael E. Murphy, Chairman
Alan T. Dickson
David A. Stonecipher
ORGANIZATION, COMPENSATION AND NOMINATING COMMITTEE REPORT
The Organization, Compensation and Nominating Committee of the Board of
Directors (the "Committee") has assisted the Company in developing and
implementing compensation policies and programs which seek to improve the
profitability of the Company and to maximize stockholder value over time. To
accomplish this, the directors who comprise the Committee have developed
executive compensation policies that are consistent with, and directly linked
to, the Company's business objectives. These business objectives represent a
composite of factors that are considered important for the future success of the
Company. These factors attempt to balance long and short-term performance,
including the continued maintenance of a strong balance sheet, growth of pre-tax
profitability and earnings per share, control of costs, market growth and
diversification and other criteria which may be introduced over time as a result
of changes in the household furniture environment. The members of the Committee
deliberate on matters affecting executive compensation. The decisions are
reviewed by the full Board, with the exception of decisions on stock or option
awards which are made by the Committee to satisfy tax law requirements.
The key principles which the Committee emphasizes in developing
compensation programs affecting senior executives are:
o Paying for performance that emphasizes corporate, business unit and
individual achievement.
o Motivating senior executives to the achievement of strategic and
tactical business goals and objectives and rewarding outstanding
achievement.
o Linking the interests of senior executives with the long-term
interests of the stockholders through ownership of the Common
Stock.
As the level of responsibility increases, an executive's compensation
will be proportionately at greater risk, reflecting the rewards earned as a
result of goal attainment. As responsibility increases, the compensation mix
will rely increasingly on the value of stock awards.
Section 162(m) of the Internal Revenue Code (the "Code") imposes a $1
million limit on the amount of annual compensation that can be deducted by the
Company with respect to each of the Chief Executive Officer and the four other
most highly compensated executive officers. Performance-based compensation that
meets certain requirements will not be subject to this deductibility limit. It
is generally the Company's policy to seek to qualify the performance-based
components of its compensation program for this exclusion from the Section
162(m) limitation as necessary to maximize the deductibility of executive
compensation so long as doing so is consistent with the Committee's objectives
for executive compensation.
The four components of executive compensation are:
Base Salary. When the Committee last reviewed the base salaries of the
named executive officers at similar-sized companies and at the companies
included in the performance peer group shown on page 8, the base salaries of the
Company's executive officers were generally in the low- to mid-range compared
with the base salaries at those other companies. In recent years the base
salaries have been kept at relatively fixed levels to reflect the general
economic conditions of the industry and to keep fixed costs under control. The
Committee and the Company emphasize rewards in the total compensation context
(i.e., with greater emphasis on at-risk compensation), rather than appreciably
increasing base salary.
Annual Incentive Bonuses. Annual incentives are established for each
executive in the form of a percentage of base salary. Bonus targets are based on
performance criteria related to achievement of the Company's annual plans,
6
such as profitability, earnings per share, market growth and returns on invested
capital and equity, and bonus targets include, to a certain extent,
individualized goals based on areas of responsibility. In the last two years,
and for the current fiscal year, more emphasis (and reward) has been placed on
improving cash flow and managing the balance sheet to reflect the Company's
response to market conditions and efforts to position the Company for earnings
growth as the overall market improves. The bonuses paid to the Company's
executive officers for the 2002 fiscal year generally ranged from 15% to 30% of
the executives' maximum potential bonus amounts for the year. The determination
of the amount of any bonus to be paid is made after the end of the year based on
the degree to which the performance criteria have been met. At risk,
performance-based bonus compensation averaged approximately 13% of total annual
cash compensation for the executive officers named in the Summary Compensation
Table during the fiscal year ended November 30, 2002.
Stock Option Grants. Grants of stock options to the Company's
executives under the Company's stock option plans provide incentives to achieve
the Company's long-term performance objectives. Whether a grant will be made to
an executive officer, and if so in what amount, is determined by the Committee
based on the Committee's subjective evaluation of the executive officer's
potential contribution to the Company's future success, the level of incentive
already provided by the number and terms of the executive officer's existing
stock option holdings and the market price of the Company's Common Stock.
Consistent with the Committee's compensation philosophy, all stock options
awarded to executive officers and other key managers in fiscal year 2002 were
granted with a three-year vesting requirement.
Benefits. These programs are designed to provide protection against
financial catastrophe that can result from illness, disability or death.
Benefits offered to executive officers are similar to those offered to all
employees, with certain variations to promote tax efficiency and the replacement
of benefits lost due to regulatory limitations.
Chief Executive Officer's 2002 Compensation. The base salary component
of Mr. Spilman's compensation for fiscal 2002 was $300,000. Mr. Spilman's bonus,
based on quantifiable, objective performance measures set at the beginning of
the year (which related to earnings per share, operating income and cash flow),
was 15% of the maximum potential bonus amount for the year. Mr. Spilman was
granted 30,000 options with three year vesting requirements as part of and
consistent with the long term incentive program described above.
For fiscal year 2003, the Organization, Compensation and Nominating
Committee has again established performance criteria designed to enhance
stockholder value. These criteria are heavily weighted toward improved operating
earnings and operating cash flows, and maintaining reduced fixed costs
consistent with the financial objectives of the Company and representative of
the success needed to ensure growth and profitability.
Howard H. Haworth, Chairman
Peter W. Brown
Willie D. Davis
Dale C. Pond
7
STOCKHOLDER RETURN PERFORMANCE GRAPH
Presented below is a line graph comparing the yearly percentage change
in the cumulative total stockholder return on the Company's Common Stock against
the cumulative total return of the Standard & Poor's 500 Index and the Company's
peer group for the period commencing November 28, 1997 and ending November 30,
2002, covering the Company's five fiscal years ended November 30, 2002. The
Company's peer group consists of eight publicly traded companies: the Company,
Bush Industries, Inc. Class A Common Stock, Chromcraft Revington Inc., Ethan
Allen Interiors, Inc., Furniture Brands International, Inc., La-Z-Boy
Incorporated, the Rowe Companies and Stanley Furniture Company, Inc., each of
which is in the household furniture industry. This graph assumes that $100 was
invested on November 28, 1997 in the Company's Common Stock, the S&P 500 Index
and the peer group and that dividends were reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG THE COMPANY,
S&P 500 INDEX AND PEER GROUP
[PERFORMANCE GRAPH]
11/28/97 11/27/98 11/26/99 11/24/00 11/23/01 11/30/02
Basset 100.00 87.52 58.21 45.43 60.18 57.35
S&P 500 100.00 123.66 149.50 143.19 125.69 104.94
Peer Group 100.00 111.32 112.95 88.75 127.88 134.26
Media General Financial Services supplied the data for the Company, the
S&P 500 Index and the Company's peer group.
8
EXECUTIVE COMPENSATION
The table below shows the compensation paid or accrued by the Company
for the three fiscal years ended November 30, 2002, to or for the account of the
Chief Executive Officer and the Company's four other most highly compensated
officers who were serving at the end of the fiscal year (collectively, the
"named Executive Officers").
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------- ----------------------------------
RESTRICTED SECURITIES ALL OTHER
OTHER ANNUAL STOCK UNDERLYING COMPEN-
NAME AND FISCAL SALARY BONUS COMPENSATION AWARD(s) OPTIONS SATION
PRINCIPAL POSITION YEAR ($)(1) ($)(2) ($)(3) ($) (#SH) ($)(4)
------- ------- ------- ------------ ---------- ---------- ---------
Robert H. Spilman, Jr. 2002 300,000 44,930 -- 0 30,000 19,897
President and Chief 2001 275,000 82,500 -- 0 0 17,355
Executive Officer 2000 225,000 89,944 -- 0 76,668 16,778
------- ------- ------- ------------ ---------- ---------- ---------
Keith R. Sanders 2002 184,000 27,342 -- 0 15,000 4,757
Executive Vice President - 2001 178,000 35,600 -- 0 0 3,753
Operations 2000 178,000 0 -- 0 0 4,357
------- ------- ------- ------------ ---------- ---------- ---------
Thomas Swanston 2002 175,000 35,127 -- 0 0 3,019
Executive Vice President- 2001 61,542 0 -- 0 30,000 0
Sales and Marketing 2000 0 0 -- 0 0 0
------- ------- ------- ------------ ---------- ---------- ---------
Barry C. Safrit 2002 155,000 18,209 -- 0 15,000 4,065
Vice President and 2001 143,333 21,750 -- 0 0 3,545
Chief Financial Officer 2000 125,000 10,781 -- 0 0 3,613
------- ------- ------- ------------ ---------- ---------- ---------
Thomas E. Prato 2002 128,000 22,630 -- 0 8,000 6,167
Vice President - Sales 2001 125,000 18,750 -- 0 0 4,405
2000 125,000 5,022 -- 0 23,334 5,601
------- ------- ------- ------------ ---------- ---------- ---------
----------------
(1) The salaries shown above include deferred compensation for each named
Executive Officer under the Section 401(k) qualified, defined
contribution Employee Savings/Retirement Plan.
(2) Under the Company's incentive bonus program, executives are paid cash
awards, which are directly related to predetermined performance goals and
attainment of Company objectives, including, in fiscal year 2002, goals
for operating cash flow and operating income, which were partially
achieved and not achieved, respectively. Awards are made annually
following the completion of the fiscal year.
(3) No named Executive Officer has received personal benefits during the
listed years in excess of the lesser of $50,000 or 10% of annual salary
and bonus.
(4) Includes amounts accrued under a deferred compensation agreement with one
of the named Executive Officers and Company matching contributions under
the Company's Employee Savings/Retirement Plan. During the 2002 fiscal
year, the amount accrued under the deferred compensation agreement with
Mr. Spilman was $10,697.
9
The table below shows the individual grants to the named Executive Officers of
stock options during the fiscal year ended November 30, 2002.
OPTION/SAR GRANTS IN THE 2002 FISCAL YEAR
-------------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO GRANT DATE
OPTIONS/SARS EMPLOYEES EXERCISE OR BASE EXPIRATION PRESENT
NAME GRANTED (#SH) IN FISCAL YEAR PRICE ($/SH) DATE VALUE ($)(1)
------------------------- -------------- --------------- ----------------- ------------ -------------
Robert H. Spilman, Jr. 30,000(2) 8.6% 14.70 1/14/2012 110,000
Keith Sanders 15,000(2) 4.3% 14.70 1/14/2012 55,000
Barry C. Safrit 15,000(2) 4.3% 14.70 1/14/2012 55,000
Thomas Prato 8,000(2) 2.3% 14.70 1/14/2012 29,000
Thomas Swanston 0 -- -- --
-------------------
(1) Based on the Black-Scholes option pricing model adapted for use in
valuing executive stock options. The estimated values under the model are
based on arbitrary assumptions as follows: options to be exercised in
five years, stock price volatility at 0.40, annual dividend yield of 5.4%
and a risk-free interest rate of 4.5%. No downward adjustments are made
to the resulting grant-date option values to account for potential
forfeitures or non-transferability of the options. The actual value of
the options depends upon the actual performance of the Company's Common
Stock during the applicable period.
(2) These options were granted pursuant to the Company's 1997 Employee Stock
Plan, and have a three year vesting requirement and have an exercise
price equal to the market price of the Company's Common Stock on the date
of grant. The exercisability of the options is subject to acceleration in
the discretion of the Organization, Compensation and Nominating Committee
and upon the occurrence of a change in control.
The table below shows, on an aggregated basis, the exercise of stock
options during the fiscal year ended November 30, 2002 by each named Executive
Officer and the 2002 fiscal year-end value of unexercised in-the-money stock
options.
AGGREGATED OPTION/SAR EXERCISES IN THE 2002 FISCAL YEAR
AND FY-END OPTION/SAR VALUES
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS
ON VALUE OPTIONS/SARS AT FY-END AT FY-END
EXERCISE REALIZED (#SH)(1) ($)(1)(2)
NAME (#SH) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
----------------------- ----------- --------- -------------------------- ---------------------------
Robert H. Spilman, Jr. 0 0 179,362/55,556 0/0
Barry C. Safrit 0 0 25,000/15,000 0/0
Keith R. Sanders 0 0 55,000/15,000 0/0
Thomas Swanston 0 0 15,000/15,000 0/0
Thomas E. Prato 0 0 37,681/15,778 0/0
-------------------
(1) No SARs were exercised in 2002 and there were no SARs outstanding at the
2002 fiscal year-end.
(2) Represents the difference between the fair market value of the Company's
Common Stock and the exercise price at the 2002 fiscal year-end.
10
SUPPLEMENTAL RETIREMENT INCOME PLAN
The Company has a Supplemental Retirement Income Plan (the "Supplemental
Plan") that covers one current and certain former senior executives to promote
their long service and dedication and to provide an additional retirement
benefit. Upon retirement, the Supplemental Plan provides for lifetime monthly
payments in an amount equal to 65% of the participant's final average
compensation as defined in the Supplemental Plan, which amount is reduced by (i)
50% of old age social security benefits, (ii) the benefit that would be payable
on a life annuity basis from Company contributions to the Employee
Savings/Retirement Plan based on a formula using maximum employee contributions,
and (iii) the benefit that would be payable on a life annuity basis from funds
the Company contributed to a Defined Benefit Plan that was terminated in 1977.
There is no provision under the Supplemental Plan for a disability benefit if a
participant's employment is terminated prior to age 65 due to disability;
however, the participant, notwithstanding the termination of employment, will
continue to be covered by the Supplemental Plan. The death benefit is divided
into (a) prior to retirement death, which pays the beneficiary 50% of final
average compensation for a period of 120 months, and (b) post-retirement death,
which pays the beneficiary 200% of final average compensation in a single
payment. There are no benefits payable as a result of a termination of
employment for any reason other than death or retirement, other than a change of
control provision which provides for the immediate vesting and payment of the
retirement benefit under the Supplemental Plan in the event of an employment
termination resulting from a change of control. The executives covered under
this Supplemental Plan have waived participation in the Company's group life
insurance program.
Assuming no change in the rate of compensation for Robert H. Spilman, Jr.,
after November 30, 2002, it is projected that the benefit that would otherwise
have been payable on retirement at age 65 to Mr. Spilman will be fully offset by
the benefits calculated (using the aforementioned formula) to be payable from
Company contributions to the Employee Savings/Retirement Plan. Mr. Spilman is
the only named Executive Officer participating in the Supplemental Plan.
DEFERRED COMPENSATION AGREEMENT
Robert H. Spilman, Jr. has entered into a Deferred Compensation Agreement
with the Company pursuant to the Executive Deferred Compensation Plan. Under
that agreement, Mr. Spilman deferred a portion of his compensation over a
four-year period. Upon Mr. Spilman's retirement, death or disability, he would
be entitled to the following annual payments for a fifteen year period: upon his
retirement, $108,125.20; upon his death, $14,776.40; and upon his disability,
$8,200.00.
DIRECTOR COMPENSATION
Directors who are also employees of the Company receive no additional
compensation for serving as directors. Directors who are not employees of the
Company receive an annual retainer fee of $20,000 and, beginning after April 1,
2003, will receive a meeting attendance fee of $500 per committee or board
meeting. Chairpersons of the Board of Directors' standing committees receive an
additional fee of $1,000 per Board meeting, and the chairperson of the Audit
Committee will receive an additional annual retainer fee of $10,000 on April 1
of each year, beginning April 1, 2003.
Under the Company's 1993 Stock Plan for Non-Employee Directors (the
"Director Plan"), each Director who is not a regular employee of the Company
automatically receives an option to purchase 2,500 shares of Common Stock upon
his or her initial election to the Board of Directors and on each April 1
thereafter automatically receives an option to purchase 1,000 shares of Common
Stock. All such options have an exercise price equal to the market price of the
Common Stock on the date of grant and are subject to adjustment in the event of
stock dividends and splits, recapitalizations and similar transactions. An
option granted under the Director Plan is not exercisable unless the optionee
remains available to serve as a Director of the Company for six months after the
date of grant. An optionee's rights under all outstanding options will terminate
three years after his termination as a Director, unless the termination is
because of death or disability, in which case the options will be exercisable
for one year after such termination. Unless earlier terminated, all options
granted under the Director Plan expire ten years from the date of grant.
11
In addition, the Director Plan provides that each eligible Director will
receive one-half of his or her annual retainer fee in the form of a Common Stock
award on April 1 of each year and may elect to receive all or part of the
remaining portion of his or her annual retainer fee on October 1 in the form of
a Common Stock award; however, the April 1, 2003 grants of 1000 stock options
described above will leave an insufficient number of shares to fully cover the
first half of the Director's annual retainer fees. Prorated grants of stock
(supplemented with cash) will exhaust the shares available under the Director
Plan. The total number of shares of Common Stock to be issued pursuant to a
stock award is determined by dividing the amount of the Director's compensation
that is to be paid in Common Stock by the fair market value of a share of the
Common Stock on the date the award is made.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's Directors and executive officers and persons who own more
than 10% of the Company's Common Stock to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
the Common Stock and other equity securities. Executive officers, Directors and
greater than 10% stockholders are required to furnish the Company with copies of
all such reports they file. To the Company's knowledge, based solely on a review
of the copies of such reports furnished to the Company and written
representations that no other reports were required, during the fiscal year
ended November 30, 2002, all Section 16(a) filing requirements applicable to its
executive officers, Directors and greater than 10% beneficial stockholders were
complied with.
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
Upon the recommendation and approval of the Audit Committee, the Board of
Directors has approved the selection of Ernst & Young, LLP as independent public
accountants to audit the financial statements of the Company for the fiscal year
ending November 29, 2003. This selection is being presented to the stockholders
for their ratification at the Annual Meeting of Stockholders. The firm of Ernst
& Young, LLP is considered well qualified. Representatives of Ernst & Young, LLP
are expected to be present at the Annual Meeting of Stockholders with an
opportunity to make a statement if they desire to do so and are expected to be
available to respond to appropriate questions.
Change of Independent Public Accountants
On May 13, 2002, upon the recommendation and approval of the Audit
Committee, the Board of Directors dismissed Arthur Andersen, LLP as the
Company's independent public accountants and engaged Ernst & Young, LLP to serve
as the Company's independent public accountants for the Company's fiscal year
2002.
Arthur Andersen's reports on the Company's consolidated financial
statements for each of the fiscal years ended November 24, 2001 and November 25,
2000 did not contain an adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope or accounting principles.
During the fiscal years ended November 25, 2000, and November 24, 2001 and
the subsequent interim periods through May 13, 2002, there were no disagreements
with Arthur Andersen on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure which, if not
resolved to Arthur Andersen's satisfaction, would have caused it to make
reference to the subject matter of any such disagreement in connection with its
report on the Company's consolidated financial statements for such years; and
there were no reportable events as defined in Item 304(a)(1)(v) of Regulation
S-K.
The Company provided Arthur Andersen with a copy of the foregoing
disclosures, and a letter from Arthur Andersen confirming its agreement with
these disclosures was filed with the Securities and Exchange Commission on May
14, 2002.
12
Audit and Other Fees
Audit Fees. The Company incurred aggregate fees of $202,730 from Ernst &
Young for the 2002 annual audit and for review of the Company's financial
statements included in its Forms 10-Q for the 2002 fiscal year, and $15,000 from
Arthur Andersen for the review of the Company's financial statements included in
its Form 10-Q for the first quarter of the 2002 fiscal year.
Financial Information Systems Design and Implementation. The Company did
not incur any fees from Ernst & Young or Arthur Andersen for these types of
services for the 2002 fiscal year.
All Other Fees. During the 2002 fiscal year, the Company incurred aggregate
fees of $14,110 from Ernst & Young for all other services, including
audit-related fees of $11,160 and other fees of $2,950, and $67,582 from Arthur
Andersen for all other services, including audit related fees of $5,000 and
other fees of $62,582. Audit-related fees were for the audit of the Company's
employee benefit plan, accounting consultation and consents. Other fees were
primarily for tax compliance and tax consultation.
The Audit Committee considered whether, and determined that, the auditor's
provision of non-audit services was compatible with maintaining the auditor's
independence. The Company intends to continue using Ernst & Young, LLP solely
for audit and audit-related services, tax consultation and tax compliance
services, and, as needed, for due diligence in acquisitions.
Recommendation
The Board of Directors recommends a vote FOR the ratification of the
selection of Ernst & Young, LLP as independent public accountants to audit the
financial statements of the Company for the fiscal year ending November 29,
2003, and proxies solicited by the Board of Directors will be so voted unless
stockholders specify a different choice. If the stockholders do not ratify the
selection of Ernst & Young, LLP, the selection of independent public accountants
will be reconsidered by the Board of Directors.
STOCKHOLDER PROPOSALS FOR INCLUSION IN THE PROXY STATEMENT
Any proposal that a stockholder intends to present for action at the 2004
Annual Meeting of Stockholders must be received by the Company no later than
October 25, 2003, in order for the proposal to be included in the proxy
statement and form of proxy for the 2004 Annual Meeting of Stockholders. Any
such proposal must meet the applicable requirements of the Securities Exchange
Act of 1934 and the rules and regulations thereunder. Such proposals should be
sent to Jay R. Hervey, Secretary, Bassett Furniture Industries, Incorporated,
Post Office Box 626, Bassett, Virginia 24055.
OTHER STOCKHOLDER PROPOSALS AND NOMINATIONS
The Company's Bylaws prescribe the procedures that a stockholder must
follow to nominate directors for election at an annual meeting or to bring other
business before an annual meeting (other than matters that have been included in
the Company's proxy statement for such meeting). The Chairman of the meeting may
refuse to acknowledge the nomination of any person as a director or any other
proposal by a stockholder not made in compliance with these procedures. The
following summary of these procedures is qualified by reference to the Company's
Bylaws, a copy of which may be obtained, without charge, upon written request to
Jay R. Hervey, Secretary, Bassett Furniture Industries, Incorporated, Post
Office Box 626, Bassett, Virginia 24055.
13
A stockholder who desires to nominate a director for election at an annual
meeting must give timely written notice thereof to the Secretary of the Company
by personal delivery or by registered or certified mail, postage prepaid, at the
address shown above. To be timely, a stockholder's notice must be received not
later than December 26, 2003 for nominations to be made at the 2004 Annual
Meeting. The notice must contain the information specified in the Bylaws
regarding the stockholder giving the notice and each person whom the stockholder
wishes to nominate for election as a director. The notice must be accompanied by
the written consent of each proposed nominee to serve as a director of the
Company, if elected.
A stockholder who desires to bring any other business before an annual
meeting (other than matters that have been included in the Company's proxy
statement for such meeting) must give timely written notice thereof to the
Secretary of the Company by personal delivery or by registered or certified
mail, postage prepaid, at the address shown above. To be timely, a stockholder's
notice must be received not later than October 17, 2003 for business to be acted
upon at the 2004 Annual Meeting. The notice must contain the information
specified in the Bylaws regarding the stockholder giving the notice and the
business proposed to be brought before the meeting.
With respect to stockholder proposals not included in the Company's proxy
statement for the 2004 Annual Meeting, the persons named in the Board of
Directors' proxy for such meeting will be entitled to exercise the discretionary
voting power conferred by such proxy under the circumstances specified in Rule
14a-4(c) under the Exchange Act, including with respect to proposals received by
the Company after October 17, 2003.
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED NOVEMBER 30, 2002, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
CAN BE OBTAINED WITHOUT CHARGE UPON WRITTEN REQUEST TO JAY R. HERVEY, SECRETARY,
BASSETT FURNITURE INDUSTRIES, INCORPORATED, POST OFFICE BOX 626, BASSETT,
VIRGINIA 24055.
14
EXHIBIT A
BASSETT FURNITURE INDUSTRIES, INC.
AUDIT COMMITTEE CHARTER
JUNE 25, 2002
The Audit Committee's primary functions are to monitor and to review on
behalf of the Board of Directors the Corporation's financial reports and
financial reporting structure; internal control structure regarding finance,
accounting and financial reporting; external audit and scope of other work by
the Corporation's independent auditors; and compliance with law. The Audit
Committee (the "Committee") reports to the full Board of Directors on all
matters within the Committee's responsibilities. The Committee will not infringe
on and does not undertake to supervise or control activities and functions
properly belonging to the senior management of the Corporation in the normal
operations of the Corporation.
The Committee shall be composed of no fewer than three directors, each of
whom shall be financially literate, and at least one of whom shall have
accounting or related financial management expertise, in each case as required
from time to time by the audit committee standards of NASDAQ. The Board of
Directors shall interpret these requirements and determine such qualifications
of Committee members in its business judgment. Furthermore, the Committee shall
be composed entirely of directors who are independent within the meaning of the
audit committee independence standards of NASDAQ, as determined by the Board of
Directors. The Committee shall review and reassess the adequacy of its charter
annually. The Committee shall cause to be provided to NASDAQ such appropriate
written confirmation concerning these matters as NASDAQ may from time to time
require.
The independent auditors shall be ultimately accountable to the Committee
and the Board of Directors on all matters pertaining to their engagement, and
the independent auditors shall report to the Committee as the Board of
Directors' representative. The Committee shall encourage open communication
among the Committee, independent auditors, internal audit and the Corporation's
management regarding matters within the Committee's responsibilities. The
Committee shall establish a calendar incorporating regular reporting items it
requires from independent auditors and the senior management during the fiscal
year.
To carry out the Committee's responsibilities:
1. The Committee, as the Board of Directors' representative, has the
authority and responsibility to evaluate and recommend to the Board of
Directors the appointment of (and, where appropriate, the replacement
of) the independent auditors. The Committee shall require the
independent auditors to submit periodically a formal written statement
delineating all relationships between the independent auditors and the
Corporation, including audit and non-audit assignments and the fees
and any other compensation paid to the independent auditors therefor.
The Committee is responsible for actively engaging in a dialogue with
the independent auditors with respect to any disclosed relationships
or services that may impact the objectivity or independence of the
independent auditors, and for recommending that the Board of Directors
take appropriate action in response to the independent auditors'
report to satisfy itself of their independence.
2. The Committee will meet with the independent auditors and the
Corporation's senior management to review the scope and methodology of
the proposed audits for each fiscal year. The independent auditors
shall provide regular reports to the Committee during the fiscal year
on the underlying process and status of their audits and any findings
or preliminary conclusions that have been reached. At least annually,
the independent auditors and senior management will review with the
Committee any audits of and recommendations relating to employee
benefit plans.
3. The Committee shall discuss and review with senior management and
approve annually the internal audit plan; including the basis for
audit risk assessment, the schedule for receipt and review of internal
audit reports, and evaluation of internal audit findings and
recommendations to senior management. Throughout the fiscal year,
internal audit shall report to senior management. Internal audit or
senior management will convey internal audit reports to the Committee.
1
4. Senior management and the independent auditors shall review with the
Committee the Corporation's annual financial statements, and, prior to
filing with the Securities and Exchange Commission, drafts of the
Corporations Quarterly Reports on Form 10-Q. Quarterly, the
independent auditors shall provide to the Committee a review letter as
contemplated by Statement on Auditing Standards No. 71. During each
fiscal year, the independent auditors shall review with the Committee
their assessment as to the adequacy of the Corporation's structure of
internal controls over financial accounting and reporting, and their
qualitative judgments as to accounting principles employed and related
disclosures by the Corporation and the conclusions expressed in the
Corporation's financial reports. The independent auditors shall review
with the Committee significant judgments made by senior management in
the preparation of the financial statements. The Committee will review
in detail reports of examination issued by federal and state
regulatory agencies as well as the Corporations' responses thereto.
5. The independent auditors shall promptly identify to the Committee any
areas of disagreement with senior management in the preparation of
financial statements.
6. The independent auditors and senior management, including general
counsel, shall identify to the Committee significant business,
financial or legal issues that may significantly impact the
Corporation's financial statements and internal control systems.
During each fiscal year, senior management, including general counsel,
shall report to the Committee as to all significant litigation,
threatened litigation or potential litigation in which the Corporation
and its subsidiaries are or may be engaged, as well as the anticipated
or potential impact of such litigation, threatened litigation or
potential litigation on the Corporation.
7. During each fiscal year, senior management shall review with the
Committee the Corporation's monitoring efforts and procedures to
ensure compliance with laws and governmental regulations. Senior
management shall provide such information to the Committee as is
reasonably required to keep the Committee current on changes in
accounting standards and securities regulations affecting the
Corporation, as well as material developments in the home furnishings
industry generally and the promulgation of regulations materially
affecting the home furnishings industry.
8. If the occasion arises, senior management will report as soon as
possible to the Committee any material violation of laws or
governmental regulations. The Committee has the authority to
investigate any matter brought to its attention within the scope of
its duties and to retain independent legal counsel, at its discretion
and without permission from the Board of Directors or management.
9. The Committee shall hold at least four meetings each fiscal year. The
Chairperson of the Committee has authority to call Committee meetings,
to preside at such meetings and to make assignments to Committee
members. The Committee will evaluate findings and recommendations of
the independent auditors and internal audit, and make recommendations
as warranted to the Board of Directors.
10. At every meeting of the Committee where the independent auditors are
present, the independent auditors shall for at least a portion of such
meeting meet with the Committee without members of management or
internal audit present.
11. Senior management shall report all related party transactions to the
Committee, and the Committee shall be responsible for the review and
oversight contemplated by NASDAQ with respect to any such reported
transactions.
12. The Corporation shall provide the Committee such support, including
access to and use of the Corporation's records, physical properties,
management, staff, independent auditors, attorneys and consultants, as
the Committee deems necessary to discharge its responsibilities.
2