Bassett Furniture To Restate 1Q; SEC Review Nearly Complete

Bassett Furniture Industries Inc. (BSET) said an accounting review by the Securities and Exchange Commission was close to being completed, as the company expects to report a wider restated loss for its fiscal first quarter.

The Furniture manufacturer said the restatement will increase its loss for the quarter ended Feb. 28 by $3.3 million, to $12 million. The increase was primarily due to increased reserves and valuation adjustments related to long-term notes receivable as a result of the company's re-evaluation of its accounting policies.

Bassett Furniture said it has worked closed with external auditors and the SEC to address accounting questions raised by the commission in its comment letters.

As a result of the restatement, the company violated the net worth covenant under its revolving credit facility. As such, it has reclassified the debt under the revolving facility from long-term to current. It expects to file an amended 10-Q for the quarter within the next week.

The company is also seeking a waiver of the debt covenant violation and/or an amendment to the net worth covenant and expects those negotiations to be complete by the end of the month.

"We believe we have resolved the main accounting and reporting issues, and we expect to have a final resolution next month after we file our official response to the last comment letter from the SEC," said interim Chief Financial Officer J. Michael Daniel.

Last month, the company delayed its fiscal second-quarter results, saying it received comment letters from the SEC during the second and third quarters of fiscal 2009. At the time, Bassett Furniture said it would report the results for the quarter ended May 30 by the end of the month - but those results still haven't been filed. On Thursday, the company said it expects the 10-Q filing for that quarter to be complete by the end of the month.

Home Furniture retailers have been pummeled by a decline in the housing market and credit. Demand hasn't improved even though Furniture makers felt the downturn early. A handful of retailers in the segment have filed for bankruptcy protection during the downturn.

Shares were up 4.9% to $3.50 in recent trading amid a broader market rally. The stock has improved recently, but is still down by over two-thirds from the 52-week high last August.