bset20160629_8k.htm

 



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 


 

FORM 8-K

 


 

CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported) June 30, 2016

 


 

BASSETT FURNITURE INDUSTRIES, INCORPORATED

(Exact name of registrant as specified in its charter)

 


 

         

VIRGINIA

 

0-209

 

54-0135270

(State or other jurisdiction of

incorporation or organization)

 

(Commission File No.)

 

(I.R.S. Employer

Identification No.)

 

     

3525 FAIRYSTONE PARK HIGHWAY

BASSETT, VIRGINIA

 

24055

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code 276/629-6000

  

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

 

☐

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 



 

 
 

 

 

Item 2.02.

Results of Operations and Financial Condition.

 

On June 30, 2016 Bassett Furniture Industries issued a news release relating to, among other things, the second quarter financial results for the fiscal year ending November 26, 2016. A copy of the news release announcing this information is attached to this report as Exhibit 99.

  

Item 9.01.

Financial Statements and Exhibits.

  

     

Exhibit 99

   

News release issued by Bassett Furniture Industries, Inc. on June 30, 2016.

 

 
 

 

  

Signatures

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

BASSETT FURNITURE INDUSTRIES, INCORPORATED

 

 

 

 

 

Date: June 30, 2016

By:

/s/ J. Michael Daniel

 

  J. Michael Daniel  
  Title: Senior Vice President – Chief Financial Officer  

 

 
 

 

 

EXHIBIT INDEX 

 

 

 

Description

 

 

Exhibit No. 99

News release issued by Bassett Furniture Industries on June 30, 2016.

 

ex99.htm

Exhibit 99

 

 

 

   

Bassett Furniture Industries, Inc.

J. Michael Daniel

P.O. Box 626

Senior Vice President and

Bassett, VA 24055 

Chief Financial Officer

 

(276) 629-6614 – Investors

 

 

 

Jay S. Moore

 

Director of Communications

For Immediate Release

(276) 629-6450 – Media

 

 

 

Bassett Furniture News Release

Bassett Announces Fiscal Second Quarter Results

(Bassett, Va.) – June 30, 2016 – Bassett Furniture Industries, Inc. (Nasdaq: BSET) announced today its results of operations for its fiscal quarter ended May 28, 2016.

 

Fiscal 2016 Second Quarter Highlights 

 

Consolidated sales were $106.7 million for the second quarter of 2016 compared to $111.6 million for the second quarter of 2015, a decrease of 4.4%.

 

Operating income for the quarter was $5.9 million or 5.5% of sales as compared to $6.7 million or 6.0% of sales for the prior year quarter.

 

Wholesale sales were $59.9 million for the second quarter of 2016 compared to $66.7 million for the second quarter of 2015, a decrease of 10%. Wholesale operating profit for the quarter was $4.3 million or 7.3% of sales as compared to $4.8 million or 7.2% of sales for the prior year quarter.

 

Company-owned store sales were $61.9 million for the second quarter of 2016 compared to $63.9 million for the second quarter of 2015, a decrease of 3.1%. This included a comparable store sales decrease of 3.6%, compared to the prior year quarter, with the twelve Texas stores accounting for over 70% of the decrease. Comparable store operating income was $1.2 million or 2.0% of sales for the current year quarter as compared to $2.3 million or 3.7% of sales for the prior year quarter. Total retail operating income was $0.4 million or 0.6% of sales for the quarter as compared to $2.0 million or 3.1% of sales for the prior year quarter. Comparable store written sales for the quarter decreased 3.9%. However, comparable store written sales for the 12-day Memorial Day promotional period increased 24% as compared to the 2015 promotional period.

 

Revenue for Zenith was $23.8 million for the second quarter of 2016 compared to $22.0 million for the second quarter of 2015, an 8.4% increase. Zenith’s operating profit for the quarter was $0.7 million or 2.8% of sales as compared to $1.0 million or 4.7% of sales for the prior year quarter.

 

Net income for the quarter was $3.4 million or $0.31 per diluted share as compared to $4.5 million or $0.42 per diluted share for the prior year quarter, which included income of $1.1 million related to the Continued Dumping & Subsidy Offset Act (“CDSOA”). Excluding the CDSOA income, net income for the second quarter of 2015 would have been $3.9 million, or $0.36 per diluted share.

  

 
 

 

“The year over year sales growth that we have generated in 15 of the past 16 quarters stalled for our quarter ended May 28, 2016,” commented Robert H. Spilman, Jr., Chairman and CEO. “Although we saw decreases in our consolidated, wholesale, and retail sales for the quarter, we remain optimistic about our prospects for the future as we continue to open new stores, remodel older ones, and close the remaining handful of underperformers. Against the backdrop of last year’s 31% sales increase, sales fell 4.4%. Operating income declined to $5.9 million compared to the $6.7 million that we produced last year. Much of our efforts in the first half of the year have been pointed toward the large product rollout that we executed in preparation for this year’s Memorial Day sales event and we were extremely pleased with the sales that our new products produced, as the net result for the 12-day promotional period produced comparable store written sales that were 24% higher compared to the 2015 promotional period. Amidst the choppy sales environment that has characterized the past few months in our sector, we are encouraged by the performance of our new assortment and will focus on additional enhancements as the remainder of 2016 unfolds.”

 

 

 

Wholesale Segment

 

Net sales for the wholesale segment were $59.9 million for the second quarter of 2016 as compared to $66.7 million for the second quarter of 2015, a decrease of $6.8 million or 10%. This decrease was driven by lower shipments to both the Bassett Home Furnishings store network and the open market (outside the Bassett Home Furnishings network). The decrease in sales to the Bassett Home Furnishings store network and the open market, was primarily due to general softness at retail. In addition, sales to the open market were impacted by lower sales of the HGTV Home Collection brand that was discontinued in late 2015. Gross margins for the wholesale segment increased to 33.8% for the second quarter of 2016 from 32.8% for the second quarter of 2015, driven largely by higher margins in the imported wood operation from favorable ocean freight and lower impact of discounting in 2016, as the Company was exiting the open market HGTV Home Collection brand in 2015. In addition, gross margins in the upholstery operation improved due to improved pricing strategies coupled with favorable raw material costs. Wholesale SG&A for the second quarter of 2016 was $15.9 million as compared to $17.1 million for the prior year period. SG&A as a percentage of sales increased to 26.5% as compared to 25.6% for the second quarter of 2015. This increase in SG&A as a percentage of sales was primarily driven by reduced leverage of fixed costs from lower sales levels partially offset by lower bad debt costs and incentive compensation expenses. Operating income was $4.3 million or 7.3% of sales as compared to $4.8 million or 7.2% of sales in the prior year.

 

“Both our wood and upholstery divisions suffered sales declines in the quarter,” continued Spilman. “Only our domestically produced Bench Made product range generated revenue growth. In reviewing the quarter’s results, it has been difficult to pinpoint specific macro factors that slowed our sales momentum. Closer to home, however, we can cite the closure of three Bassett stores, the discontinuation of our open market HGTV product line, temporary disruptions in our imported motion supply chain, and the comparatively weak performance of our stores in the energy-related economy of Texas, as the primary contributors to our down quarter. Despite this, we were able to hold our wholesale margins intact, albeit on less volume. Our Grand Prairie, Texas upholstery facility was modestly profitable in its first full quarter of operation, further showcasing the portability of our cellular manufacturing model. Once again, we are building on the success of our recent product launch with the upcoming additions of several new product collections that will hit our stores this fall.”

 

 
 

 

  

Retail Segment

 

Net sales for the 58 Company-owned Bassett Home Furnishings stores were $61.9 million for the second quarter of 2016 as compared to $63.9 million for the second quarter of 2015, a decrease of $2.0 million or 3.1%. The decrease was due to a $2.2 million or 3.6% decrease in comparable store sales.

 

While the Company does not recognize sales until goods are delivered to the consumer, management tracks written sales (the retail dollar value of sales orders taken, rather than delivered) as a key store performance indicator. Written sales for comparable stores decreased by 3.9% for the second quarter of 2016 as compared to the second quarter of 2015.

 

The consolidated retail operating profit for the second quarter of 2016 was $0.4 million as compared to $2.0 million for the second quarter of 2015, a decline of $1.6 million. The 56 comparable stores generated operating income of $1.2 million for the quarter, or 2.0% of sales, as compared to $2.3 million, or 3.7% of sales, for the prior year quarter. Gross margins for comparable stores were 49.4% for the second quarter of 2016 compared to 49.9% for the second quarter of 2015.  Lower gross margins were due primarily to increased discounting of clearance items in preparation for a significant product rollout for the Memorial Day holiday promotion. SG&A expenses for comparable stores decreased $0.3 million to $28.0 million or 47.4% of sales as compared to 46.2% of sales for the second quarter of 2015. This increase in SG&A as a percentage of sales was primarily driven by reduced leverage of fixed costs from lower sales levels.

 

“Comparable store delivered sales decreased by 3.6% compared to last year’s 17% increase resulting in a $1.6 million decline in retail operating profit,” said Spilman. “Over 70% of our comparable store decline was attributable to our twelve Texas stores where local economies have been impacted by volatility in oil prices. Our Houston market was particularly hard hit with a sales decline in excess of 20%. On the other hand, store sales have been strong since the end of the quarter. We are especially pleased with the strides we have made in staffing our stores and with our recruitment strategies in general. In keeping with our ongoing store portfolio improvement program, three underperforming stores with expiring leases were closed during the period, resulting in losses of $(0.4) million. We also incurred preopening expenses from our new Sterling, Virginia store that opened at the end of the quarter. Looking ahead, we are under construction with a new store in Hunt Valley, Maryland and have three more signed leases for units that are set to open at the end of fiscal 2016 or at the beginning of next year.”

  

 

 

About Bassett Furniture Industries, Inc.

Bassett Furniture Industries, Inc. (NASDAQ:BSET), is a leading manufacturer and marketer of high quality, mid-priced home furnishings. With 90 company- and licensee-owned stores at the time of this release, Bassett has leveraged its strong brand name in furniture into a network of corporate and licensed stores that focus on providing consumers with a friendly environment for buying furniture and accessories. The most significant growth opportunity for Bassett continues to be the Company’s dedicated retail store program. Bassett’s retail strategy includes affordable custom-built furniture that is ready for delivery in the home within 30 days. The stores also feature the latest on-trend furniture styles, free in-home design visits, and coordinated decorating accessories. Bassett also has a traditional wholesale business with more than 700 accounts on the open market, across the United States and internationally. For more information, visit the Company’s website at bassettfurniture.com. (BSET-E)

 

 
 

 

  

Certain of the statements in this release, particularly those preceded by, followed by or including the words “believes,” “expects,” “anticipates,” “intends,” “should,” “estimates,” or similar expressions, or those relating to or anticipating financial results for periods beyond the end of the second fiscal quarter of 2016, constitute “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended. For those statements, Bassett claims the protection of the safe harbor for forward looking statements contained in the Private Securities Litigation Reform Act of 1995. In many cases, Bassett cannot predict what factors would cause actual results to differ materially from those indicated in the forward looking statements. Expectations included in the forward-looking statements are based on preliminary information as well as certain assumptions which management believes to be reasonable at this time. The following important factors affect Bassett and could cause actual results to differ materially from those indicated in the forward looking statements: the effects of national and global economic or other conditions and future events on the retail demand for home furnishings and the ability of Bassett’s customers and consumers to obtain credit; and the economic, competitive, governmental and other factors identified in Bassett’s filings with the Securities and Exchange Commission. Any forward-looking statement that Bassett makes speaks only as of the date of such statement, and Bassett undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Comparisons of results for current and any prior periods are not intended to express any future trends or indication of future performance, unless expressed as such, and should only be viewed as historical data.

 

###

 

 
 

 

 

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income - unaudited

(In thousands, except for per share data)

 

 

   

Quarter Ended

   

Six Months Ended

 
   

May 28, 2016

   

May 30, 2015

   

May 28, 2016

   

May 30, 2015

 
   

Amount

   

Percent of

Net Sales

   

Amount

   

Percent of

Net Sales

   

Amount

   

Percent of

Net Sales

   

Amount

   

Percent of

Net Sales

 
                                                                 

Sales revenue:

                                                               

Furniture and accessories

  $ 92,990             $ 99,467             $ 185,392             $ 189,015          

Logistics

    13,677               12,086               28,148               15,345          

Total sales revenue

    106,667       100.0 %     111,553       100.0 %     213,540       100.0 %     204,360       100.0 %
                                                                 

Cost of furniture and accessories sold

    42,419       39.8 %     46,921       42.1 %     84,405       39.5 %     88,851       43.5 %
                                                                 

Selling, general and administrative expenses excluding

                                                               

new store pre-opening costs

    58,088       54.5 %     57,425       51.5 %     117,045       54.8 %     104,900       51.3 %

New store pre-opening costs

    307       0.3 %     44       0.0 %     446       0.2 %     44       0.0 %

Lease exit costs

    -       0.0 %     -       0.0 %     -       0.0 %     419       0.2 %

Asset impairment charges

    -       0.0 %     -       0.0 %     -       0.0 %     106       0.1 %

Management restructuring costs

    -       0.0 %     449       0.4 %     -       0.0 %     449       0.2 %

Income from operations

    5,853       5.5 %     6,714       6.0 %     11,644       5.5 %     9,591       4.7 %
                                                                 

Remeasurement gain on acquisition of affiliate

    -       0.0 %     -       0.0 %     -       0.0 %     7,212       3.5 %

Income from Continued Dumping & Subsidy Offset Act

    -       0.0 %     1,066       1.0 %     -       0.0 %     1,066       0.5 %

Other loss, net

    (600 )     -0.6 %     (597 )     -0.5 %     (1,257 )     -0.6 %     (1,220 )     -0.6 %

Income before income taxes

    5,253       4.9 %     7,183       6.4 %     10,387       4.9 %     16,649       8.1 %
                                                                 

Income tax provision

    1,868       1.8 %     2,654       2.4 %     3,768       1.8 %     6,164       3.0 %

Net income

  $ 3,385       3.2 %   $ 4,529       4.1 %   $ 6,619       3.1 %   $ 10,485       5.1 %
                                                                 

Basic earnings per share

  $ 0.31             $ 0.42             $ 0.61             $ 0.99          
                                                                 

Diluted earnings per share

  $ 0.31             $ 0.42             $ 0.61             $ 0.98          

 

 
 

 

 

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands)

 

   

(Unaudited)

         

 

 

May 28, 2016

   

November 28, 2015

 
Assets                

Current assets

               

Cash and cash equivalents

  $ 29,726     $ 36,268  

Short-term investments

    23,125       23,125  

Accounts receivable, net

    18,987       21,197  

Inventories, net

    54,834       59,896  

Other current assets

    8,249       6,798  

Total current assets

    134,921       147,284  
                 

Property and equipment, net

    104,075       96,104  
                 

Other long-term assets

               

Deferred income taxes, net

    12,205       13,471  

Goodwill and other intangible assets

    17,521       17,682  

Other

    7,525       8,002  

Total long-term assets

    37,251       39,155  

Total assets

  $ 276,247     $ 282,543  
                 

Liabilities and Stockholders’ Equity

               

Current liabilities

               

Accounts payable

  $ 20,198     $ 20,916  

Accrued compensation and benefits

    11,614       14,345  

Customer deposits

    20,132       23,999  

Dividends payable

    -       2,184  

Current portion of long-term debt

    6,438       5,273  

Other accrued liabilities

    10,907       13,133  

Total current liabilities

    69,289       79,850  
                 

Long-term liabilities

               

Post employment benefit obligations

    12,654       12,694  

Long-term debt

    9,220       8,500  

Other long-term liabilities

    4,151       4,133  

Total long-term liabilities

    26,025       25,327  
                 
                 

Stockholders’ equity

               

Common stock

    54,525       54,580  

Retained earnings

    125,563       120,904  

Additional paid-in-capital

    3,409       4,560  

Accumulated other comprehensive loss

    (2,564 )     (2,678 )

Total stockholders' equity

    180,933       177,366  

Total liabilities and stockholders’ equity

  $ 276,247     $ 282,543  

 

 
 

 

  

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows - unaudited

(In thousands)

 

   

Six Months Ended

 
   

May 28, 2016

   

May 30, 2015

 

Operating activities:

               

Net income

  $ 6,619     $ 10,485  

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

               

Depreciation and amortization

    5,611       4,729  

Equity in undistributed income of investments and unconsolidated affiliated companies

    -       (220 )

Non-cash asset impairment charges

    -       106  

Non-cash portion of lease exit costs

    -       419  

Remeasurement gain on acquisition of affiliate

    -       (7,212 )

Tenant improvement allowances received from lessors

    590       330  

Deferred income taxes

    1,198       4,212  

Excess tax benefits from stock-based compensation

    41       1,032  

Other, net

    697       1,018  

Changes in operating assets and liabilities

               

Accounts receivable

    2,436       (1,490 )

Inventories

    5,062       (5,706 )

Other current and long-term assets

    (1,451 )     (2,121 )

Customer deposits

    (3,867 )     763  

Accounts payable and accrued liabilities

    (5,926 )     3,882  

Net cash provided by operating activities

    11,010       10,227  
                 

Investing activities:

               

Purchases of property and equipment

    (14,116 )     (7,942 )

Proceeds from sale of retail real estate and property and equipment

    577       2,952  

Cash paid for business acquisition, net of cash acquired

    -       (7,323 )

Capital contribution to affiliate

    -       (1,345 )

Net cash used in investing activities

    (13,539 )     (13,658 )
                 

Financing activities:

               

Cash dividends

    (4,145 )     (3,777 )

Proceeds from the exercise of stock options

    114       2,993  

Other issuance of common stock

    176       171  

Repurchases of common stock

    (1,930 )     (255 )

Repayments of notes payable

    (4,920 )     (1,214 )

Proceeds from equipment loans

    6,692       1,307  

Net cash used in financing activities

    (4,013 )     (775 )

Change in cash and cash equivalents

    (6,542 )     (4,206 )

Cash and cash equivalents - beginning of period

    36,268       26,673  
      .       .  

Cash and cash equivalents - end of period

  $ 29,726     $ 22,467  

 

 
 

 

   

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES

Segment Information - unaudited

(In thousands)

 

   

Quarter Ended

   

Six Months Ended

 
   

May 28, 2016

   

May 30, 2015

   

May 28, 2016

   

May 30, 2015

 

Net Sales

                               

Wholesale

  $ 59,906     $ 66,705     $ 119,482     $ 125,510  

Retail - Company-owned stores

    61,943       63,921       123,538       121,104  

Logistical services

    23,810       21,958       48,489       27,957  

Inter-company eliminations:

                               

Furniture and accessories

    (28,859 )     (31,159 )     (57,628 )     (57,600 )

Logistical services

    (10,133 )     (9,872 )     (20,341 )     (12,611 )

Consolidated

  $ 106,667     $ 111,553     $ 213,540     $ 204,360  
                                 

Operating Income

                               

Wholesale

  $ 4,334     $ 4,796     $ 8,732     $ 7,723  

Retail

    381       1,971       697       1,929  

Logistical services

    661       1,027       1,405       1,019  

Inter-company elimination

    477       (631 )     810       (106 )

Lease exit costs

    -       -       -       (419 )

Asset impairment charges

    -       -       -       (106 )

Management restructuring costs

    -       (449 )     -       (449 )

Consolidated

  $ 5,853     $ 6,714     $ 11,644     $ 9,591  

 

 
 

 

  

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES

Rollforward of BHF Store Count

 

   

November 28,

                   

May 28,

 
   

2015

   

Opened*

   

Closed*

   

2016

 
                                 

Company-owned stores

    60       1       (3 )     58  

Licensee-owned stores

    33       -       (1 )     32  
                                 

Total

    93       1       (4 )     90  

 

 

* Does not include openings and closures due to relocation of existing stores within a market.

 

 
 

 

 

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES

Supplemental Retail Information--unaudited

(In thousands)

 

   

56 Comparable Stores

   

56 Comparable Stores

 
   

Quarter Ended

   

Quarter Ended

   

Six Months Ended

   

Six Months Ended

 
   

May 28, 2016

   

May 30, 2015

   

May 28, 2016

   

May 30, 2015

 
           

Percent of

           

Percent of

           

Percent of

           

Percent of

 
   

Amount

   

Net Sales

   

Amount

   

Net Sales

   

Amount

   

Net Sales

   

Amount

   

Net Sales

 
                                                                 

Net sales

  $ 59,003       100.0 %   $ 61,192       100.0 %   $ 117,054       100.0 %   $ 115,965       100.0 %
                                                                 

Cost of sales

    29,834       50.6 %     30,633       50.1 %     58,977       50.4 %     57,773       49.8 %
                                                                 

Gross profit

    29,169       49.4 %     30,559       49.9 %     58,077       49.6 %     58,192       50.2 %
                                                                 

Selling, general and administrative expense*

    27,963       47.4 %     28,269       46.2 %     55,736       47.6 %     55,616       48.0 %
                                                                 

Income from operations

  $ 1,206       2.0 %   $ 2,290       3.7 %   $ 2,341       2.0 %   $ 2,576       2.2 %

 

 

   

All Other Stores

   

All Other Stores

 
   

Quarter Ended

   

Quarter Ended

   

Six Months Ended

   

Six Months Ended

 
   

May 28, 2016

   

May 30, 2015

   

May 28, 2016

   

May 30, 2015

 
           

Percent of

           

Percent of

           

Percent of

           

Percent of

 
   

Amount

   

Net Sales

   

Amount

   

Net Sales

   

Amount

   

Net Sales

   

Amount

   

Net Sales

 
                                                                 

Net sales

  $ 2,940       100.0 %   $ 2,729       100.0 %   $ 6,484       100.0 %   $ 5,139       100.0 %
                                                                 

Cost of sales

    1,807       61.5 %     1,531       56.1 %     3,979       61.4 %     2,791       54.3 %
                                                                 

Gross profit

    1,133       38.5 %     1,198       43.9 %     2,505       38.6 %     2,348       45.7 %
                                                                 

Selling, general and administrative expense

    1,651       56.2 %     1,473       54.0 %     3,703       57.1 %     2,951       57.4 %

Pre-opening store costs**

    307       10.4 %     44       1.6 %     446       6.9 %     44       0.9 %
                                                                 

Loss from operations

  $ (825 )     -28.1 %   $ (319 )     -11.7 %   $ (1,644 )     -25.4 %   $ (647 )     -12.6 %

 

*

Comparable store SG&A includes retail corporate overhead and administrative costs.

**

Pre-opening store costs include the accrual for straight-line rent recorded during the period between date of possesion and store opening date, employee payroll and training costs prior to store opening and other various expenses incurred prior to store opening.