(Bassett, Va.) - September 28, 2005 - Bassett Furniture Industries Inc. (Nasdaq: BSET) announced today its earnings for its fiscal quarter ended August 27, 2005.
Sales for the third quarter of 2005 were $82.7 million, up 5.3 percent from third quarter 2004 levels, led by a $5 million or 12 percent increase in shipments to Bassett Furniture Direct (BFD) stores, which outpaced approximately $4 million of expected attrition with traditional furniture stores. Additionally, the acquisition of the Dallas BFD stores impacted net sales by approximately $3 million in the third quarter of 2005.
The Bassett Furniture Direct retail store program continues to grow with 127 stores currently in operation. Licensees opened six stores during the third quarter. The Company expects licensees to open another four to five stores in the fourth quarter for a total of 20 or 21 new BFD stores in fiscal 2005. Sales to BFD stores were 67 percent of total wholesale shipments in the first nine months of 2005 compared to 58 percent in the first nine months of 2004.
"We are pleased with the growth of our Bassett Furniture Direct program and the continued strong performance from our upholstery division and imported products within our wood division," said Robert H. Spilman Jr., president and chief executive officer. "Our focus is squarely on retail and utilizing our expanded group of Corporate stores to build a platform for operational excellence which will serve the entire BFD store program."
Margins for the quarter and year are up due to both the increase in Company-owned BFD retail sales and an improved sales mix of imported products. SG&A expenses were also up due to the addition of Company-owned BFD stores and increases in marketing spending.
The Company reported net income for the quarter of $1.9 million or $.16 per share including impairment charges of $1.7 million (pretax) for the previously announced acquisitions and consolidations of seven BFD stores (three in Upstate NY and four in Atlanta, Ga.). This compares to net income of $1.1 million or $.10 per share including a $1.2 million pretax charge for a plant closing in the third quarter of 2004. Excluding the respective charges, net income was $3.0 million or $.25 per share in the third quarter of 2005 compared to net income of $1.9 million or $.16 per share in the third quarter of 2004. A reconciliation to the net income and earnings per share calculations has been set forth below.
The Company acquired the Upstate NY BFD operations and a controlling interest in its Atlanta licensee and has accounted for these transactions using the purchase method of accounting. The $1.7 million charge reflects the excess of cash paid and liabilities assumed over the fair market value of net assets acquired (primarily inventories, fixed assets and recorded goodwill). For the year, the Company has acquired 15 Company-owned stores bringing its total number of Company-owned stores to 27, 21% of the 127 store network. The Company does not anticipate acquiring or consolidating any additional BFD stores this year.
Year-to-date, net income for 2005 is $5.3 million or $.44 per diluted share including $4.2 million of year-to-date pre-tax impairment charges. This compares to $5.3 million or $.45 per diluted share including pre-tax restructuring and impaired asset charges of $4.1 million and a $3.9 million gain on the sale of property for the first nine months of fiscal 2004. Excluding the respective charges and prior year gain, year-to-date net income is $7.9 million or $.66 per share which compares to $5.4 million or $.46 per share in 2004. A reconciliation to the net income and earnings per share calculations has been set forth below.
The Company has generated positive operating cash flow for the year through a combination of earnings and reductions in domestic wood inventories. The Company paid its regular quarterly dividend to shareholders during the quarter.
Bassett also announced that its Board of Directors has declared a regular quarterly dividend of $.20 per share payable on December 1, 2005, to shareholders of record on November 15, 2005.
Bassett Furniture Industries, Inc. is a leading manufacturer and marketer of high quality, mid-priced home furnishings. With over 125 Bassett Furniture Direct stores, Bassett has leveraged its strong brand name in furniture into a growing network of owned and licensed stores that focus on providing consumers with a friendly environment for buying furniture and accessories. The most significant growth vehicle for Bassett continues to be the Company's dedicated retail store program. Bassett's retail strategy encompasses 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, more than 1,000 upholstery fabrics, free in-home design visits, and coordinated decorating accessories.
The Company has included the "as adjusted" information because it uses, and believes that others may use, such information in comparing the Company's operating results from period to period. However, the items excluded in determining the "as adjusted" information are significant components in understanding and assessing the Company's overall financial performance for the periods covered.
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 third quarter of 2005, 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 those results to differ materially from those expressed in the forward looking statements: economic, competitive, governmental and other factors identified in Bassett's filings with the Securities and Exchange Commission, and the effects of national and global economic or other conditions and future events on the retail demand for home furnishings.