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Bassett Announces Fiscal Second Quarter Results

BASSETT, Va., July 5, 2012 (GLOBE NEWSWIRE) -- Bassett Furniture Industries, Inc. (Nasdaq:BSET) announced today its results of operations for its fiscal quarter ended May 26, 2012.

Fiscal 2012 Second Quarter Highlights

  • Consolidated sales for the second quarter 2012 increased 1.8% as compared to the second quarter 2011.
  • Operating profit for the second quarter was $1.6 million versus a $14.3 million loss for the second quarter last year.
  • Company-owned store delivered sales increased 12.6% with a 7.9% increase from the 43 comparable stores.
  • Company-owned stores generated a $0.1 million operating profit for the quarter.
  • Received $9.0 million distribution from U.S. Customs and Border Protection as part of the Continued Dumping and Subsidy Offset Act of 2000.
  • Repurchased 64,350 shares using $0.6 million and paid $0.6 million in dividends during the quarter.  

On a consolidated basis, the Company reported net sales for the second quarter of 2012 of $67.5 million, an increase of $1.2 million, or 1.8%, from sales levels attained in the second quarter of 2011. Operating income improved to $1.6 million from a loss of $14.3 million driven primarily by increased gross margins and significantly lower bad debt and notes receivable, licensee debt cancellation, restructuring, asset impairment and lease exit charges.  This was partially offset by higher selling, general and administrative expenses due to the increased mix of Company-owned stores as well as investments in our new Home and Garden Television (HGTV) initiatives and new showrooms in Las Vegas and High Point. The Company received a $9.0 million cash distribution from U.S. Customs and Border Protection in the second quarter of 2012, representing the final distribution due the Company as part of the Continued Dumping and Subsidy Offset Act of 2000, which is included as other income in the condensed consolidated statement of operations. As a result, the Company recorded net income of $8.0 million or $0.71 per diluted share compared to $62.6 million or $5.39 per diluted share in the second quarter of 2011. Included in the prior year quarter was an $85.5 million gain associated with the Company's sale of its interest in the International Home Furnishings Center.

"Our second quarter was highlighted by an overall sales increase and an increase in consolidated operating profit," commented Robert H. Spilman Jr., president and chief executive officer. "Perhaps more significantly, our Corporate Retail Division generated its first ever operating profit. Moving forward, we will continue to vigorously pursue our strategies designed to grow the Company through sales to our store network, independent accounts, and our new partnership with HGTV. Although it is difficult to gauge the strength of the overall economy at the moment, we are encouraged by the improved traffic in our Bassett Home Furnishings (BHF) stores and by our efforts to increase our business with independent furniture retailers. We believe that our strong balance sheet in conjunction with our service levels in both our domestically produced and imported products are enabling us to take market share."

Wholesale Segment                                                                         

Net sales for the wholesale segment were $45.9 million for the second quarter of 2012 as compared to $45.8 million for the second quarter of 2011, an increase of 0.4%. Wholesale shipments increased primarily due to a 5.8% increase in wholesale sales outside the BHF store network partially offset by a 1.0% decrease in shipments to the network. The decrease in sales to the store network was due to the decline in the number of BHF stores; however, the average shipments per store actually increased by 4.3%. Gross margins for the wholesale segment were 32.9% for the second quarter of 2012 and 32.8% for the second quarter of 2011. Wholesale SG&A, excluding bad debt and notes receivable valuation charges, decreased $0.1 million to $12.8 million for the second quarter of 2012 as compared to $12.9 million for the second quarter of 2011. As a percentage of net sales, SG&A decreased 0.3 percentage points to 28.0% for the second quarter of 2012 as compared to 28.3% for the second quarter of 2011. The Company recorded $0.2 million of bad debt and notes receivable valuation charges for the second quarter of 2012 as compared with $6.2 million for the second quarter of 2011, which reflects the improved credit positions of the Company's current fleet of licensees. 

"We were pleased to achieve sales growth in our wholesale segment despite operating fewer stores than we did in the same period of fiscal 2011, primarily due to increased market share with independent furniture stores," said Mr. Spilman. "In addition, the debut of the HGTV Furniture Collection in our new HGTV showroom at the April High Point Market was very encouraging as we placed the assortment with several major new customers. These products will begin to ship in September of this year and will continue to be phased in to our dealers through the first quarter of 2013.

"Excluding bad debt charges, our wholesale operating profit was flat with last year," continued Mr. Spilman. "Even though we have been incurring expense in preparation for the launch of HGTV, wholesale SGA costs were down slightly for the quarter. Upfront expenditures for product development, personnel, marketing, and showrooms have been substantial as we set the table for this new venture. Once again, we look forward to leveraging these investments with additional sales beginning this fall."

Retail Segment

Company-owned stores had sales of $42.8 million in the second quarter of 2012 as compared to $38.0 million in the second quarter of 2011, an increase of 12.6%. The increase was comprised of a $2.8 million or 7.9% increase in comparable store sales along with a $2.0 million increase in non-comparable store sales.  Contributing to the improvement in comparable store sales are such factors as improved pricing and merchandising strategies and improvements in the quality and training of the design associates who sell the Company's products, as well as a general improvement in the retail environment in combination with targeted advertising which produced increased traffic through the Company's stores.  While the Company does not recognize sales until goods are delivered to the customer, management tracks written sales (the dollar value of sales orders taken, rather than delivered) as a key store performance indicator. Written sales for comparable stores increased by 11.2% for the second quarter of 2012 as compared to the second quarter of 2011. 

Operating income for the Company-owned stores improved to $0.1 million in the second quarter of 2012 as compared to a loss of $0.3 million for the second quarter of 2011 which was primarily driven by the sales increases noted above and a 1.5 percentage point improvement in gross margins. The gross margin improvement was primarily due to the adverse impact of store liquidation sales which ran during the second quarter of 2011 related to the closure of five retail locations and the improved pricing strategies and increased sales of higher margin mattresses in the second quarter of 2012.  SG&A increased $2.5 million, primarily due to increased store count.  Included in the operating income for the second quarter of 2012 was a $0.2 million loss associated with the start-up of the new store in Paramus, New Jersey at the end of the quarter as there were essentially no delivered sales due to the timing of the opening. Refer to the accompanying schedule of Supplemental Retail Information for results of operations for the Company's retail segment by comparable and all other stores.

The following table summarizes the changes in store count during the six months ended May 26, 2012:

  November 26,
2011
New
Stores
Stores
Acquired
Stores
Closed
May 26,
2012
           
Licensee-owned stores  39  --   --   (2)  37
Company-owned stores  49  3  --   (2)  50
           
Total  88  3  --   (4)  87

"Our corporate retail group produced a milestone achievement this quarter by producing their first ever quarterly operating profit," added Mr. Spilman. "This marks the fifth consecutive quarter of year over year improvement for the segment. The delivered sales increase of 7.9% and the written sales increase of 11.2% are the result of the continuing maturation of our merchandising and marketing strategies and the absence of the distraction of the many licensee store takeovers that has hampered our corporate retail performance for the past few years. We opened a new store in Paramus, New Jersey in late May and plan a new store in Dallas later this year. Meanwhile, we will focus on the conversion of our in-store design centers to HGTV Design Studios at Bassett that will be rolled out later this summer and featured nationally on the HGTV network beginning Labor Day weekend."

Balance Sheet and Cash Flow

As previously stated, the Company received a $9.0 million cash distribution from U.S. Customs and Border Protection in the second quarter of 2012, representing the final distribution due the Company as part of the Continued Dumping and Subsidy Offset Act of 2000. Excluding this distribution, the Company generated $0.5 million in cash from operating activities for the three month's ended May 26, 2012 as compared with cash used in operations of $0.9 million for the three month's ended May 28, 2011. Capital expenditures for the second quarter of 2012 were $2.4 million primarily related to the expansion of the Company-owned store network. The Company also repurchased 64,350 shares using $0.6 million and paid $0.6 million in dividends during the quarter.

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 87 company- and licensee- owned stores, 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, more than 750 upholstery fabrics, free in-home design visits, and coordinated decorating accessories. 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 2012, 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
May 26, 2012
Quarter Ended
May 28, 2011
Six Months Ended
May 26, 2012
Six Months Ended
May 28, 2011
  Amount Percent of
Net Sales
Amount Percent of
Net Sales
Amount Percent of
Net Sales
Amount Percent of
Net Sales
                 
Net sales  $ 67,454 100.0%  $ 66,261 100.0%  $ 128,422 100.0%  $ 130,525 100.0%
                 
Cost of sales  31,793 47.1%  33,064 49.9%  61,090 47.6%  65,480 50.2%
                 
Gross profit  35,661 52.9%  33,197 50.1%  67,332 52.4%  65,045 49.8%
                 
Selling, general and administrative expense excluding bad debt and notes receivable valuation charges  33,213 49.2%  30,879 46.6%  64,209 50.0%  61,387 47.0%
Bad debt and notes receivable valuation charges  222 0.3%  6,200 9.4%  254 0.2%  13,026 10.0%
Licensee debt cancellation charges  -- 0.0%  6,447 9.7%  -- 0.0%  6,447 4.9%
Restructuring and asset impairment charges  475 0.7%  1,080 1.6%  711 0.6%  1,959 1.5%
Lease exit costs  131 0.2%  2,844 4.3%  359 0.3%  3,728 2.9%
Operating income (loss)  1,620 2.4%  (14,253) -21.5%  1,799 1.4%  (21,502) -16.5%
                 
Gain on sale of affiliate  -- 0.0%  85,542 129.1%  -- 0.0%  85,542 65.5%
Income from Continued Dumping & Subsidy Offset Act  9,010 13.4%  -- 0.0%  9,010 7.0%  -- 0.0%
Other loss, net  (677) -1.0%  (4,815) -7.3%  (1,924) -1.5%  (5,773) -4.4%
Income before income taxes  9,953 14.8%  66,474 100.3%  8,885 6.9%  58,267 44.6%
                 
Income tax expense  (1,911) -2.8%  (3,928) -5.9%  (1,439) -1.1%  (3,975) -3.0%
Net income  $ 8,042 11.9%  $ 62,546 94.4%  $ 7,446 5.8%  $ 54,292 41.6%
                 
Basic earnings per share  $ 0.72    $ 5.43    $ 0.67    $ 4.72  
                 
Diluted earnings per share  $ 0.71    $ 5.39    $ 0.67    $ 4.69  
 
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets 
(In thousands)
  (unaudited)  
Assets May 26, 2012 November 26, 2011
Current assets    
Cash and cash equivalents   $ 67,133  $ 69,601
Accounts receivable, net  14,165  14,756
Marketable securities  3,034  2,939
Inventories  47,915  45,129
Other current assets   6,532  7,778
Total current assets  138,779  140,203
     
Property and equipment    
Cost  142,864  143,824
Less accumulated depreciation  91,521  93,878
Property and equipment, net  51,343  49,946
     
Investments   --  806
Retail real estate  15,989  16,257
Notes receivable, net  1,783  1,802
Other  13,730  14,160
Total long-term assets  31,502  33,025
Total assets  $ 221,624  $ 223,174
     
Liabilities and Stockholders' Equity    
Current liabilities    
Accounts payable  $ 16,457  $ 18,821
Accrued compensation and benefits  6,491  7,201
Customer deposits  9,918  9,238
Dividends payable  563  6,063
Other accrued liabilities  12,618  10,302
Current portion of real estate notes payable  208  202
Total current liabilities  46,255  51,827
     
Long-term liabilities    
Post employment benefit obligations  11,015  11,226
Real estate notes payable  3,556  3,662
Other long-term liabilities  3,247  4,024
Total long-term liabilities  17,818  18,912
     
Commitments and Contingencies    
     
Stockholders' equity    
Common stock  56,160  56,712
Retained earnings  102,417  96,331
Accumulated other comprehensive loss  (1,026)  (608)
Total stockholders' equity  157,551  152,435
Total liabilities and stockholders' equity  $ 221,624  $ 223,174
 
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - unaudited
(In thousands)
     
  Six Months Ended
May 26, 2012
Six Months Ended
May 28, 2011
Operating activities:    
Net income  $ 7,446  $ 54,292
Adjustments to reconcile net income to net cash provided by (used in) operating activities:    
Depreciation and amortization  2,615  2,907
Equity in undistributed income of investments and unconsolidated affiliated companies  (134)  (1,921)
Provision for restructuring and asset impairment charges  711  1,959
Non-cash portion of lease exit costs  359  2,228
Licensee debt cancelation charges  --  6,447
Provision for lease and loan guarantees  219  1,457
Bad debt and notes receivable valuation charges  254  13,026
Gain on mortgage settlement  --  (436)
Gain on sale of affiliate  --  (85,542)
Other than temporary impairment of investments  806  --
Impairment and lease exit charges on retail real estate  --  4,790
Other, net  (36)  852
Changes in operating assets and liabilities     
Accounts receivable  337  2,000
Inventories  (2,786)  2,782
Other current assets   (64)  (23)
Accounts payable and accrued liabilities  (1,465)  (9,439)
Net cash provided by (used in) operating activities  8,262  (4,621)
     
Investing activities:    
Purchases of property and equipment  (4,352)  (964)
Proceeds from sale of interest in affiliate  1,410  67,752
Proceeds from sales of investments  875  2,603
Purchases of investments  (857)  (2,603)
Dividend from affiliate  --  3,756
Equity contribution to affiliate  --  (980)
Other,net  13  201
Net cash provided by (used in) investing activities  (2,911)  69,765
     
Financing activities:     
Repayments of real estate notes payable  (100)  (3,791)
Issuance of common stock  157  88
Repurchases of common stock  (1,250)  (473)
Cash dividends   (6,626)  --
Payments on other notes  --  (2,127)
Net cash used in financing activities  (7,819)  (6,303)
Change in cash and cash equivalents  (2,468)  58,841
Cash and cash equivalents - beginning of period  69,601  11,071
  . .
Cash and cash equivalents - end of period  $ 67,133  $ 69,912
 
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES 
Segment Information - unaudited
(In thousands)
                 
  Quarter ended
May 26, 2012
  Quarter ended
May 28, 2011
  Six months ended
May 26, 2012
  Six months ended
May 28, 2011
 
Net Sales                
Wholesale  $ 45,940  (a)   $ 45,751  (a)   $ 88,550  (a)   $ 91,720  (a) 
Retail  42,805    38,009    81,622    74,988  
Inter-company elimination  (21,291)    (17,499)    (41,750)    (36,183)  
Consolidated  $ 67,454    $ 66,261    $ 128,422    $ 130,525  
                 
Operating Income (Loss)                
Wholesale  $ 2,035  (b)   $ (4,153)  (b)   $ 3,863  (b)   $ (8,044)  (b) 
Retail  66    (343)    (933)    (2,135)  
Inter-company elimination  125    614    (61)    810  
Licensee debt cancellation charge  --    (6,447)    --    (6,447)  
Restructuring and asset impairment charges  (475)    (1,080)    (711)    (1,959)  
Lease exit costs  (131)    (2,844)    (359)    (3,727)  
Consolidated  $ 1,620    $ (14,253)    $ 1,799    $ (21,502)  
                 
                 
(a) Excludes wholesale shipments for dealers where collectibility is not reasonably assured at time of shipment as follows:
  May 26, 2012   May 28, 2011          
 Quarter ended  $ --    $ --          
 Six Months  --    1,254          
(b) Includes bad debt and notes receivable valuation charges as follows:          
  May 26, 2012   May 28, 2011          
 Quarter ended  $ 222    $ 6,200          
 Six Months  254    13,026          
 
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Supplemental Retail Information--unaudited
(In thousands)
                 
   43 Comparable Stores  40 Comparable Stores
  Quarter Ended
May 26, 2012
Quarter Ended
May 28, 2011
Six Months Ended
May 26, 2012
Six Months Ended
May 28, 2011
  Amount Percent of
Net Sales
Amount Percent of
Net Sales
Amount Percent of
Net Sales
Amount Percent of
Net Sales
                 
Net sales  $ 37,893 100.0%  $ 35,124 100.0%  $ 68,028 100.0%  $ 63,680 100.0%
                 
Cost of sales  19,359 51.1%  18,210 51.8%  34,673 51.0%  32,824 51.5%
                 
Gross profit  18,534 48.9%  16,914 48.2%  33,355 49.0%  30,856 48.5%
                 
Selling, general and administrative expense*  17,956 47.4%  17,070 48.6%  32,999 48.5%  32,174 50.5%
                 
Income (loss) from operations  $ 578 1.5%  $ (156) -0.4%  $ 356 0.5%  $ (1,318) -2.0%
                 
  All Other Stores All Other Stores
  Quarter Ended
May 26, 2012
Quarter Ended
May 28, 2011
Six Months Ended
May 26, 2012
Six Months Ended
May 28, 2011
  Amount Percent of
Net Sales
Amount Percent of
Net Sales
Amount Percent of
Net Sales
Amount Percent of
Net Sales
                 
Net sales  $ 4,912 100.0%  $ 2,885 100.0%  $ 13,593 100.0%  $ 11,308 100.0%
                 
Cost of sales  2,670 54.4%  1,932 67.0%  7,502 55.2%  7,158 63.3%
                 
Gross profit  2,242 45.6%  953 33.0%  6,091 44.8%  4,150 36.7%
                 
Selling, general and administrative expense  2,754 56.2%  1,140 39.5%  7,380 54.4%  4,967 43.9%
                 
Loss from operations  $ (512) -10.6%  $ (187) -6.5%  $ (1,289) -9.6%  $ (817) -7.2%
                 
*Comparable store SG&A includes retail corporate overhead and administrative costs.          
CONTACT: J. Michael Daniel, Vice-President and Chief Accounting Officer

         (276) 629-6614 - Investors



         Jay S. Moore, Director of Communications

         (276) 629-6450 - Media
Source: Bassett Furniture Industries, Inc.

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