Bassett Furniture Industries
Sep 27, 2012
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Bassett Announces Fiscal Third Quarter Results

BASSETT, Va., Sept. 27, 2012 (GLOBE NEWSWIRE) -- Bassett Furniture Industries, Inc. (Nasdaq:BSET) announced today its results of operations for its fiscal quarter ended August 25, 2012.

Fiscal 2012 Third Quarter Highlights

On a consolidated basis, the Company reported net sales for the third quarter of 2012 of $64.4 million, an increase of $5.0 million, or 8.5%, from sales levels attained in the third quarter of 2011. Operating income improved to $0.8 million from a loss of $0.2 million driven primarily by higher sales in both the wholesale and retail segments. This was offset by higher selling, general and administrative expenses due primarily to the increased number of Company-owned stores. The Company also recorded a tax benefit of $1.9 million primarily as a result of favorable provision to return adjustments related to our 2011 Federal income tax return and the release of a portion of the valuation allowance against certain deferred tax assets. As a result, the Company recorded net income of $2.4 million or $0.21 per diluted share compared to $0.4 million or $0.04 per diluted share in the third quarter of 2011.

"The achievement of solid growth in both our wholesale and retail segments in our fiscal third quarter was encouraging," commented Robert H. Spilman, Jr. President and Chief Executive Officer. "New product introductions, comparable corporate retail sales gains, and greater penetration with open market independent retailers contributed to the 8.5% consolidated revenue growth that the Company generated during the period. Returning from the traditional July 4th shut down of our manufacturing facilities, production schedules compared favorably to those of the past few years. And, of course, we were very pleased to post a 9.9% increase in our comparable corporate store sales. Despite continuing up front expense associated with the pending launch of our partnership with the HGTV television network, we returned to operating profitability for the quarter after posting a small operating loss for the same quarter last year."

"After 18 months of planning and preparation, we look forward to finally realizing the benefits we expect from our partnership with HGTV," continued Spilman. "The in-store design centers in our Bassett Home Furnishings network have been co-branded with HGTV to more forcefully market the concept of a 'home makeover', an important point of differentiation for our stores that also mirrors much of the programming content on the HGTV network. In addition, new HGTV Home branded furniture will hit independent retailers' floors during the fourth quarter. As we move into what has generally been a stronger selling season for our industry, we believe this partnership will drive additional sales."

Wholesale Segment                                                                  

Net sales for the wholesale segment were $44.8 million for the third quarter of 2012 as compared to $41.9 million for the third quarter of 2011, an increase of 6.9%. Wholesale shipments increased due to a 9.1% increase in wholesale sales outside the BHF store network and a 4.6% increase in shipments to the network. Gross margins for the wholesale segment were essentially flat at 31.7% for the third quarter of 2012 as compared to 31.9% for the third quarter of 2011. Wholesale SG&A increased $0.7 million to $12.5 million for the third quarter of 2012 as compared to $11.8 million for the third quarter of 2011. As a percentage of net sales, SG&A decreased 0.4 percentage points to 27.9% for the third quarter of 2012 as compared to 28.3% for the third quarter of 2011 due to greater leverage of fixed costs partially offset by investments in our new Home and Garden Television (HGTV) initiatives and new showrooms in Las Vegas and High Point.

"Both our upholstery and wood operating divisions posted sales gains for the quarter with increases of 8% and 3%, respectively," added Spilman. "Wholesale operating income increased 11% to $1.7 million. Although operating with three fewer stores than one year ago, we increased wholesale shipments to our BHF store network this quarter. Also contributing to our growth was the favorable reception of our new product introductions from the High Point Market that turned into shipments in July and August. We have also added several new wholesale sales representatives to continue to present our programs to independent furniture retailers and designers in areas that do not conflict with our dedicated store network."

Retail Segment

Company-owned stores had sales of $41.2 million in the third quarter of 2012 as compared to $33.6 million in the third quarter of 2011, an increase of 22.5%. The increase was comprised of a $3.2 million or 9.9% increase in comparable store sales along with a $4.4 million increase in non-comparable store sales. 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 13% for the third quarter of 2012 as compared to the third quarter of 2011. 

Operating loss for the Company-owned stores improved to a loss of $1.5 million in the third quarter of 2012 as compared to a loss of $1.8 million for the third quarter of 2011 which was primarily driven by the sales increases noted above. Gross margins decreased to 47.3% for the third quarter of 2012 from 47.6% for the third quarter of 2011 as there was a greater percentage of clearance sales due to significant floor sample resets for new product offerings. Margins for the fiscal third quarter have historically been lower due to the Company's planned timing of new product offerings. SG&A expense increased $3.2 million, primarily due to increased store count. As a percentage of sales, SG&A decreased to 50.9% for the third quarter of 2012 as compared to 52.9% for the same quarter last year primarily due to greater leverage of fixed costs from higher sales. 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 nine months ended August 25, 2012:

  November 26, New Stores Stores August 25,
  2011 Stores Acquired Closed 2012
           
Licensee-owned stores  39  --   (1)  (3)  35
Company-owned stores  49  3  1  (2)  51
           
Total  88  3  --   (5)  86

"Corporate retail losses decreased by 15% for the quarter and by 38% for the fiscal year to date," said Spilman. "The quarter was characterized by an abnormal amount of product clearance sales, which carry a lower margin, due to the large amount of new products that hit our showroom floors in July and August. Our Corporate Retail associates and our licensee partners spent a tremendous amount of effort over the summer to convert our in-store design centers to the HGTV Design Studio at Bassett that officially debuted over Labor Day weekend. Our marketing efforts and our design associates are the impetus that has allowed us to continue to increase our sales and to improve our year over year corporate retail results for six consecutive quarters. We believe that our new national television campaign on the HGTV network and the momentum that our retail division currently enjoys gives us the ability to continue to increase our market share and to further improve our results as the overall economy strengthens."

Balance Sheet and Cash Flow

The Company used $1.3 million in cash from operating activities for the three months ended August 25, 2012 as compared with cash used in operations of $7.7 million for the three months ended August 27, 2011. The use of cash during the third quarter of 2012 is due primarily to an investment in inventory for the HGTV initiative, timing of receipt of certain inventory from Asia and planned increases to support other upholstery growth initiatives. Capital expenditures for the third quarter of 2012 were $2.5 million primarily related to the expansion of the Company-owned store network. The Company also repurchased 369,500 shares using $4.3 million in cash and paid $0.6 million in dividends during the quarter. In addition, the Company declared a special dividend on August 29, 2012 of $1.25 per share of common stock outstanding payable on October 26, 2012 to holders of record on October 12, 2012. This will result in an approximate $13.6 million cash dividend payment based on the number of shares currently outstanding.

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 86 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. Bassett is also growing its traditional wholesale business with more than 500 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 third 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 Quarter Ended Nine Months Ended Nine Months Ended
  August 25, 2012 August 27, 2011 August 25, 2012 August 27, 2011
    Percent of   Percent of   Percent of   Percent of
 
Amount
Net Sales
Amount
Net Sales
Amount
Net Sales
Amount
Net Sales
                 
Net sales  $ 64,438 100.0%  $ 59,417 100.0%  $ 192,860 100.0%  $ 189,942 100.0%
                 
Cost of sales  30,620 47.5%  30,166 50.8%  91,710 47.6%  95,646 50.4%
                 
Gross profit  33,818 52.5%  29,251 49.2%  101,150 52.4%  94,296 49.6%
                 
Selling, general and administrative expense excluding bad debt and notes receivable valuation charges  32,891 51.0%  29,267 49.3%  97,099 50.3%  90,653 47.7%
Bad debt and notes receivable valuation charges  161 0.2%  90 0.2%  416 0.2%  13,116 6.9%
Licensee debt cancellation charges  -- 0.0%  -- 0.0%  -- 0.0%  6,447 3.4%
Restructuring and asset impairment charges  -- 0.0%  123 0.2%  711 0.4%  2,082 1.1%
Lease exit costs  -- 0.0%  -- 0.0%  359 0.2%  3,728 2.0%
Operating income (loss)  766 1.2%  (229) -0.4%  2,565 1.3%  (21,730) -11.4%
                 
Gain on sale of affiliate  -- 0.0%  -- 0.0%  -- 0.0%  85,542 45.0%
Income from Continued Dumping & Subsidy Offset Act  -- 0.0%  -- 0.0%  9,010 4.7%  -- 0.0%
Other income (loss), net  (315) -0.5%  304 0.5%  (2,239) -1.2%  (5,470) -2.9%
Income before income taxes  451 0.7%  75 0.1%  9,336 4.8%  58,342 30.7%
                 
Income tax benefit (expense)  1,920 3.0%  342 0.6%  481 0.2%  (3,633) -1.9%
Net income  $ 2,371 3.7%  $ 417 0.7%  $ 9,817 5.1%  $ 54,709 28.8%
                 
Basic earnings per share  $ 0.21    $ 0.04    $ 0.88    $ 4.76  
                 
Diluted earnings per share  $ 0.21    $ 0.04    $ 0.87    $ 4.72  
 
 
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets 
(In thousands)
     
  (unaudited)  
Assets August 25, 2012 November 26, 2011
Current assets    
Cash and cash equivalents   $ 57,967  $ 69,601
Accounts receivable, net  14,468  14,756
Marketable securities  3,206  2,939
Inventories  54,544  45,129
Other current assets   7,614  7,778
Total current assets  137,799  140,203
     
Property and equipment    
Cost  148,609  143,824
Less accumulated depreciation  93,178  93,878
Property and equipment, net  55,431  49,946
     
Investments   --  806
Retail real estate  12,872  16,257
Notes receivable, net  1,703  1,802
Other  13,934  14,160
Total long-term assets  28,509  33,025
Total assets  $ 221,739  $ 223,174
     
Liabilities and Stockholders' Equity    
Current liabilities    
Accounts payable  $ 19,170  $ 18,821
Accrued compensation and benefits  6,692  7,201
Customer deposits  11,072  9,238
Dividends payable  545  6,063
Other accrued liabilities  11,938  10,302
Current portion of real estate notes payable  212  202
Total current liabilities  49,629  51,827
     
Long-term liabilities    
 Post employment benefit obligations  10,919  11,226
 Real estate notes payable  3,502  3,662
 Other long-term liabilities  2,293  4,024
Total long-term liabilities  16,714  18,912
     
Stockholders' equity    
Common stock  54,411  56,712
Retained earnings  101,961  96,331
Accumulated other comprehensive loss  (976)  (608)
Total stockholders' equity  155,396  152,435
Total liabilities and stockholders' equity  $ 221,739  $ 223,174
 
 
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - unaudited
(In thousands)
     
  Nine Months Ended Nine Months Ended
  August 25, 2012 August 27, 2011
Operating activities:    
Net income  $ 9,817  $ 54,709
Adjustments to reconcile net income to net cash provided by (used in) operating activities:    
Depreciation and amortization  3,931  4,150
Equity in undistributed income of investments and unconsolidated    
affiliated companies  (157)  (1,782)
Provision for restructuring and asset impairment charges  711  2,082
Non-cash portion of lease exit costs  359  2,228
Licensee debt cancelation charges  --  6,447
Provision for lease and loan guarantees  197  1,315
Bad debt and notes receivable valuation charges  416  13,116
Gain on mortgage settlement  --  (1,305)
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
Deferred income taxes  (658)  (111)
Other, net  1,042  343
Changes in operating assets and liabilities     
Accounts receivable  (316)  746
Inventories  (8,948)  1,091
Other current assets   (1,122)  248
Accounts payable and accrued liabilities  853  (14,859)
Net cash provided by (used in) operating activities  6,931  (12,334)
     
Investing activities:    
Purchases of property and equipment  (6,858)  (2,459)
Proceeds from sale of property and equipment  17  189
Proceeds from sale of interest in affiliate  1,410  69,152
Release of collateral restrictions on cash equivalents  --  11,240
Proceeds from sales of investments  1,186  2,925
Purchases of investments  (1,303)  (2,925)
Dividend from affiliate  --  3,756
Equity contribution to affiliate  --  (980)
Acquisition of retail licensee store  (485)  --
Other, net  84  127
Net cash provided by (used in) investing activities  (5,949)  81,025
     
Financing activities:     
Repayments of real estate notes payable  (149)  (6,375)
Issuance of common stock  295  136
Repurchases of common stock  (5,572)  (2,084)
Cash dividends   (7,190)  (348)
Payments on other notes  --  (2,202)
Net cash used in financing activities  (12,616)  (10,873)
Change in cash and cash equivalents  (11,634)  57,818
Cash and cash equivalents - beginning of period  69,601  11,071
     
Cash and cash equivalents - end of period  $ 57,967  $ 68,889
 
 
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES 
Segment Information - unaudited
(In thousands)
                 
  Quarter ended   Quarter ended   Nine months ended   Nine months ended  
  August 25, 2012   August 27, 2011   August 25, 2012   August 27, 2011  
Net Sales                
Wholesale  $ 44,805  (a)   $ 41,905  (a)   $ 133,355  (a)   $ 133,626  (a) 
Retail  41,178    33,610    122,800    108,598  
Inter-company elimination  (21,545)    (16,098)    (63,295)    (52,282)  
Consolidated  $ 64,438    $ 59,417    $ 192,860    $ 189,942  
                 
Operating Income (Loss)                
Wholesale  $ 1,711  (b)   $ 1,540  (b)   $ 5,575  (b)   $ (6,502)  (b) 
Retail  (1,503)    (1,775)    (2,437)    (3,912)  
Inter-company elimination  558    129    497    941  
Licensee debt cancellation charge  --    --    --    (6,447)  
Restructuring and asset impairment charges  --    (123)    (711)    (2,082)  
Lease exit costs  --    --    (359)    (3,728)  
Consolidated  $ 766    $ (229)    $ 2,565    $ (21,730)  
                 
                 
(a) Excludes wholesale shipments for dealers where collectibility is not reasonably assured at time of shipment as follows:  
  August 25, 2012   August 27, 2011          
 Quarter ended  $ --    $ 424          
 Nine Months  --    1,678          
(b) Includes bad debt and notes receivable valuation charges as follows:          
  August 25, 2012   August 27, 2011          
 Quarter ended  $ 161    $ 90          
 Nine Months  416    13,116          
 
 
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Supplemental Retail Information - unaudited
(In thousands)
                 
   43 Comparable Stores  40 Comparable Stores
  Quarter Ended Quarter Ended Nine Months Ended Nine Months Ended
  August 25, 2012 August 27, 2011 August 25, 2012 August 27, 2011
    Percent of   Percent of   Percent of   Percent of
  Amount Net Sales Amount Net Sales Amount Net Sales Amount Net Sales
                 
Net sales  $ 35,758 100.0%  $ 32,544 100.0%  $ 101,476 100.0%  $ 94,444 100.0%
                 
Cost of sales  18,823 52.6%  16,878 51.9%  52,265 51.5%  48,760 51.6%
                 
Gross profit  16,935 47.4%  15,666 48.1%  49,211 48.5%  45,684 48.4%
                 
Selling, general and administrative expense*  17,914 50.1%  16,881 51.8%  49,824 49.1%  48,026 50.9%
                 
Income (loss) from operations  $ (979) -2.7%  $ (1,215) -3.7%  $ (613) -0.6%  $ (2,342) -2.5%
                 
                 
  All Other Stores All Other Stores
  Quarter Ended Quarter Ended Nine Months Ended Nine Months Ended
  August 25, 2012 August 27, 2011 August 25, 2012 August 27, 2011
    Percent of   Percent of   Percent of   Percent of
  Amount Net Sales Amount Net Sales Amount Net Sales Amount Net Sales
                 
Net sales  $ 5,420 100.0%  $ 1,065 100.0%  $ 21,324 100.0%  $ 14,152 100.0%
                 
Cost of sales  2,879 53.1%  716 67.2%  11,613 54.5%  8,821 62.3%
                 
Gross profit  2,541 46.9%  349 32.8%  9,711 45.5%  5,331 37.7%
                 
Selling, general and administrative expense  3,065 56.6%  909 85.4%  11,534 54.0%  6,901 48.8%
                 
Loss from operations  $ (524) -9.7%  $ (560) -52.6%  $ (1,823) -8.5%  $ (1,570) -11.1%
                 
*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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