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Bassett Announces Fiscal Third Quarter Results

BASSETT, Va., Oct. 3, 2013 (GLOBE NEWSWIRE) -- Bassett Furniture Industries, Inc. (Nasdaq:BSET) announced today its results of operations for its fiscal quarter ended August 31, 2013.

Fiscal 2013 Third Quarter Highlights

  • Consolidated sales of $77.2 million for the third quarter of 2013 increased 20% as compared to the third quarter of 2012;
  • Operating profit for the quarter was $0.8 million which was flat compared to the prior year quarter;
  • Wholesale sales increased 18% compared to the prior year quarter;
  • Company-owned store delivered sales increased 12% compared to the prior year quarter, which included a 3.9% increase from the 50 comparable stores; and
  • Pre-tax income for the quarter was $0.6 million versus $0.5 million for the prior year quarter.

On a consolidated basis, the Company reported net sales for the third quarter of 2013 of $77.2 million as compared to $64.4 million for the third quarter of 2012, an increase of $12.7 million or 20%. Operating income for the quarter was $0.8 million, or 1.1% of sales, which was flat as compared to the prior year quarter. The Company reported net income of $0.6 million or $0.05 per diluted share for the third quarter of 2013 compared to net income of $2.4 million or $0.21 per diluted share in the third quarter of 2012. The prior year quarter included a $1.9 million tax benefit as a result of favorable provision to return adjustments related to the 2011 Federal income tax return and the release of a portion of the valuation allowance against certain deferred tax assets.

"In reviewing our 2013 third quarter, we are pleased to have posted our fourth consecutive quarter of double digit revenue growth," commented Robert H. Spilman, Jr., President and CEO. "Our multi-pronged sales strategy continues to bear fruit as we leverage our high level of service and logistics competencies over a broader spectrum of distribution. While we experienced modest increases in wholesale shipments to our retail network in the quarter, we again gained share with independent furniture dealers and in our juvenile products division. Also, shipments to our open market HGTV dealer network met our internal goals for the period.

"Conversely, although our operating income increased marginally for the quarter, we still have work to do in our efforts to bolster our bottom line, particularly during our fiscal third quarter which is historically our toughest reporting period," added Spilman. "The seasonality of summer retail furniture sales continues to challenge our retail network. We incurred additional operating expenses during the period in conjunction with the ongoing migration to a new retail operating system. This large project ($3 million in capital) will be completed by the end of November 2013. Further, our wholesale wood division suffered margin erosion as we continued to discount certain wood inventories, as discussed at the end of the second quarter. Finally, the final settlement of litigation associated with a vendor surrounding a 2006 product recall did not end favorably, resulting in $400k of expenses. Despite these factors, we remain focused and optimistic that we will continue to further improve our operating results as we move forward."

Wholesale Segment

Net sales for the wholesale segment were $52.9 million for the third quarter of 2013 as compared to $44.8 million for the third quarter of 2012, an increase of $8.1 million or 18%. Wholesale shipments to the open market (outside the Bassett Home Furnishings store network) increased 57% and shipments to the Bassett Home Furnishings store network increased by 0.5% compared to the prior year quarter. Gross margins for the wholesale segment were 32.2% for the third quarter of 2013 as compared to 31.7% for the third quarter of 2012. This increase was primarily due to increased margins in the upholstery operations as increased sales volumes provided greater leverage of fixed costs partially offset by lower wood margins due to product mix and increased discounting of discontinued product. Wholesale SG&A increased $2.2 million to $14.7 million for the third quarter of 2013 as compared to $12.5 million for the third quarter of 2012. Included in wholesale SG&A is $0.4 million of increased legal costs due primarily to the unfavorable settlement of litigation associated with a vendor surrounding a 2006 product recall. SG&A as a percentage of sales decreased to 27.7% as compared to 27.9% for the third quarter of 2012. Operating income was $2.4 million or 4.5% of sales as compared to $1.7 million or 3.8% of sales in the prior year quarter.

"Once again, our wholesale segment was able to leverage strong growth to improve profitability," continued Spilman. "Our upholstery and wood segments both posted growth rates of 18% for the period. At the divisional level, upholstery operating profit grew by 37% while inventory reductions in the wood division limited divisional operating improvement to 2% compared to last year's third quarter. Also noteworthy in our wholesale division for the quarter was the change in our mix. This year 39% of our wholesale shipments went to open market customers compared to 30% last year. Our focus on gaining market share outside of our stores is gaining momentum through independent Bassett dealers, our juvenile division, and our open market HGTV HOME accounts."

Retail Segment

Net sales for the 55 Company-owned stores were $46.2 million for the third quarter of 2013 as compared to $41.2 million for the third quarter of 2012, an increase of $5.1 million or 12%. The increase was comprised of a $1.6 million or 3.9% increase in comparable store sales and a $3.5 million increase in non-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 increased by 0.3% for the third quarter of 2013 as compared to the third quarter of 2012.

The consolidated retail operating loss for the third quarter of 2013 was $1.5 million, which was comparable to the loss recorded for the third quarter of 2012. The 50 comparable stores generated an operating loss of $0.8 million for the quarter, or 1.9% of sales, as compared to $1.3 million or 3.3% of sales for the prior year quarter. Gross margins improved to 48.3% compared to 47.5% in the prior year quarter due primarily to improved pricing strategies and lower levels of clearance sales. SG&A expenses increased $0.6 million due primarily to higher sales volumes. SG&A expenses were 50.2% of sales for the current year quarter compared to 50.8% of sales for the prior year as the higher sales volumes leverage the fixed costs.

Included in the consolidated retail results are $0.2 million of pre-opening costs associated with three stores that will open in the fourth quarter of 2013 and $0.1 million in losses associated with a store closing sale in California. This store is being closed and subsequently moved to a smaller location with lower rent. There were no such costs incurred in the third quarter of 2012. As the Company expects to open or reposition up to 10 stores over the next 12 months, retail operating results will continue to be impacted by such costs.

The following table summarizes the changes in store count year to date through the third quarter of 2013:

  November 24, New Stores Stores August 31,
  2012 Stores Acquired Closed 2013
           
Company-owned stores  53  2  --   --   55
Licensee-owned stores  33  2  --   (1)  34
           
Total  86  4  --   (1)  89

"Although we are pleased to post our 12th consecutive quarter of comparable store sales increase in our corporate retail division, we were disappointed to post an operating loss that was identical to last year," said Spilman. "Apart from the normal tepid sales environment that we experience each summer at retail, this year was especially challenging as we lay the foundation to expand our store footprint over the next 12 months and beyond. As alluded to earlier in this report, we are well on our way to implementing a new retail operating system that will enable us to run our large platform of stores more efficiently. After months of planning during 2012, we began the installation this February and had 36 of our 55 corporate stores up and running on the new system by the end of the August quarter. Although we are confident that all stores will be online by our fiscal year end in November, the process has been disruptive to the sales, administration, warehousing and delivery areas of our retail business."

"Furthermore, we began to incur pre-opening costs related to new store expansion this quarter", continued Spilman. "Although we opened two new stores and a replacement location earlier this year, the pace of new openings will pick up significantly over the next three to four quarters as will the pre-opening expenses that accompany these events. During this time period we plan to open six new stores and relocate an additional four stores that will replace older locations where the leases have expired. We have been encouraged by the performance of the new stores that we have brought to market over the past two years and look forward to adding to our fleet during the coming months. Likewise, we believe that the replacement stores that we are planning to open will be located in real estate that features attractive demographics and improved store economics for today's Bassett."

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 89 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 1,000 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 2013, 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 31, 2013 August 25, 2012 August 31, 2013 August 25, 2012
    Percent of   Percent of   Percent of   Percent of
  Amount Net Sales Amount Net Sales Amount Net Sales Amount Net Sales
                 
Net sales  $ 77,152 100.0%  $ 64,438 100.0%  $ 238,224 100.0%  $ 192,860 100.0%
                 
Cost of sales  38,429 49.8%  30,620 47.5%  116,315 48.8%  91,710 47.6%
                 
Gross profit  38,723 50.2%  33,818 52.5%  121,909 51.2%  101,150 52.4%
                 
Selling, general and administrative expense  37,900 49.1%  33,052 51.3%  115,312 48.4%  97,515 50.6%
Restructuring and asset impairment charges  -- 0.0%  -- 0.0%  -- 0.0%  711 0.4%
Lease exit costs  -- 0.0%  -- 0.0%  -- 0.0%  359 0.2%
Operating income  823 1.1%  766 1.2%  6,597 2.8%  2,565 1.3%
                 
Income from Continued Dumping & Subsidy Offset Act   0.0%  -- 0.0%   0.0%  9,010 4.7%
Other loss, net  (229) -0.3%  (315) -0.5%  (1,026) -0.4%  (2,239) -1.2%
Income before income taxes  594 0.8%  451 0.7%  5,571 2.3%  9,336 4.8%
                 
Income tax (expense) benefit  (38) 0.0%  1,920 3.0%  (2,082) -0.9%  481 0.2%
Net income  $ 556 0.7%  $ 2,371 3.7%  $ 3,489 1.5%  $ 9,817 5.1%
                 
Basic earnings per share  $ 0.05    $ 0.22    $ 0.33    $ 0.89  
                 
Diluted earnings per share  $ 0.05    $ 0.21    $ 0.32    $ 0.88  
 
 
 
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
     
  Unaudited  
Assets August 31, 2013 November 24, 2012
Current assets    
Cash and cash equivalents  $ 8,904  $ 45,566
Short-term investments  28,125  --
Accounts receivable, net  16,219  15,755
Inventories, net  58,475  57,916
Deferred income taxes, net  6,687  6,832
Other current assets  10,304  6,439
Total current assets  128,714  132,508
     
Property and equipment, net  60,809  56,624
     
Other long-term assets    
Retail real estate  12,368  12,736
Deferred income taxes, net  9,565  10,485
Other  14,116  14,827
Total long-term assets  36,049  38,048
Total assets  $ 225,572  $ 227,180
     
Liabilities and Stockholders' Equity    
Current liabilities    
Accounts payable  $ 19,048  $ 22,405
Accrued compensation and benefits  7,323  6,926
Customer deposits  15,040  12,253
Dividends payable  --  542
Other accrued liabilities  8,613  10,454
Total current liabilities  50,024  52,580
     
Long-term liabilities    
Post employment benefit obligations  11,118  11,577
Real estate notes payable  2,862  3,053
Other long-term liabilities  1,972  2,690
Total long-term liabilities  15,952  17,320
     
     
Stockholders' equity    
Common stock  54,623  54,184
Retained earnings  106,067  104,319
Additional paid-in-capital  72  --
Accumulated other comprehensive loss  (1,166)  (1,223)
Total stockholders' equity  159,596  157,280
Total liabilities and stockholders' equity  $ 225,572  $ 227,180
 
 
 
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - unaudited
(In thousands)
     
  Nine Months Ended Nine Months Ended
  August 31, 2013 August 25, 2012
Operating activities:    
Net income  $ 3,489  $ 9,817
Adjustments to reconcile net income to net cash provided by (used in) operating activities:    
Depreciation and amortization  4,445  3,931
Equity in undistributed income of investments and unconsolidated affiliated companies  (466)  (157)
Provision for restructuring and asset impairment charges  --  711
Non-cash portion of lease exit costs  --  359
Other than temporary impairment of investments  --  806
Deferred income taxes  1,284  (658)
Other, net  (888)  1,655
Changes in operating assets and liabilities    
Accounts receivable  (656)  (316)
Inventories  (559)  (8,948)
Other current assets  (3,864)  (1,122)
Accounts payable and accrued liabilities  (2,682)  853
Net cash provided by operating activities  103  6,931
     
Investing activities:    
Purchases of property and equipment  (9,547)  (6,858)
Proceeds from sales of property and equipment  958  17
Proceeds from sale of interest in affiliate  2,348  1,410
Proceeds from sales of investments  --  1,186
Purchases of investments  (28,125)  (1,303)
Acquisition of retail licensee store  --  (485)
Other, net  88  84
Net cash used in investing activities  (34,278)  (5,949)
     
Financing activities:    
Repayments of real estate notes payable  (179)  (149)
Issuance of common stock  643  295
Repurchases of common stock  (759)  (5,572)
Taxes paid related to net share settlements of equity awards  (226)  --
Excess tax benefits from stock-based compensation  317  --
Cash dividends  (2,283)  (7,190)
Net cash used in financing activities  (2,487)  (12,616)
Change in cash and cash equivalents  (36,662)  (11,634)
Cash and cash equivalents - beginning of period  45,566  69,601
Cash and cash equivalents - end of period  $ 8,904  $ 57,967
 
 
 
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES 
Segment Information - unaudited
(In thousands)
         
  Quarter ended Quarter ended Nine months ended Nine months ended
  August 31, 2013 August 25, 2012 August 31, 2013 August 25, 2012
Net Sales        
Wholesale  $ 52,927  $ 44,805  $ 160,820  $ 133,355
Retail  46,245  41,178  147,672  122,800
Inter-company elimination  (22,020)  (21,545)  (70,268)  (63,295)
Consolidated  $ 77,152  $ 64,438  $ 238,224  $ 192,860
         
Operating Income (Loss)        
Wholesale  $ 2,367  $ 1,711  $ 8,218  $ 5,575
Retail  (1,509)  (1,503)  (1,803)  (2,437)
Inter-company elimination  (35)  558  182  497
Restructuring and asset impairment charges  --  --  --  (711)
Lease exit costs  --  --  --  (359)
Consolidated  $ 823  $ 766  $ 6,597  $ 2,565
 
 
 
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Supplemental Retail Information---unaudited
(In thousands)
                 
   50 Comparable Stores  48 Comparable Stores
  Quarter Ended Quarter Ended Nine Months Ended Nine Months Ended
  August 31, 2013 August 25, 2012 August 31, 2013 August 25, 2012
    Percent of   Percent of   Percent of   Percent of
  Amount Net Sales Amount Net Sales Amount Net Sales Amount Net Sales
                 
Net sales  $ 42,528 100.0%  $ 40,931 100.0%  $ 130,338 100.0%  $ 118,977 100.0%
                 
Cost of sales  21,968 51.7%  21,492 52.5%  67,832 52.0%  61,479 51.7%
                 
Gross profit  20,560 48.3%  19,439 47.5%  62,506 48.0%  57,498 48.3%
                 
Selling, general and administrative expense*  21,355 50.2%  20,776 50.8%  62,583 48.0%  58,559 49.2%
                 
Income from operations  $ (795) -1.9%  $ (1,337) -3.3%  $ (77) -0.1%  $ (1,061) -0.9%
                 
                 
  All Other Stores All Other Stores
  Quarter Ended Quarter Ended Nine Months Ended Nine Months Ended
  August 31, 2013 August 25, 2012 August 31, 2013 August 25, 2012
    Percent of   Percent of   Percent of   Percent of
  Amount Net Sales Amount Net Sales Amount Net Sales Amount Net Sales
                 
Net sales  $ 3,717 100.0%  $ 247 100.0%  $ 17,334 100.0%  $ 3,823 100.0%
                 
Cost of sales  2,086 56.1%  210 85.0%  9,362 54.0%  2,399 62.8%
                 
Gross profit  1,631 43.9%  37 15.0%  7,972 46.0%  1,424 37.2%
                 
Selling, general and administrative expense  2,123 57.1%  203 82.2%  9,136 52.7%  2,538 66.4%
Pre-opening store costs**  222 6.0%  -- 0.0%  562 3.2%  262 6.9%
                 
Loss from operations  $ (714) -19.2%  $ (166) -67.2%  $ (1,726) -10.0%  $ (1,376) -36.0%
                 
*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 possession and the store opening date, employee payroll and training costs prior to store opening and other various expenses incurred prior to store opening.
CONTACT: J. Michael Daniel

         Senior Vice President and

         Chief Financial Officer

         (276) 629-6614 - Investors



         Jay S. Moore

         Director of Communications

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

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