Bassett Furniture Industries
Sep 29, 2016
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Bassett Announces Fiscal Third Quarter Results

BASSETT, Va., Sept. 29, 2016 (GLOBE NEWSWIRE) -- Bassett Furniture Industries, Inc. (Nasdaq:BSET) announced today its results of operations for its fiscal quarter ended August 27, 2016.

Fiscal 2016 Third Quarter Highlights

"Despite facing an environment of weaker demand for home furnishings during our third quarter, our level of profitability remained intact while consolidated sales declined by 5.7%," said Robert H. Spilman, Jr., Chairman and CEO.  "We were especially encouraged by the 7.9% comparable store written sales gain that we posted in the period.  With our factories running efficiently and our inventory levels in good shape, we are positioned to service our Labor Day sales and meet demand for the historically stronger fall selling season."

Wholesale Segment                                                                                        

Net sales for the wholesale segment were $58.3 million for the third quarter of 2016 as compared to $62.2 million for the third quarter of 2015, a decrease of $3.9 million or 6.2%.  This decrease was driven by lower shipments to the open market (outside the Bassett Home Furnishings network) while shipments to the Bassett Home Furnishings network were essentially flat compared to the prior year period. The decrease in sales to the open market was primarily due to lower sales of imported product primarily from the discontinuation of our relationship with a significant customer and loss of sales from the HGTV Home Collection brand, exited late in 2015.  Gross margins for the wholesale segment were 35.4% for the third quarter of 2016 as compared to 33.5% for the third quarter of 2015.  This increase is primarily due to the $1.4 million settlement of the Polyurethane Foam Antitrust Litigation.  Excluding the effects of the legal settlement, the gross margin would have been 33.0%.  This decrease is due primarily to lower margins in domestic wood operations associated with introduction of new products into the growing Bench Made line.  Wholesale SG&A for the third quarter of 2016 was $15.0 million as compared to $17.0 million for the prior year period. SG&A as a percentage of sales decreased to 25.7% as compared to 27.4% for the third quarter of 2015. This decrease in SG&A as a percentage of sales was primarily driven by lower bad debt costs and incentive compensation expenses.  Operating income was $5.6 million or 9.8% of sales as compared to $3.8 million or 6.1% of sales in the prior year.

"Our domestically produced products accounted for 69% of wholesale sales for the quarter as consumers continue to gravitate to the custom options and high levels of service that characterize our casual dining, Bench Made, and custom upholstery product lines," continued Spilman.  "Our wholesale sales decline was primarily attributable to sales of imported products to customers outside of our store network, most notably one major account that we discontinued our relationship with earlier in the year.  We will be introducing a new range of motion upholstery products designed specifically for non-Bassett store markets at the upcoming High Point furniture market in three weeks.  Additionally, we are excited about our upcoming late fall retail product launch as we plan to build on the successful spring introduction that drove our written comparable store sales gains this summer."

Retail Segment

Net sales for the 59 Company-owned Bassett Home Furnishings stores were $61.2 million for the third quarter of 2016 as compared to $62.0 million for the third quarter of 2015, a decrease of $0.8 million or 1.3%. The decrease was due to a $0.5 million or 0.9% decrease in comparable store sales along with a $0.3 million decrease 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 7.9% for the third quarter of 2016 as compared to the third quarter of 2015. 

The consolidated retail operating profit for the third quarter of 2016 was $0.8 million as compared to $2.0 million for the third quarter of 2015, a decline of $1.2 million.  The 56 comparable stores generated operating income of $1.5 million for the quarter, or 2.4% of sales, as compared to $2.5 million, or 4.3% of sales, for the prior year quarter. Gross margins for comparable stores were 50.2% for the third quarter of 2016 compared to 50.4% for the third quarter of 2015.  SG&A expenses for comparable stores increased $0.8 million to $28.4 million or 47.8% of sales as compared to 46.1% of sales for the third quarter of 2015. This increase in SG&A as a percentage of sales was primarily driven by higher advertising and promotional costs along with increased health care costs. 

"Corporate retail profitability was affected by several factors in the quarter as delivered comparable sales declined by (0.9%)," added Spilman.  "In addition to higher advertising and financing expenses designed to drive sales, our new store opening costs increased significantly as we begin a period of growth that will accelerate in 2017.  Our Hunt Valley, Maryland location opened during the last week of the quarter.  We have opened two new stores in fiscal 2016 and closed three locations as leases have expired.  Next year, we plan to open five to six new locations and reposition four others.  Finally, we are focused on continuing our third quarter written sales momentum and extending our 5+ year run of comparable store growth.  To this end, we currently have initiatives underway to improve our in-store visual presentation and better communicate our custom capabilities to the consumer."

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 third 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  Nine Months Ended
 August 27, 2016  August 29, 2015  August 27, 2016  August 29, 2015
  Percent of   Percent of   Percent of   Percent of
 Amount Net Sales  AmountNet Sales  AmountNet Sales  AmountNet Sales
               
Sales revenue:              
Furniture and accessories$91,465    $97,107    $276,857     $286,122  
Logistics 13,247     13,904     41,395     29,250  
Total sales revenue 104,712   100.0%   111,011  100.0%   318,252  100.0%    315,372  100.0%
               
Cost of furniture and accessories sold 40,091  38.3%   44,824  40.4%   124,496  39.1%   133,676  42.4%
               
Selling, general and administrative expenses excluding              
new store pre-opening costs 56,800  54.2%   58,303  52.5%   173,845  54.6%   163,203  51.7%
New store pre-opening costs 281  0.3%   192  0.2%   727  0.2%   236  0.1%
Lease exit costs -  0.0%   -  0.0%   -  0.0%   419  0.1%
Asset impairment charges -  0.0%   -  0.0%   -  0.0%   106  0.0%
Management restructuring costs -  0.0%    -  0.0%   -  0.0%   449  0.1%
Income from operations 7,540  7.2%   7,692  6.9%   19,184  6.0%   17,283  5.5%
               
Remeasurement gain on acquisition of affiliate -  0.0%   -  0.0%   -  0.0%    7,212  2.3%
Income from Continued Dumping & Subsidy Offset Act -  0.0%   -  0.0%   -  0.0%   1,066  0.3%
Other loss, net (647) -0.6%   (472) -0.4%   (1,904) -0.6%   (1,692)  -0.5%
Income before income taxes 6,893  6.6%   7,220  6.5%   17,280  5.4%   23,869  7.6%
               
Income tax provision 2,728  2.6%   2,954  2.7%   6,496  2.0%    9,118  2.9%
Net income$4,165  4.0%  $4,266  3.8%  $10,784  3.4%  $14,751  4.7%
                
Basic earnings per share$0.39    $0.39    $1.00    $1.38  
               
Diluted earnings per share$0.38    $0.39    $0.99    $1.36  
                       


BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
  (Unaudited)   
Assets August 27, 2016  November 28, 2015
Current assets     
Cash and cash equivalents $28,051   $36,268 
Short-term investments  23,125    23,125 
Accounts receivable, net  19,302    21,197 
Inventories, net   53,413    59,896 
Other current assets  11,519    6,798 
Total current assets  135,410    147,284 
       
Property and equipment, net  105,595    96,104 
      
Other long-term assets     
Deferred income taxes, net  9,006    13,471 
Goodwill and other intangible assets   17,440    17,682 
Other   8,048    8,002 
Total long-term assets  34,494    39,155 
Total assets  $275,499   $282,543 
      
Liabilities and Stockholders' Equity     
Current liabilities     
Accounts payable $19,569   $20,916 
Accrued compensation and benefits  11,927    14,345 
Customer deposits  20,132    23,999 
Dividends payable  -    2,184 
Current portion of long-term debt  5,003    5,273 
Other accrued liabilities  11,077    13,133 
Total current liabilities  67,708    79,850 
      
Long-term liabilities     
Post employment benefit obligations  12,634    12,694 
Long-term debt  9,077    8,500 
Other long-term liabilities  3,915    4,133 
Total long-term liabilities  25,626     25,327 
      
Stockholders' equity     
Common stock  54,114    54,580 
Retained earnings  128,635    120,904 
Additional paid-in-capital  1,924    4,560 
Accumulated other comprehensive loss  (2,508)   (2,678)
Total stockholders' equity  182,165    177,366 
Total liabilities and stockholders' equity $275,499   $282,543 
          


BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - unaudited
(In thousands)
      
   Nine Months Ended
  August 27, 2016  August 29, 2015
Operating activities:     
Net income $10,784   $14,751 
Adjustments to reconcile net income to net cash provided by     
(used in) operating activities:     
Depreciation and amortization   8,866    7,302 
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    933 
Deferred income taxes  4,360    3,778 
Excess tax benefits from stock-based compensation  87    2,008 
Other, net  256    1,445 
Changes in operating assets and liabilities     
Accounts receivable  2,334    (751)
Inventories  6,483    (8,165)
Other current and long-term assets  (4,721)   (21)
Customer deposits  (3,867)   (3,196)
Accounts payable and accrued liabilities  (6,207)   2,158 
Net cash provided by operating activities  18,965    13,335 
      
Investing activities:     
Purchases of property and equipment  (18,955)    (11,283)
Proceeds from sale of retail  real estate and property and equipment  632    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  (18,323)   (16,999)
      
Financing activities:      
Cash dividends  (5,238)   (4,806 )
Proceeds from the exercise of stock options  114    4,018 
Other issuance of common stock  182    254 
Repurchases of common stock  (3,989)   (1,374)
Taxes paid related to net share settlement of equity awards  (77)   (178)
Repayments of notes payable  (7,235)   (1,630)
Proceeds from equipment loans  7,384    1,307 
Net cash used in financing activities  (8,859)   (2,409)
Change in cash and cash equivalents  (8,217)   (6,073)
Cash and cash equivalents - beginning of period  36,268    26,673 
Cash and cash equivalents - end of period $28,051   $20,600 
          


BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Segment Information - unaudited
(In thousands)
            
  Quarter Ended  Nine Months Ended
  August 27, 2016  August 29, 2015  August 27, 2016  August 29, 2015
Net Sales           
Wholesale $58,303   $62,165   $177,785   $187,675 
Retail - Company-owned stores  61,216     62,009    184,754    183,113 
Logistical services  22,991    23,650    71,480    51,607 
Inter-company eliminations:           
Furniture and accessories  (28,054)   (27,067)   (85,682)   (84,666)
Logistical services  (9,744)   (9,746)   (30,085)   (22,357)
Consolidated $104,712   $111,011   $318,252   $315,372 
            
Operating Income           
Wholesale $5,648   $3,795   $14,380   $11,518 
Retail  768    2,037    1,465    3,967 
Logistical services  674    1,070    2,079    2,089 
Inter-company elimination  450    790    1,260    683 
Lease exit costs  -    -    -    (419)
Asset impairment charges  -    -    -    (106)
Management restructuring costs  -    -    -     (449)
Consolidated $7,540   $7,692   $19,184   $17,283 
            


BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Rollforward of BHF Store Count
     
      
  November 28,  August 27,
  2015 Opened*Closed*2016
      
Company-owned stores 602 (3)59
Licensee-owned stores 33- (1)32
      
Total 932 (4)91
      
      
* 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   Nine Months Ended  Nine Months Ended
 August 27, 2016  August 29, 2015   August 27, 2016  August 29, 2015
  Percent of   Percent of    Percent of   Percent of
 AmountNet Sales  AmountNet Sales   AmountNet Sales  AmountNet Sales
                
Net sales$59,371  100.0%  $59,884  100.0%    $176,425  100.0%  $175,849  100.0%
                
Cost of sales 29,568  49.8%   29,717  49.6%    88,545  50.2%   87,490  49.8%
                
Gross profit 29,803  50.2%   30,167  50.4%    87,880  49.8%   88,359  50.2%
                
Selling, general and administrative expense* 28,353  47.8%   27,621  46.1%    84,088  47.7%   83,237  47.3%
                
Income from operations$1,450  2.4%  $2,546  4.3%   $3,792  2.1%  $5,122  2.9%
                
                
 All Other Stores   All Other Stores
 Quarter Ended  Quarter Ended   Nine Months Ended  Nine Months Ended
 August 27, 2016  August 29, 2015   August 27, 2016   August 29, 2015
  Percent of   Percent of    Percent of   Percent of
 AmountNet Sales  AmountNet Sales   AmountNet Sales  AmountNet Sales
                
Net sales$1,845   100.0%  $2,125  100.0%   $8,329  100.0%  $7,264  100.0%
                
Cost of sales 910  49.3%   1,151  54.2%    4,889  58.7%   3,942  54.3%
                
Gross profit 935  50.7%   974  45.8%    3,440  41.3%   3,322  45.7%
                
Selling, general and administrative expense 1,336  72.4%   1,291  60.8%    5,040  60.5%   4,241  58.4%
Pre-opening store costs** 281  15.2%   192  9.0%    727  8.7%   236  3.2%
                 
Loss from operations $(682) -37.0%  $(509) -24.0%   $(2,327) -27.9%  $(1,155) -15.9%
                 
*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 store opening date, employee payroll and training costs prior to store opening         
and other various expenses incurred prior to store opening.         
           
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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