Bassett Furniture Industries
Jan 19, 2017
PDF

Bassett Announces Fiscal Fourth Quarter Results

BASSETT, Va., Jan. 19, 2017 (GLOBE NEWSWIRE) -- Bassett Furniture Industries, Inc. (Nasdaq:BSET) announced today its results of operations for its fiscal quarter ended November 26, 2016.

Fiscal 2016 Fourth Quarter Highlights

"Led by a strong performance from our corporate retail segment, we closed the year on a high note," commented Robert H. Spilman, Jr., Chairman and CEO.  "After a sluggish start to the year, both our corporate and licensed retail store groups finished 2016 positively, largely due to the comparable store sales momentum that they generated during the second half of the year.  We look ahead to a new year that will see us make significant investments in our store network, expand our digital presence, upgrade our manufacturing facilities and broaden our logistics platform."

Wholesale Segment                                                                                        

Net sales for the wholesale segment were $62.6 million for the fourth quarter of 2016 as compared to $64.5 million for the fourth quarter of 2015, a decrease of $1.9 million or 3.0%.  This decrease was driven by lower shipments to the open market (outside the Bassett Home Furnishings network) partially offset by a 5.7% increase in shipments to the Bassett Home Furnishings network as 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 35.5% for the fourth quarter of 2016 as compared to 33.9% for the fourth quarter of 2015. This increase is due primarily to improved margins in the imported wood product as significant margin adjustments were necessary in the fourth quarter of 2015 as the Company was exiting the HGTV Home Collection brand.  Wholesale SG&A for the fourth quarter of 2016 was $17.9 million as compared to $17.7 million for the prior year period. SG&A as a percentage of sales increased to 28.7% as compared to 27.5% for the fourth quarter of 2015. This increase in SG&A as a percentage of sales was primarily driven by higher marketing and advertising costs.  Operating income was $4.3 million or 6.9% of sales as compared to $4.1 million or 6.4% of sales in the prior year.

"Our product assortment continues to undergo an important makeover as we seek more sales," continued Spilman.  "From our wood division, the Peninsula collection, the Wood Haven bedroom, the Bench Made bedroom, and several new occasional offerings hit our stores in December in advance of the key holiday selling weekends that start the year.  In upholstery, the Designer Comfort and American Casual collections arrived in the stores on the same schedule.  In addition to these assortment changes, two other new product offerings are significant as we look ahead.  A revamped casual dining program was introduced at the October High Point Market which will begin shipping to our dealers and stores in February.  This program has been a stalwart contributor to our wood sales for over 15 years and we have made capital investments in finishing technology in our Martinsville, Virginia manufacturing facility to produce the latest advancements in today's marketplace.  In addition to the work at the Martinsville facility, we will move our Zenith Logistics Texas distribution center and our Texas upholstery factory into a new 375,000 square foot building in mid-February.  By housing both of these entities under one roof, we expect to gain efficiency and cut costs.  The October show also included the debut of Club Level by Bassett, a major foray into the growing motion upholstery category.  Primarily aimed at the open market channel but also featured in select Bassett stores, Club Level was met with enthusiasm by our independent dealer base and is already showing potential with the initial retail sell through results.  Taken collectively, this new product effort will be a key determinant in the fortunes of Bassett in 2017 and our management will spend significant time in the field to make it successful."

Retail Segment

Net sales for the 59 Company-owned Bassett Home Furnishings stores were $69.9 million for the fourth quarter of 2016 as compared to $66.3 million for the fourth quarter of 2015, an increase of $3.6 million or 5.5%. The increase was due to a $2.8 million or 4.3% increase in comparable store sales along with a $0.9 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 3.3% for the fourth quarter of 2016 as compared to the fourth quarter of 2015. 

The consolidated retail operating profit for the fourth quarter of 2016 was $2.9 million as compared to $2.2 million for the fourth quarter of 2015, an increase of $0.7 million.  The 56 comparable stores generated operating income of $3.4 million for the quarter, or 5.2% of sales, as compared to $2.9 million, or 4.6% of sales, for the prior year quarter. Gross margins for comparable stores were 50.2% for the fourth quarter of 2016 compared to 50.4% for the fourth quarter of 2015.  SG&A expenses for comparable stores increased $0.8 million to $30.0 million or 45.0% of sales as compared to 45.8% of sales for the fourth quarter of 2015. The decrease in SG&A as a percentage of sales was primarily due to greater leverage of fixed costs due to higher sales volumes for the comparable stores. 

"We were pleased with the performance of our retail segment during the second half of the year and we look to the future with excitement as we work to expand our 59 store corporately owned network," said Spilman.  "2016 was foundational to our blueprint for store expansion in 2017 and beyond.  This included repositioning one store, closing three, and opening two new ones in the year just ended.  Furthermore, a tremendous amount of site selection and real estate negotiations took place during the year as we prepare to open six new stores and reposition two others over the course of 2017.  Four of the new stores are expansions of existing markets and the other two are brand new.  Therefore, 2017 will be a year of investment as we absorb in excess of $2 million more in preopening and startup costs than we experienced in 2016.  In addition to these up front expenses, proper site selection, store economics, and staffing are major challenges that must be met in order to successfully execute store expansion and these factors cannot be compromised.  While we do not provide financial forecasts externally, we do believe that we have the ability to open five to six new stores annually in addition to strategically repositioning stores when warranted.  With a track record of six consecutive years of positive same store sales and our focus on store productivity, we are intent on taking our concept to new markets and consistently growing our overall store count in the years to come."

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 fourth 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 Year Ended
 November 26, 2016 November 28, 2015 November 26, 2016 November 28, 2015
  Percent of  Percent of  Percent of  Percent of
 AmountNet Sales AmountNet Sales AmountNet Sales AmountNet Sales
            
Sales revenue:           
  Furniture and accessories$  100,339   $  101,283   $  377,196   $  387,405  
  Logistics   13,447      14,272      54,842      43,522  
    Total sales revenue   113,786 100.0%    115,555 100.0%    432,038 100.0%    430,927 100.0%
            
Cost of furniture and accessories sold   43,023 37.8%    45,615 39.5%    167,519 38.8%    179,291 41.6%
            
Selling, general and administrative expenses excluding           
  new store pre-opening costs   61,333 53.9%    60,847 52.7%    235,178 54.4%    224,050 52.0%
New store pre-opening costs   421 0.4%    387 0.3%    1,148 0.3%    623 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   9,009 7.9%    8,706 7.5%    28,193 6.5%    25,989 6.0%
            
Remeasurement gain on acquisition of affiliate   - 0.0%    - 0.0%    - 0.0%    7,212 1.7%
Income from Continued Dumping & Subsidy Offset Act   240 0.2%    90 0.1%    240 0.1%    1,156 0.3%
Other loss, net   (752) -0.7%    (797)-0.7%    (2,656)-0.6%    (2,489)-0.6%
Income before income taxes   8,497 7.5%    7,999 6.9%    25,777  6.0%    31,868 7.4%
            
Income tax provision   3,452 3.0%    2,317 2.0%    9,948 2.3%    11,435 2.7%
Net income$  5,045 4.4 % $  5,682 4.9% $  15,829 3.7% $  20,433 4.7%
            
Basic earnings per share$  0.47   $  0.53   $  1.47   $  1.91  
             
Diluted earnings per share$  0.47   $  0.52   $  1.46   $  1.88  
            

 

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
 
  (Unaudited)  
Assets November 26, 2016 November 28, 2015
Current assets    
  Cash and cash equivalents  $  35,144  $  36,268 
  Short-term investments    23,125     23,125  
  Accounts receivable, net    18,358     21,197 
  Inventories, net     53,215     59,896 
  Other current assets     10,727     6,798 
Total current assets    140,569     147,284 
     
Property and equipment, net    104,655     96,104 
     
Other long-term assets    
  Deferred income taxes, net    8,071     13,471 
  Goodwill and other intangible assets    17,360     17,682 
  Other    7,612     8,002 
Total long-term assets    33,043     39,155 
Total assets $  278,267  $  282,543 
     
Liabilities and Stockholders' Equity    
Current liabilities    
  Accounts payable $  21,281  $  20,916 
  Accrued compensation and benefits    13,602     14,345 
  Customer deposits    25,181     23,999 
  Dividends payable    3,218     2,184 
  Current portion of long-term debt    3,290     5,273  
  Other accrued liabilities    10,441     13,133 
Total current liabilities    77,013     79,850 
     
Long-term liabilities    
   Post employment benefit obligations    12,760     12,694 
   Long-term debt    3,821     8,500 
  Other long-term liabilities    3,968      4,133 
Total long-term liabilities    20,549     25,327 
     
     
Stockholders' equity    
  Common stock    53,615     54,580 
  Retained earnings    129,388     120,904 
  Additional paid-in-capital    255     4,560 
  Accumulated other comprehensive loss    (2,553)    (2,678)
Total stockholders' equity    180,705     177,366 
Total liabilities and stockholders' equity $  278,267  $  282,543 
     

 

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - unaudited
(In thousands)
     
  Year Ended
  November 26, 2016 November 28, 2015
Operating activities:    
Net income $  15,829  $  20,433 
Adjustments to reconcile net income to net cash provided by    
(used in) operating activities:    
Depreciation and amortization    12,249     10,137 
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    914     1,283 
Deferred income taxes    5,324     1,930 
Collateral deposited with insurance carrier    (300)    - 
Excess tax benefits from stock-based compensation    87     1,998 
Other, net     1,055     2,082 
Changes in operating assets and liabilities     
Accounts receivable    3,228     (2,354)
Inventories    6,681     (2,624)
Other current and long-term assets     (3,629)    1,494 
Customer deposits    1,182     1,796 
Accounts payable and accrued liabilities    (3,558)    5,128 
Net cash provided by operating activities    39,062     34,396 
     
Investing activities:    
Purchases of property and equipment    (21,501)    (13,974)
Proceeds from sale of retail  real estate and property and equipment    667     2,981 
Cash paid for business acquisition, net of cash acquired    -     (7,323)
Capital contribution to affiliate    -     (1,345)
Net cash used in investing activities    (20,834)    (19,661)
     
Financing activities:     
Cash dividends     (6,311)    (5,786)
Proceeds from the exercise of stock options    114     4,031 
Other issuance of common stock    182     325 
Repurchases of common stock    (6,393)     (2,071)
Taxes paid related to net share settlement of equity awards    (77)    (178)
Repayments of notes payable    (14,251)    (2,768)
Proceeds from equipment loans    7,384     1,307 
Net cash used in financing activities    (19,352)    (5,140)
Change in cash and cash equivalents    (1,124)    9,595 
Cash and cash equivalents - beginning of period    36,268     26,673 
     
Cash and cash equivalents - end of period $  35,144  $  36,268 
     


BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES 
Segment Information - unaudited
(In thousands)
         
  Quarter Ended Year Ended
  November 26, 2016 November 28, 2015 November 26, 2016 November 28, 2015
Net Sales        
Wholesale $  62,561  $  64,505  $  240,346  $  252,180 
Retail - Company-owned stores    69,913     66,266     254,667     249,379 
Logistical services    24,227     25,643     95,707     77,250 
Inter-company eliminations:        
   Furniture and accessories    (32,135)    (29,488)    (117,817)    (114,154)
   Logistical services    (10,780)    (11,371)    (40,865)    (33,728)
Consolidated $  113,786  $  115,555  $  432,038  $  430,927 
         
Operating Income        
Wholesale $  4,292  $  4,100  $  18,672  $  15,618 
Retail     2,868     2,203     4,333     6,170 
Logistical services    1,432     1,439     3,511     3,528 
Inter-company elimination    417     964     1,677     1,647 
Lease exit costs    -      -     -      (419)
Asset impairment charges    -     -     -     (106)
Management restructuring costs    -     -     -     (449)
Consolidated $  9,009  $  8,706  $  28,193  $  25,989 
         

 

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES 
Rollforward of BHF Store Count
     
      
  November 28,  November 26,
  2015Opened*Closed*2016
      
Company-owned stores   60  2  (3)  59
Licensee-owned stores   33  -   (2)  31
      
      Total   93  2  (5)  90
      
      
* 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 Year Ended Year Ended 
 November 26, 2016 November 28, 2015 November 26, 2016  November 28, 2015 
  Percent of  Percent of   Percent of  Percent of 
 AmountNet Sales AmountNet Sales AmountNet Sales AmountNet Sales 
             
Net sales$  66,637 100.0% $  63,865 100.0%  $  243,062 100.0% $  239,713 100.0% 
             
Cost of sales   33,190 49.8%    31,688 49.6%    121,735 50.1%    119,178 49.7% 
             
   Gross profit   33,447 50.2%    32,177 50.4%    121,327 49.9%    120,535 50.3% 
             
Selling, general and administrative expense*   30,009 45.0%    29,248 45.8%    114,097 46.9%    112,484 46.9% 
             
   Income from operations$  3,438 5.2% $  2,929 4.6% $  7,230 3.0% $  8,051 3.4% 
             
             
 All Other Stores All Other Stores 
 Quarter Ended Quarter Ended Year Ended Year Ended 
 November 26, 2016 November 28, 2015 November 26, 2016 November 28, 2015 
  Percent of  Percent of  Percent of  Percent of 
 AmountNet Sales AmountNet Sales AmountNet Sales AmountNet Sales 
              
Net sales$  3,276 100.0% $  2,401 100.0% $  11,605 100.0% $  9,666 100.0% 
             
Cost of sales   1,584 48.4 %    1,257 52.4%    6,473 55.8%    5,198 53.8% 
             
   Gross profit   1,692 51.6%    1,144 47.6%    5,132 44.2%    4,468 46.2% 
             
Selling, general and administrative expense   1,841 56.2%    1,483 61.8%    6,881 59.3%    5,726 59.2% 
Pre-opening store costs**   421 12.9%    387 16.1%    1,148 9.9%    623  6.4% 
             
   Loss from operations$  (570)-17.4% $  (726)-30.2% $  (2,897)-25.0% $  (1,881)-19.5% 
             
 *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.

News Provided by Acquire Media