Bassett Furniture Industries
Oct 4, 2007
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Bassett Announces Third Quarter 2007 Results

BASSETT, Va., Oct 4, 2007 (PrimeNewswire via COMTEX News Network) -- Bassett Furniture Industries Inc. (Nasdaq:BSET) announced today its results of operations for its fiscal quarter ended August 25, 2007.

Sales for the third quarter of 2007 were $70.5 million down 9% from $77.6 million for the third quarter of 2006. This shortfall is primarily due to continued soft furniture retail conditions, which have impacted both retail sales and wholesale shipments. Gross margins for the third quarter of 2007 were 35% compared to 30% for the third quarter of 2006 due primarily to a shift in product mix from domestic to imported, improved retail margins and a change in classification of invoiced freight on wholesale shipments (see below). Selling, general and administrative expenses increased primarily due to spending to support the Company's key retail initiatives and the change in classification of invoiced freight as noted above. The Company reported net income of $0.7 million, or $0.06 per share, as compared to net income of $0.1 million, or $0.01 per share, in the third quarter of 2006.

The Bassett Furniture retail store program had 132 stores (103 licensed and 29 Company-owned) in operation at the end of the third quarter. No stores were opened during the quarter and one store was closed. Last month, the Company unveiled a new store prototype opening a new Company-owned store in Atlanta and a remodeled store in Charlotte. The prototype was created to allow a more stylish, residential feel while highlighting Bassett's custom manufacturing capabilities. The Company expects three new licensee-owned stores to open in the next three to four months incorporating this prototype.

"Our industry continues to suffer from sluggish consumer demand coupled with a weak housing market and a growing consumer credit crunch. Industry conditions remain difficult and our results for the third quarter reflect that," said Robert H. Spilman Jr., Bassett president and chief executive officer. "Although business conditions are tough, we are excited about our recently announced retail strategies. Our dealers' reception of our new lines introduced in September have been extremely positive. We also believe that the new prototype recently introduced in Atlanta and Charlotte will reinforce both our commitment to elevating the visual appeal of our stores while highlighting our custom furniture capabilities."

Wholesale Segment

Net sales for the wholesale segment were $58.5 million for the third quarter of 2007, 13% below the $67.2 million level attained in the third quarter of 2006. This shortfall is partially offset by $1.0 million of reported revenue due to a change in the company's invoicing practices with respect to freight charges for wholesale shipments to retailers. During July, the Company began invoicing these customers on a fully landed basis such that the dealer invoice price includes the freight charge for delivery. For the first nine months of 2007, approximately 73% of wholesale shipments were to Bassett stores compared to 70% for the first nine months of 2006. Additionally, approximately 47% of wholesale shipments in the first nine months were imported products compared to 44% for the first nine months of 2006. Gross margins for the wholesale segment were 24.4% for the third quarter of 2007 as compared to 23.2% for 2006. As expected, gross margins have been favorably impacted by an increased mix of higher margin imported product. In addition, margins have been negatively impacted by the wind-down costs and inventory markdowns associated with the closure of the Bassett plant and lower volumes in the Company's two domestic production facilities. The Company expects improved wholesale operating results in the fourth quarter of 2007 from a full quarter of improved product mix coupled with aggressive cost control. With the continued difficult furniture retail environment, the Company will continue to assess and adjust its wholesale cost structure to match associated demand.

Retail Segment

Bassett's 29 corporate stores continued to experience soft conditions at retail with sales of $21.1 million in the third quarter of 2007 as compared to $20.1 million in the third quarter of 2006 with sales increases primarily resulting from additional Company-owned stores. Comparable store sales (sales for stores open for longer than one year) for Company-owned stores increased 2% for the year as compared to 2006. Gross margins for the quarter increased by over five percentage points due to improved pricing and promotional strategies, coupled with less clearance sales activity as compared to 2006. The Company believes that the combination of new product introductions, store prototype retrofits, better hiring and training of design consultants and continued improved marketing efforts will lead to the further improvement of retail operating results.

Other Income and Income Taxes

Other income for the third quarter was $0.8 million as compared to $1.2 million for 2006. This reflects lower levels of investment income due to overall market conditions. The Company's Alternative Asset Fund did record positive earnings for the quarter, however, below the historical levels of 2006 and the first half of 2007. The Company also recorded a significant tax benefit during the third quarter of 2007 due to changes in the projected full year pretax losses.

Balance Sheet and Cash Flow

Accounts receivable have increased $2.5 million during the first nine months of 2007, due to the slower pace of collections from certain store licensees related in part to the overall retail environment. The Company continually assesses its levels of bad debt reserves and increased those reserves by $0.8 million during the third quarter of 2007. Although the Company believes it has adequate reserves for bad debts, it will continue to work with its dealers to help limit bad debt exposure. Some of these actions expected to be taken could result in three to four licensed store closings over the next several months. Inventories have decreased $4.8 million for the year due to lower business levels and improved inventory management.

The Company is committed to maintaining the overall strength of its balance sheet. With its $78.2 million investment portfolio and relatively low levels of debt, the Company continues to invest in retail growth and has continued to pay quarterly dividends to shareholders. The Company used $6.7 million of cash from operations during the first nine months of 2007 and paid $7.1 million in regular quarterly dividends. These cash uses were primarily funded through sales of investments netting an approximate $4.5 million, $6.1 million of dividends received from an affiliate and a $2.0 million increase in borrowings under its revolving credit facility. With $6.0 million outstanding, the $40 million revolving credit facility matures November 30, 2007 and is presented as a current liability in the consolidated balance sheet. The Company is in the process of finalizing an extension of the credit agreement and expects to have the amended facility in place by the middle of October 2007.

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 more than 130 Bassett stores, Bassett has leveraged its strong brand name in furniture into a growing network of corporate and licensed stores that focus on providing consumers with a friendly environment for buying furniture and accessories. The most significant growth vehicle 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. 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 quarter of fiscal 2007, 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: economic, competitive, governmental and other factors identified in Bassett's filings with the Securities and Exchange Commission, and the effects of national and global economic or other conditions and future events on the retail demand for home furnishings.



           BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
        Condensed Consolidated Statements of Income - Unaudited
               (In thousands, except for per share data)

                                                        (Restated)
                                  13 Weeks Ended      13 Weeks Ended
                                  August 25, 2007     August 26, 2006
                                 -----------------   -----------------
                                          Percent             Percent
                                           of Net              of Net
                                  Amount   Sales      Amount   Sales
                                 -----------------   -----------------

 Net sales                       $ 70,497   100.0%   $ 77,560   100.0%

 Cost of sales                     45,847    65.0%     54,226    69.9%
                                 -----------------   -----------------

 Gross profit                      24,650    35.0%     23,334    30.1%
                                 -----------------   -----------------

 Selling, general and
  administrative                   27,123    38.5%     24,854    32.0%

 Income (loss) from operations     (2,473)   -3.5%     (1,520)   -2.0%

 Other income, net                    785     1.1%      1,175     1.5%
                                 -----------------   -----------------

 Income (loss) before income
  taxes                            (1,688)   -2.4%       (345)   -0.4%
 Income tax (provision) benefit     2,364     3.4%        402     0.5%
                                 -----------------   -----------------
 Net income                      $    676     1.0%   $     57     0.1%
                                 =================   =================

 Basic earnings per share:       $   0.06            $   0.01
                                 =========           =========

 Diluted earnings per share:     $   0.06            $   0.01
                                 =========           =========


           BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
        Condensed Consolidated Statements of Income - Unaudited
               (In thousands, except for per share data)

                                                        (Restated)
                                  39 Weeks Ended      39 Weeks Ended
                                  August 25, 2007     August 26, 2006
                                 -----------------   -----------------
                                          Percent              Percent
                                           of Net               of Net
                                  Amount   Sales      Amount    Sales
                                 -----------------   -----------------

 Net sales                       $219,349   100.0%   $251,712   100.0%

 Cost of sales                    148,442    67.7%    173,264    68.8%
                                 -----------------   -----------------

 Gross profit                      70,907    32.3%     78,448    31.2%
                                 -----------------   -----------------

 Selling, general and
  administrative                   79,005    36.0%     77,947    31.0%
 Restructuring and impaired
  asset charges                     5,544     2.5%         --     0.0%
 Lease exit costs                   1,934     0.9%         --     0.0%
                                 -----------------   -----------------
 Operating Income (loss)          (15,576)   -7.1%        501     0.2%

 Other income, net                  4,477     2.0%      5,974     2.4%
                                 -----------------   -----------------

 Income (loss) before income
  taxes                           (11,099)   -5.1%      6,475     2.6%
 Income tax (provision) benefit     5,168     2.4%    (1,405)    -0.6%
                                 -----------------   -----------------

 Net income (loss)               $ (5,931)   -2.7%   $  5,070     2.0%
                                 -----------------   -----------------

 Basic earnings (loss) per
  share:                         $  (0.50)           $   0.43
                                 =========           =========

 Diluted earnings (loss) per
  share:                         $  (0.50)           $   0.43
                                 =========           =========


          BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
                 Condensed Consolidated Balance Sheets
            (In thousands, except share and per share data)

                                      (Unaudited)
 Assets                            August 25, 2007   November 25, 2006
                                   ---------------   -----------------
 Current assets
  Cash and cash equivalents        $         4,360   $           6,051
  Accounts receivable, net                  40,704              38,253
  Inventories                               44,049              48,880
  Deferred income taxes                      4,915               6,391
  Assets held for sale                          --               1,091
  Other current assets                      10,297               6,812
                                   ---------------   -----------------
  Total current assets                     104,325             107,478
                                   ---------------   -----------------

 Property and equipment, net                52,026              58,925
                                   ---------------   -----------------

 Investments                                78,193              78,617
 Retail real estate                         31,200              33,501
 Notes receivable, net                      14,296              13,391
 Deferred income taxes                      11,081               5,657
 Other                                      13,429              12,368
                                   ---------------   -----------------
                                           148,199             143,534
                                   ---------------   -----------------
 Total assets                      $       304,550   $         309,937
                                   ===============   =================

 Liabilities and Stockholders'
  Equity

 Current liabilities
  Accounts payable                 $        18,954   $          16,927
  Customer deposits                          7,594               8,310
  Short-term revolving debt                  6,000                  --
  Other accrued liabilities                 20,915              18,323
                                   ---------------   -----------------
  Total current liabilities                 53,463              43,560
                                   ---------------   -----------------

 Long-term liabilities
  Post employment benefit
   obligations                              15,051              15,263
  Long-term revolving debt                      --               4,000
  Real estate notes payable                 19,022              19,522
  Distributions in excess of
   affiliate earnings                       13,427              11,726
  Other long-term liabilities                1,517                  --
                                   ---------------   -----------------
                                            49,017              50,511
                                   ---------------   -----------------

 Commitments and Contingencies

 Stockholders' equity

  Common stock                              59,032              59,018
  Retained earnings                        138,515             151,535
  Additional paid-in-capital                 2,100               1,993
  Accumulated other comprehensive
   income                                    2,423               3,320
                                   ---------------   -----------------
  Total stockholders' equity               202,070             215,866
                                   ---------------   -----------------
 Total liabilities and
  stockholders' equity             $       304,550   $         309,937
                                   ===============   =================


          BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
           Consolidated Statements of Cash Flows - Unaudited
                            (In thousands)

                                            Nine Months Ended
                                    ----------------------------------
                                                         As restated
                                    August 25, 2007    August 26, 2006
                                    ---------------    ---------------
 Operating activities:
 Net income (loss)                  $       (5,931)    $        5,070
 Adjustments to reconcile net
  income (loss) to net cash
  used in operating activities:
  Depreciation and amortization              6,864              6,886
  Equity in undistributed income of
   investments and unconsolidated
   affiliated companies                     (6,358)            (7,193)
  Provision for restructuring and
   asset impairment costs                    5,544                 --
  Provision for lease exit costs             1,934                 --
  Realized income from investments          (2,393)            (1,844)
  Net loss from sales of property
   and equipment                                33                 --
  Provision for losses on trade
   accounts receivable                       2,205              2,633
  Deferred income taxes                     (3,693)              (238)
  Changes in post employment
   benefit obligations                         (18)              (407)
  Cash received on licensee notes
   for operating activities                    100                 28
  Changes in operating assets and
   liabilities (exclusive of assets
   acquired in business
   combinations):
    Accounts receivable                     (9,660)            (7,707)
    Inventories                              5,465             (1,897)
    Other current assets                    (3,283)               828
    Accounts payable and accrued
     liabilities                             2,487             (3,496)
                                    ---------------    ---------------
    Net cash used in operating
     activities                             (6,704)            (7,337)
                                    ---------------    ---------------
 Investing activities:

 Purchases of property and
  equipment                                 (2,842)            (2,712)
 Purchases of retail real estate               (40)            (3,552)
 Proceeds from sales of property
  and equipment                              3,111              1,826
 Proceeds from sales of investments         13,134             18,227
 Purchases of investments                   (8,590)           (11,678)
 Dividends from an affiliate                 6,091              6,559
 Proceeds from sale of certain
  assets of Weiman division                     --              1,300
 Net cash received (paid) on
  licensee notes                               920               (465)
 Other, net                                   (322)              (304)
                                    ---------------    ---------------
    Net cash provided by investing
      activities                            11,462              9,201
                                    ---------------    ---------------
 Financing activities:
 Borrowings under revolving
  credit facility                            2,000              5,000
 Repayments of long-term debt                 (770)              (372)
 Repayments of real estate notes
  payable                                     (500)              (372)
 Issuance of common stock                      385                510
 Repurchases of common stock                  (476)              (910)
 Cash dividends                             (7,088)            (7,088)
                                    ---------------    ---------------
    Net cash provided by (used in)
     financing activities                   (6,449)            (3,232)
                                    ---------------    ---------------

 Change in cash and cash
  equivalents                               (1,691)            (1,368)

 Cash and cash equivalents -
  beginning of period                        6,051              7,109
                                    ---------------    ---------------

 Cash and cash equivalents - end
  of period                         $        4,360     $        5,741
                                    ===============    ===============



          BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
                    Segment Information - Unaudited
                            (In thousands)

                            13 Weeks Ended          39 Weeks Ended
                        ----------------------  ----------------------
                                    (Restated)              (Restated)
                        August 25,  August 26,  August 25,  August 26,
                           2007        2006        2007        2006
                        ----------------------  ----------------------
 Net Sales
 Wholesale              $  58,482   $  67,190   $ 184,216   $ 218,919
 Retail                    21,075      20,102      63,614      62,905
 Inter-company
  elimination              (9,060)     (9,732)    (28,481)    (30,112)
                        ----------------------  ----------------------
 Consolidated           $  70,497   $  77,560   $ 219,349   $ 251,712
                        ======================  ======================
 Operating Income (loss)
 Wholesale              $     555   $   2,433   $     157   $   9,623
 Retail                    (2,898)     (3,846)     (8,023)     (8,692)
 Inter-company
  elimination                (130)       (107)       (232)       (430)
 Restructuring and
  impaired asset charges       --          --      (5,544)         --
 Lease exit costs              --          --      (1,934)         --
                        ----------------------  ----------------------
 Consolidated           $  (2,473)  $  (1,520)  $ (15,576)  $     501
                        ======================  ======================


          BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES

               Reconciliation of Net Income as Reported
                 to Net Income as Adjusted (Unaudited)
               (In thousands, except for per share data)

                                               (Restated)
                      39 Weeks Ended    Per   39 Weeks Ended     Per
                      August 25, 2007  Share  August 26, 2006   Share
                      -----------------------------------------------

 Net income (loss)
  as reported            $  (5,931)   $(0.50)    $   5,070     $ 0.43
 Restructuring &
  impaired asset
  charges, net of
  taxes (a)                  3,382      0.29            --         --
 Lease exit costs,
  net of taxes (a)           1,180      0.10            --         --
 Net income (loss) as
  adjusted               $ (1,369)    $(0.11)     $ 5,070      $ 0.43
                      ===============================================

 (a)  Adjustments are net of income taxes at a 39% effective tax rate

 The Company has included the "as adjusted" information because it
 uses, and believes that others may use, such information in comparing
 the Company's operating results from period to period.  However, the
 items excluded in determining the "as adjusted" information are
 significant components in understanding and assessing the Company's
 overall financial performance for the periods covered.

Restatement of Financial Statements

As more fully discussed in our 2006 Form 10-K, the fiscal 2006 quarterly financial information was restated based on our review of the accounting treatment associated with our acquisition of three retail licensee operations in fiscal 2005 and the classification of certain notes receivable activity in the statement of cash flows. The effects of those restatements on the financial statements for the quarter and nine months ended August 26, 2006 included herein are summarized below:



                                            Increase (Decrease)
                                    ----------------------------------
                                     Quarter Ended   Nine Months Ended
                                     August 26, 2006   August 26, 2006
                                    ----------------------------------
 Gross profit                        $     (627)       $     (1,176)
 Operating income                          (627)               (929)
 Net income                                (376)               (558)

 Cash flow from operations           $       --        $         28
 Cash flow from investing activities         --                 (28)

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SOURCE: Bassett Furniture

Bassett Furniture Industries Inc.
          Investors:
          Barry C. Safrit, S.V.P., CFO
            (276) 629-6757
            Fax: (276) 629-6332
          Media:
          Jay S. Moore, Dir. of Communications
            (276) 629-6450
            Fax: (276) 629-6418

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