Bassett Furniture Industries
Jan 10, 2013
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Bassett Announces Fiscal Fourth Quarter Results

BASSETT, Va., Jan. 10, 2013 (GLOBE NEWSWIRE) -- Bassett Furniture Industries, Inc. (Nasdaq:BSET) announced today its results of operations for its fiscal quarter ended November 24, 2012.

Fiscal 2012 Fourth Quarter Highlights

On a consolidated basis, the Company reported net sales for the fourth quarter of 2012 of $76.8 million, an increase of $13.5 million, or 21%, from sales levels attained in the fourth quarter of 2011. Operating income increased to $2.5 million from $1.1 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, higher marketing and advertising costs associated with the introduction of the new HGTV Design Studios at the retail stores, and increased health care costs due to higher than normal claim activity. Included in the Company's net income is a net tax benefit of $14.2 million which was primarily due to a $16.0 million reduction of certain valuation reserves against the Company's deferred tax assets. As a result, the Company recorded net income of $16.9 million or $1.55 per diluted share for the fourth quarter of 2012 compared to $0.6 million or $0.06 per diluted share in the fourth quarter of 2011.

"We were pleased to post a 21% increase in consolidated revenue for the fourth quarter of 2012," said Robert H. Spilman, Jr., President and Chief Executive Officer. "A very strong showing by our corporate retail unit coupled with significant gains in our open market sales efforts drove the top line improvement. And, despite incurring a large unfavorable employee health insurance adjustment, quarterly operating income increased 127% to $2.5 million."

"As 2012 unfolded, our revenue improved, ultimately ending with a 6.5% sales gain for the year," continued Spilman. "Several factors behind this trend continue to provide momentum as we head into 2013. First, we are operating a much healthier retail network that is no longer plagued by the store closings of the past few years. Second, recent Bassett product line introductions have been very successful at retail. Third, our effort to grow our business outside of the store footprint continues to take hold as sales grew 38% in this channel in the quarter. Finally, we are encouraged by the initial sales results of the HGTV Design Studio at Bassett products in our Bassett Home Furnishings (BHF) store network. This assortment of custom upholstery was a major driver behind our 15% fourth quarter comparable store increase. Both the HGTV Design Studio at Bassett and the HGTV Home open market product lines will be aggressively promoted in 2013 and we look forward to fully realizing the sales that the investment in this partnership will generate."

Wholesale Segment                                                                         

Net sales for the wholesale segment were $51.8 million for the fourth quarter of 2012 as compared to $43.7 million for the fourth quarter of 2011, an increase of 18%. Wholesale shipments increased due to a 38% increase in wholesale sales outside the BHF store network and an 11% increase in shipments to the BHF store network. Gross margins for the wholesale segment were 32.7% for the fourth quarter of 2012 as compared to 33.7% for the fourth quarter of 2011. This decrease was due primarily to greater discounts on certain discontinued products and increased health care costs due to higher than normal claim activity, partially offset by improvements from greater leverage of fixed costs. Wholesale SG&A increased $2.5 million to $15.1 million for the fourth quarter of 2012 as compared to $12.6 million for the fourth quarter of 2011. SG&A costs as a percentage of sales were flat at 29% for the fourth quarter of 2012 as compared to the fourth quarter of 2011 as the profit improvement from leveraging fixed SG&A costs was offset by increased marketing and advertising costs associated with the rollout of the HGTV product lines.

"Overall wholesale sales increased 18% to $51.8 million, with upholstery sales growing by 19% for the quarter while our wood division posted a 16% gain," added Spilman. "The increase in volume and resulting efficiencies enabled both our upholstery and wood operations to post improved levels of profitability at the divisional level in spite of the aforementioned health care charges. However, increases in SG&A spending from increased promotional allowances and new HGTV national advertising expense resulted in a 9% decline in wholesale operating income to $1.9 million. We plan to better leverage these marketing costs in 2013 with growth generated from five to seven new Bassett stores, continued gains in open market sales, and increased revenues from the full rollout of the HGTV partnership."

Retail Segment

Company-owned stores had sales of $48.8 million for the fourth quarter of 2012 as compared to $39.4 million for the fourth quarter of 2011, an increase of 24%. The increase was comprised of a $5.9 million or 15% increase in comparable store sales along with a $3.5 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 14% for the fourth quarter of 2012 as compared to the fourth quarter of 2011. 

Operating income for the Company-owned stores improved to $0.4 million in the fourth quarter of 2012 as compared to a loss of $0.6 million for the fourth quarter of 2011. This improvement was primarily driven by the sales increases noted above. Gross margins were essentially flat at 48.0% for the fourth quarter of 2012 as compared to 47.9% for the fourth quarter of 2011. SG&A expense increased $3.6 million, primarily due to increased store count. As a percentage of sales, SG&A decreased to 47% for the fourth quarter of 2012 compared to 49% 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 year ended November 24, 2012:

  November 26,
2011
New
Stores
Stores
Acquired
Stores
Closed
November 24,
2012
           
Licensee-owned stores  39  --   (3)  (3)  33
Company-owned stores  49  3  3  (2)  53
           
Total  88  3  --   (5)  86

"The fourth quarter was the best ever in our corporate retail division as we generated sales of $48.8 million, an overall increase of 24%," said Spilman. "The strong gain in comparable store sales helped produce a retail operating profit of $0.4 million, a $1.0 million improvement from last year. 2012 marked another year of solid improvement for our corporate retail division as witnessed by our year-over-year 9% comparable store sales increase and the 54% decrease in corporate store losses. The combination of a strong product assortment, good looking stores, highly trained designers, effective marketing programs, and superior levels of customer service has matured our proposition into a unique experience in our industry that is resonating with consumers. In 2013, we look forward to opening five to seven new stores and repositioning two others into better retail locations. Finally, we will test a new small store concept designed to better highlight our industry leading custom upholstery capabilities."

Balance Sheet and Cash Flow

The Company generated $1.0 million in cash from operating activities for the three months ended November 24, 2012 as compared with cash generated in operations of $6.9 million for the three months ended November 26, 2011. This decrease was primarily due to increases in accounts receivable and inventory as a result of increased volume and operating activity in the fourth quarter of 2012. Capital expenditures for the fourth quarter of 2012 were $2.1 million primarily related to the expansion and remodeling in the Company-owned store network. The Company also repurchased 128,000 shares of common stock using $1.4 million in cash and paid $0.6 million in regular dividends and $13.7 million in special dividends during the quarter. 

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 fourth 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
November 24,
2012
Quarter Ended
November 26,
2011
Year Ended
November 24,
2012
Year Ended
November 26,
2011
       
 


Amount
Percent of
Net Sales



Amount
Percent of
Net Sales



Amount
Percent of
Net Sales



Amount
Percent of
Net Sales
                 
Net sales  $ 76,812 100.0%  $ 63,266 100.0%  $ 269,672 100.0%  $ 253,208 100.0%
                 
Cost of sales  36,640 47.7%  29,996 47.4%  128,350 47.6%  125,642 49.6%
                 
Gross profit  40,172 52.3%  33,270 52.6%  141,322 52.4%  127,566 50.4%
                 
Selling, general and administrative expense excluding bad debt and notes receivable valuation charges  37,697 49.1%  31,370 49.6%  134,796 50.0%  122,023 48.2%
Bad debt and notes receivable valuation charges (recoveries)  (40) -0.1%  374 0.6%  376 0.1%  13,490 5.3%
Licensee debt cancellation charges  -- 0.0%  -- 0.0%  -- 0.0%  6,447 2.5%
Restructuring and asset impairment charges  -- 0.0%  418 0.7%  711 0.3%  2,500 1.0%
Lease exit costs  -- 0.0%  -- 0.0%  359 0.1%  3,728 1.5%
Operating income (loss)  2,515 3.3%  1,108 1.8%  5,080 1.9%  (20,622) -8.1%
                 
Gain on sale of affiliate  -- 0.0%  -- 0.0%  -- 0.0%  85,542 33.8%
Income from Continued Dumping & Subsidy Offset Act  -- 0.0%  765 1.2%  9,010 3.3%  765 0.3%
Other income (loss), net  163 0.2%  (464) -0.7%  (2,076) -0.8%  (5,934) -2.3%
Income before income taxes  2,678 3.5%  1,409 2.2%  12,014 4.5%  59,751 23.6%
                 
Income tax benefit (expense)  14,218 18.5%  (776) -1.2%  14,699 5.5%  (4,409) -1.7%
Net income  $ 16,896 22.0%  $ 633 1.0%  $ 26,713 9.9%  $ 55,342 21.9%
                 
Basic earnings per share  $ 1.57    $ 0.06    $ 2.43    $ 4.84  
                 
Diluted earnings per share  $ 1.55    $ 0.06    $ 2.41    $ 4.79  
     
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets -Unaudited
(In thousands)
     
Assets November 24, 2012 November 26, 2011
Current assets    
Cash and cash equivalents   $ 45,566  $ 69,601
Accounts receivable, net  15,755  14,756
Inventories  57,916  45,129
Deferred income taxes, net  6,832  393
Other current assets   6,439  10,324
Total current assets  132,508  140,203
     
Property and equipment    
Cost  148,157  143,824
Less accumulated depreciation  91,533  93,878
Property and equipment, net  56,624  49,946
     
Long-term assets    
Retail real estate  12,736  16,257
Deferred income taxes, net  10,484  767
Other  14,828  16,001
Total long-term assets  38,048  33,025
Total assets  $ 227,180  $ 223,174
     
Liabilities and Stockholders' Equity    
Current liabilities    
Accounts payable  $ 22,405  $ 18,821
Accrued compensation and benefits  6,926  7,201
Customer deposits  12,253  9,238
Dividends payable  542  6,063
Other accrued liabilities  10,213  10,302
Current portion of real estate notes payable  241  202
Total current liabilities  52,580  51,827
     
Long-term liabilities    
Post employment benefit obligations  11,577  11,226
Real estate notes payable  3,053  3,662
Other long-term liabilities  2,690  4,024
Total long-term liabilities  17,320  18,912
     
Stockholders' equity    
Common stock  54,184  56,712
Retained earnings  104,319  96,331
Accumulated other comprehensive loss  (1,223)  (608)
Total stockholders' equity  157,280  152,435
Total liabilities and stockholders' equity  $ 227,180  $ 223,174
     
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - unaudited
(In thousands)
 
  Year Ended
November 24, 2012
Year Ended
November 26, 2011
Operating activities:    
Net income  $ 26,713  $ 55,342
Adjustments to reconcile net income to net cash provided by (used in) operating activities:    
Depreciation and amortization  5,473  5,514
Equity in undistributed income of investments and unconsolidated affiliated companies  (347)  (1,840)
Provision for restructuring and asset impairment charges  711  2,500
Non-cash portion of lease exit costs  359  2,228
Licensee debt cancellation charges  --  6,447
Provision for lease and loan guarantees  (41)  1,283
Bad debt and notes receivable valuation charges  376  13,490
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  (15,822)  236
Other, net  642  214
Changes in operating assets and liabilities     
Accounts receivable  (2,967)  1,034
Inventories  (11,307)  299
Other current assets   (276)  2,300
Accounts payable and accrued liabilities  3,636  (12,421)
Net cash provided by (used in) operating activities  7,956  (5,431)
     
Investing activities:    
Purchases of property and equipment  (9,000)  (4,168)
Proceeds from sale of property and equipment  19  211
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  4,854  3,297
Purchases of investments  (1,781)  (3,132)
Dividend from affiliate  --  3,756
Equity contribution to affiliate  --  (980)
Acquisitions of retail licensee stores  (549)  --
Note receivable payments  1,240  127
Net cash provided by (used in) investing activities  (3,807)  79,503
     
Financing activities:     
Repayments of real estate notes payable  (570)  (8,647)
Issuance of common stock  842  170
Repurchases of common stock  (7,015)  (2,964)
Cash dividends   (21,441)  (695)
Payments on other notes  --  (3,406)
Net cash used in financing activities  (28,184)  (15,542)
Change in cash and cash equivalents  (24,035)  58,530
Cash and cash equivalents - beginning of period  69,601  11,071
Cash and cash equivalents - end of period  $ 45,566  $ 69,601
                 
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES 
Segment Information - unaudited
(In thousands)
 
  Quarter ended
November 24, 2012
  Quarter ended
November 26, 2011
  Year Ended
November 24, 2012
  Year Ended
November 26, 2011
 
Net Sales                
Wholesale  $ 51,831  (a)   $ 43,746  (a)   $ 185,187  (a)   $ 177,372  (a) 
Retail  48,833    39,363    171,633    147,961  
Inter-company elimination  (23,852)    (19,843)    (87,148)    (72,125)  
Consolidated  $ 76,812    $ 63,266    $ 269,672    $ 253,208  
                 
Operating Income (Loss)                
Wholesale  $ 1,925  (b)   $ 2,110  (b)   $ 7,500  (b)   $ (4,394)  (b) 
Retail  369    (584)    (2,067)    (4,495)  
Inter-company elimination  221    --    717    942  
Licensee debt cancellation charge  --    --    --    (6,447)  
Restructuring and asset impairment charges  --    (418)    (711)    (2,500)  
Lease exit costs  --    --    (359)    (3,728)  
Consolidated  $ 2,515    $ 1,108    $ 5,080    $ (20,622)  
                 
                 
(a) Excludes wholesale shipments for dealers where collectibility is not reasonably assured at time of shipment as follows:
  November 24, 2012   November 26, 2011          
 Quarter ended  $ --    $ --          
 Year ended  --     1,678          
(b) Includes bad debt and notes receivable valuation charges (recoveries) as follows:
  November 24, 2012   November 26, 2011          
 Quarter ended  $ (40)    $ 374          
 Year ended  376    13,490          
 
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Supplemental Retail Information--unaudited
(In thousands)
 
   48 Comparable Stores  40 Comparable Stores
  Quarter Ended
November 24, 2012
Quarter Ended
November 26, 2011
Year Ended
November 24, 2012
Year Ended
November 26, 2011
 
Amount
Percent of
Net Sales

Amount
Percent of
Net Sales

Amount
Percent of
Net Sales

Amount
Percent of
Net Sales
                 
Net sales  $ 45,020 100.0%  $ 39,080 100.0%  $ 140,345 100.0%  $ 128,580 100.0%
                 
Cost of sales  23,411 52.0%  20,205 51.7%  72,470 51.6%  66,400 51.6%
                 
Gross profit  21,609 48.0%  18,875 48.3%  67,875 48.4%  62,180 48.4%
                 
Selling, general and administrative expense*  21,055 46.8%  19,082 48.8%  67,835 48.3%  64,191 49.9%
                 
Income (loss) from operations  $ 554 1.2%  $ (207) -0.5%  $ 40 0.1%  $ (2,011) -1.5%
                 
                 
  All Other Stores All Other Stores
  Quarter Ended
November 24, 2012
Quarter Ended
November 26, 2011
Year Ended
November 24, 2012
Year Ended
November 26, 2011
 
Amount
Percent of
Net Sales

Amount
Percent of
Net Sales

Amount
Percent of
Net Sales

Amount
Percent of
Net Sales
                 
Net sales  $ 3,813 100.0%  $ 283 100.0%  $ 31,288 100.0%  $ 19,381 100.0%
                 
Cost of sales  1,983 52.0%  312 110.2%  16,802 53.7%  11,699 60.4%
                 
Gross profit  1,830 48.0%  (29) -10.2%  14,486 46.3%  7,682 39.6%
                 
Selling, general and administrative expense  2,015 52.8%  348 123.0%  16,594 53.0%  10,166 52.5%
                 
Loss from operations  $ (185) -4.8%  $ (377) -133.2%  $ (2,108) -6.7%  $ (2,484) -12.9%
                 
*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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