Bassett Furniture Industries
Jul 9, 2013
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Bassett Announces Fiscal Second Quarter Results

BASSETT, Va., July 9, 2013 (GLOBE NEWSWIRE) -- Bassett Furniture Industries, Inc. (Nasdaq:BSET) announced today its results of operations for its fiscal quarter ended June 1, 2013.

Fiscal 2013 Second Quarter Highlights

On a consolidated basis, the Company reported net sales for the second quarter of 2013 of $81.2 million, an increase of $13.8 million, or 20%, over the second quarter of 2012. Operating income increased to $3.4 million, or 4.2% of sales, from $1.6 million, or 2.4% of sales, driven by higher sales in both the wholesale and retail segments. The improvement was partially offset by $0.9 million of increased health care costs due to higher claims experience. In the second quarter of 2012, the Company received a $9.0 million cash distribution from U.S. Customs and Border Protection, representing the final distribution due the Company as part of the CDSOA, which is included as other income in the condensed consolidated statement of income. Excluding the effect of the income from the CDSOA from the second quarter of 2012, pre-tax income increased $2.4 million from $0.9 million to $3.3 million. The Company recorded net income of $2.0 million or $0.18 per diluted share for the second quarter of 2013 compared to net income of $8.0 million or $0.71 per diluted share in the second quarter of 2012.

"We were pleased with the continued upward trend in our business in the second quarter," commented Robert H. Spilman Jr., president and chief executive officer. "This marks the third consecutive quarter in which our revenue grew by at least 20% compared to the prior year, which underscores the fact that we are definitely gaining market share at the moment. Virtually every sales channel, including our Bassett Home Furnishings stores, open market furniture stores, our juvenile division, and the HGTV Home Furniture Collections account base generated meaningful sales increases in the period. While we acknowledge that economic conditions have definitely improved in general, we also believe that we are currently outpacing industry-wide sales trends.

"In posting a 110% increase in operating profit to $3.4 million, we exhibited meaningful improvement in our quest to become a more profitable company," added Spilman. "Our operating performance was tempered by a $0.9 million increase in health care costs, which we are currently addressing on several fronts. Nevertheless, we are beginning to more effectively leverage our sales momentum as evidenced by a 230 basis point decline in consolidated sales, general, and administrative expenses for the quarter. As we operate through the historically weaker third quarter, we will continue to closely monitor the relationship between our revenues and expenses."

Wholesale Segment

Net sales for the wholesale segment were $53.9 million for the second quarter of 2013 as compared to $45.9 million for the second quarter of 2012, an increase of $8.0 million or 17%. Wholesale shipments to the open market (outside the Bassett Home Furnishings store network) increased 41% and shipments to the Bassett Home Furnishings store network increased by 8.2% compared to the prior year quarter. Gross margins for the wholesale segment were 32.6% for the second quarter of 2013 as compared to 32.9% for the second quarter of 2012. This decrease was primarily due to lower margins in the wood business from discounting discontinued product and increased health care costs due to higher claims experience. The decrease was partially offset by increased margins in the upholstery operations as increased sales volumes provided greater leverage of fixed costs. Wholesale SG&A increased $1.6 million to $14.7 million for the second quarter of 2013 as compared to $13.1 million for the second quarter of 2012. SG&A as a percentage of sales decreased to 27.3% as compared to 28.5% for the second quarter of 2012, as the Company effectively leveraged fixed SG&A through increased sales.

"Our wholesale segment continued to post better results in the quarter as both our upholstery and wood operations posted strong growth," continued Spilman. "Our domestic upholstery operations, driven by strong consumer reaction to our assortment, were able to produce at full strength. This enabled our domestic upholstery volume to post a 20% increase in revenue and a 45% increase in divisional operating profit. We have been able to efficiently manage our labor costs to accommodate these robust work schedules, thus enhancing our profitability. On the wood products front, we were again able to post double digit sales growth despite the overall difficulty that the segment is experiencing in the industry. Wood sales increased 16% for the period. Divisional operating results, however, were flat. We began trimming our overall wood SKU count to achieve better asset utilization and the corresponding discounts affected our wood profitability in the quarter. We plan to continue this process for the rest of 2013 in order to accomplish our internal inventory turn objective."

Retail Segment

Net sales for Company-owned stores were $51.5 million for the second quarter of 2013 as compared to $42.8 million for the second quarter of 2012, an increase of $8.7 million or 20%. The increase was comprised of a $3.9 million or 9.3% increase in comparable store sales and a $4.7 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 6.9% for the second quarter of 2013 as compared to the second quarter of 2012.

Operating income for the second quarter of 2013 was $0.3 million as compared to $0.1 million for the second quarter of 2012. Gross margins were lower at 47.4% for the quarter as compared to 48.5% for the prior year quarter due in large part to a concerted effort to reduce clearance inventory levels at the Company-owned stores. SG&A expense increased $3.4 million, primarily due to increased store count and higher sales volumes. As a percentage of sales, SG&A decreased to 46.9% for the quarter as compared to 48.4% for the same quarter last year, primarily due to leverage of fixed costs from higher sales. This improvement was partially offset by increased health care costs due to higher claims experience and incremental management and overhead costs as the Company-owned store network continues to grow. 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 year to date through the second quarter of 2013:

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

"Our corporate retail group posted their ninth consecutive quarter of improvement while recording an operating profit of $0.3 million," added Spilman. "The 9.3% increase in comparable store sales comes on top of a 7.9% increase last year. We continue to enjoy the strong custom upholstery sales that we are driving through our HGTV Design Studio at Bassett platform and we are looking forward to introducing a new television campaign later this year. Also, we are about to begin a very active phase of store development as we plan to open six new corporate locations and reposition five existing stores over the next nine months."

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 second 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 Six Months Ended Six Months Ended
  June 1, 2013 May 26, 2012 June 1, 2013 May 26, 2012
    Percent of   Percent of   Percent of   Percent of
  Amount Net Sales Amount Net Sales Amount Net Sales Amount Net Sales
                 
Net sales  $ 81,223 100.0%  $ 67,454 100.0%  $ 161,072 100.0%  $ 128,422 100.0%
                 
Cost of sales  39,397 48.5%  31,793 47.1%  77,886 48.4%  61,090 47.6%
                 
Gross profit  41,826 51.5%  35,661 52.9%  83,186 51.6%  67,332 52.4%
                 
Selling, general and administrative expense  38,416 47.3%  33,435 49.6%  77,412 48.1%  64,463 50.2%
Restructuring and asset impairment charges  -- 0.0%  475 0.7%  -- 0.0%  711 0.6%
Lease exit costs  -- 0.0%  131 0.2%  -- 0.0%  359 0.3%
Operating income  3,410 4.2%  1,620 2.4%  5,774 3.6%  1,799 1.4%
                 
Income from Continued Dumping & Subsidy Offset Act  -- 0.0%  9,010 13.4%  -- 0.0%  9,010 7.0%
Other loss, net  (129) -0.2%  (677) -1.0%  (797) -0.5%  (1,924) -1.5%
Income before income taxes  3,281 4.0%  9,953 14.8%  4,977 3.1%  8,885 6.9%
                 
Income tax expense  (1,328) -1.6%  (1,911) -2.8%  (2,044) -1.3%  (1,439) -1.1%
Net income  $ 1,953 2.4%  $ 8,042 11.9%  $ 2,933 1.8%  $ 7,446 5.8%
                 
Basic earnings per share  $ 0.18    $ 0.72    $ 0.27    $ 0.67  
                 
Diluted earnings per share  $ 0.18    $ 0.71    $ 0.27    $ 0.66  
 
 
 
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets -Unaudited
(In thousands)
     
Assets June 1, 2013 November 24, 2012
Current assets    
Cash and cash equivalents  $ 43,571  $ 45,566
Short-term investments  1,125  --
Accounts receivable, net  15,444  15,755
Inventories, net  55,994  57,916
Deferred income taxes, net  7,116  6,832
Other current assets  8,580  6,439
Total current assets  131,830  132,508
     
Property and equipment, net  57,922  56,624
     
Other long-term assets    
Retail real estate  12,485  12,736
Deferred income taxes, net  9,974  10,485
Other  13,392  14,827
Total long-term assets  35,851  38,048
Total assets  $ 225,603  $ 227,180
     
Liabilities and Stockholders' Equity    
Current liabilities    
Accounts payable  $ 18,883  $ 22,405
Accrued compensation and benefits  6,497  6,926
Customer deposits  14,341  12,253
Dividends payable  --  542
Other accrued liabilities  10,285  10,454
Total current liabilities  50,006  52,580
     
Long-term liabilities    
Post employment benefit obligations  11,183  11,577
Real estate notes payable  2,927  3,053
Other long-term liabilities  2,076  2,690
Total long-term liabilities  16,186  17,320
     
     
Stockholders' equity    
Common stock  54,275  54,184
Retained earnings  106,167  104,319
Additional paid-in-capital  154  --
Accumulated other comprehensive loss  (1,185)  (1,223)
Total stockholders' equity  159,411  157,280
Total liabilities and stockholders' equity  $ 225,603  $ 227,180
 
 
 
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - unaudited
(In thousands)
     
  Six Months Ended Six Months Ended
  June 1, 2013 May 26, 2012
Operating activities:    
Net income  $ 2,933  $ 7,446
Adjustments to reconcile net income to net cash provided  (used in) operating activities:    
Depreciation and amortization  2,890  2,615
Equity in undistributed income of investments and unconsolidated affiliated companies  (282)  (134)
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  353  107
Other, net  (491)  330
Changes in operating assets and liabilities    
Accounts receivable  243  337
Inventories  1,922  (2,786)
Other current assets  (2,101)  (64)
Accounts payable and accrued liabilities  (2,644)  (1,465)
Net cash provided by operating activities  2,823  8,262
     
Investing activities:    
Purchases of property and equipment  (5,184)  (4,352)
Proceeds from sales of property and equipment  955  --
Proceeds from sale of interest in affiliate  2,348  1,410
Proceeds from sales of investments  --  875
Purchases of investments  (1,125)  (857)
Other,net  5  13
Net cash used in investing activities  (3,001)  (2,911)
     
Financing activities:    
Repayments of real estate notes payable  (126)  (100)
Issuance of common stock  462  157
Repurchases of common stock  (526)  (1,250)
Cash dividends  (1,627)  (6,626)
Net cash used in financing activities  (1,817)  (7,819)
Change in cash and cash equivalents  (1,995)  (2,468)
Cash and cash equivalents - beginning of period  45,566  69,601
Cash and cash equivalents - end of period  $ 43,571  $ 67,133
 
 
 
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES 
Segment Information - unaudited
(In thousands)
         
  Quarter ended Quarter ended Six months ended Six months ended
  June 1, 2013 May 26, 2012 June 1, 2013 May 26, 2012
Net Sales        
Wholesale  $ 53,934  $ 45,940  $ 107,893  $ 88,550
Retail  51,470  42,805  101,427  81,622
Inter-company elimination  (24,181)  (21,291)  (48,248)  (41,750)
Consolidated  $ 81,223  $ 67,454  $ 161,072  $ 128,422
         
Operating Income (Loss)        
Wholesale  $ 2,849  $ 2,033  $ 5,850  $ 3,864
Retail  277  66  (294)  (933)
Inter-company elimination  284  127  218  (62)
Restructuring and asset impairment charges  --  (475)  --  (711)
Lease exit costs  --  (131)  --  (359)
Consolidated  $ 3,410  $ 1,620  $ 5,774  $ 1,799
 
 
 
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Supplemental Retail Information--unaudited
(In thousands)
                 
   49 Comparable Stores  48 Comparable Stores
  Quarter Ended Quarter Ended Six Months Ended Six Months Ended
  June 1, 2013 May 26, 2012 June 1, 2013 May 26, 2012
    Percent of   Percent of   Percent of   Percent of
  Amount Net Sales Amount Net Sales Amount Net Sales Amount Net Sales
                 
Net sales  $ 46,361 100.0%  $ 42,427 100.0%  $ 89,985 100.0%  $ 79,896 100.0%
                 
Cost of sales  24,252 52.3%  21,689 51.1%  46,981 52.2%  40,950 51.3%
                 
Gross profit  22,109 47.7%  20,738 48.9%  43,004 47.8%  38,946 48.7%
                 
Selling, general and administrative expense*  21,413 46.2%  20,231 47.7%  42,362 47.1%  38,901 48.7%
                 
Income from operations  $ 696 1.5%  $ 507 1.2%  $ 642 0.7%  $ 45 0.0%
                 
                 
  All Other Stores All Other Stores
  Quarter Ended Quarter Ended Six Months Ended Six Months Ended
  June 1, 2013 May 26, 2012 June 1, 2013 May 26, 2012
    Percent of   Percent of   Percent of   Percent of
  Amount Net Sales Amount Net Sales Amount Net Sales Amount Net Sales
                 
Net sales  $ 5,109 100.0%  $ 378 100.0%  $ 11,442 100.0%  $ 1,726 100.0%
                 
Cost of sales  2,805 54.9%  340 89.9%  6,159 53.8%  1,226 71.0%
                 
Gross profit  2,304 45.1%  38 10.1%  5,283 46.2%  500 29.0%
                 
Selling, general and administrative expense  2,723 53.3%  479 126.7%  6,219 54.4%  1,478 85.6%
                 
Loss from operations  $ (419) -8.2%  $ (441) -116.6%  $ (936) -8.2%  $ (978) -56.6%
                 
*Comparable store SG&A includes retail corporate overhead and administrative costs.
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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