Bassett Furniture Industries
BASSETT FURNITURE INDUSTRIES INC (Form: 8-K, Received: 03/30/2017 09:52:00)

 


 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 


 

FORM 8-K

 


 

CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported) March 30, 2017

 


 

BASSETT FURNITURE INDUSTRIES, INCORPORATED

(Exact name of registrant as specified in its charter)

 


 

         

VIRGINIA

 

0-209

 

54-0135270

(State or other jurisdiction of

incorporation or organization)

 

(Commission File No.)

 

(I.R.S. Employer

Identification No.)

 

     

3525 FAIRYSTONE PARK HIGHWAY

BASSETT, VIRGINIA

 

24055

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code 276/629-6000

  

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 


   

 
 

 

 

Item 2.02.

Results of Operations and Financial Condition.

 

On March 30, 2017 Bassett Furniture Industries issued a news release relating to, among other things, the first quarter financial results for the fiscal year ending November 25, 2017. A copy of the news release announcing this information is attached to this report as Exhibit 99.

  

Item 9.01.

Financial Statements and Exhibits.

   
   
Exhibit 99 News release issued by Bassett Furniture Industries, Inc. on March 30, 2017.

    

 
 

 

   

Signatures

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

BASSETT FURNITURE INDUSTRIES, INCORPORATED

 

 

 

 

 

Date: March 30, 2017

By:

/s/  J. Michael Daniel

 

 

 

J. Michael Daniel

 

 

 

Title:      Senior Vice President – Chief Financial Officer

 

 

 
 

 

 

EXHIBIT INDEX

 

 

Description

 

Exhibit No. 99

News release issued by Bassett Furniture Industries on March 30, 2017.

 

Exhibit 99

 

 

   

Bassett Furniture Industries, Inc.

J. Michael Daniel

P.O. Box 626  

Senior Vice President and

Bassett, VA 24055  

Chief Financial Officer

 

(276) 629-6614 – Investors

 

 

 

Jay S. Moore

 

Director of Communications

For Immediate Release   

(276) 629-6450 – Media

 

 

 

Bassett Furniture News Release

Bassett Announces Fiscal First Quarter R esults  

 

(Bassett, Va.) – March 30, 2017 – Bassett Furniture Industries, Inc. (Nasdaq: BSET) announced today its results of operations for its fiscal quarter ended February 25, 2017.

 

Fiscal 2017 First Quarter Highlights

 

Consolidated sales were $105.9 million for the first quarter of 2017 compared to $106.9 million for the first quarter of 2016, a decrease of 0.9%.

 

Operating income for the quarter was $4.7 million or 4.4% of sales as compared to $5.8 million or 5.4% of sales for the prior year quarter.

 

Wholesale sales were $62.0 million for the first quarter of 2017 compared to $59.6 million for the first quarter of 2016, an increase of 4.0%. Wholesale operating profit for the quarter was $5.9 million or 9.5% of sales as compared to $4.4 million or 7.4% of sales for the prior year quarter.

 

Company-owned store sales were $61.6 million for both the first quarter of 2017 and 2016. 2017 included a comparable store sales increase of 1.0% compared to the prior year quarter. Comparable store operating loss was $0.2 million or (0.4)% of sales for the current year quarter as compared to operating income of $1.0 million or 1.8% of sales for the prior year quarter. Total retail operating loss was $1.3 million or (2.2)% of sales for the quarter as compared to operating income of $0.3 million or 0.5% of sales for the prior year quarter. Comparable store written sales for the quarter increased 3.7%.

 

Revenue for Zenith Freight Lines (“Zenith”) was $22.3 million for the first quarter of 2017 compared to $24.7 million for the first quarter of 2016, a 9.7% decrease. Zenith’s operating loss for the quarter was $0.2 million or (0.9)% of sales as compared to an operating profit of $0.7 million or 2.8% of sales for the prior year quarter.

 

Net income for the quarter was $2.9 million or $0.27 per diluted share as compared to $3.2 million or $0.30 per diluted share for the prior year quarter.

 

 

“We produced mixed results in an unpredictable sales environment during the first quarter of 2017,” commented Robert H. Spilman, Jr. chairman and chief executive officer. “Coming off a strong Black Friday sale in late November, our year over year sales momentum remained relatively strong for the first three weeks of December in the context of the weak seasonality that we experience each year in the pre-Christmas run up. However, the calendar shift in late December that essentially eliminated the selling days of the last two weekends of the month really hurt us. Despite falling significantly behind last year’s sales numbers as a result, our retail team rallied and with a strong finish ended the quarter with a 1.0% delivered and 3.7% written comparable store sales increase. Furthermore, strong shipping at quarter’s end also produced a 4.0% gain in wholesale revenue. Unfortunately, weaker levels of non-Bassett outbound freight at our Zenith Freight Lines subsidiary offset these gains and produced the 0.9% decline in consolidated revenue that we are reporting today.

 

 
 

 

   

“Behind the scenes, this was a very active reporting period for us,” continued Mr. Spilman. “We have invested $2 million in our Martinsville, Va., table plant over the past four months installing a state of the art wood finishing system in preparation for the recent launch of our completely updated casual dining program. Production began in January for floor samples constituting 600 retail settings for this product in Bassett stores and galleries around the country. In addition, we opened a new 350,000 square foot manufacturing and distribution center in Grand Prairie, Texas at the end of February. We now plan to achieve the efficiencies that we can derive in housing manufacturing, over the road distribution, and retail home delivery in a single setting. Also, we opened two new Zenith home delivery centers in the Ohio and Philadelphia markets to expand the Zenith footprint and prepare for new store service. In retail, we closed two stores in the quarter; one licensed and one corporate. We acquired the Columbus, Ohio, Bassett location from Kittles, a top 100 retailer and good Bassett customer, that sold its Ohio operations to concentrate all of its resources on its dominant position in the state of Indiana. We relocated our Scottsdale, Ariz., store to an exciting retail corridor in early February. Finally, we opened a new 19,000 square foot Bassett store on Long Island in Westbury, N.Y., in time for a very strong Presidents Day weekend event. While the accompanying $700,000 of additional store opening costs and the short-term disruptions of these investments in general took its toll on the quarter’s consolidated results, we are excited about our growing footprint. We now look forward to opening two new stores in the second quarter and executing our plan for the remainder of the year.”

 

Wholesale Segment

 

Net sales for the wholesale segment were $62.0 million for the first quarter of 2017 as compared to $59.6 million for the first quarter of 2016, an increase of $2.4 million or 4.0%. This increase was driven by a 6.7% increase in shipments to the Bassett Home Furnishings network partially offset by a 3.2% decrease in shipments to the open market (outside the Bassett Home Furnishings network) as compared to the prior year period. Gross margins for the wholesale segment were 35.2% for the first quarter of 2017 as compared to 34.0% for the first quarter of 2016. This increase is due primarily to improved margins in the domestic upholstery operations from favorable pricing strategies and higher margins in the imported wood product as the Company had lower levels of discounted sales along with higher margins on those sales as compared to the prior year quarter. Wholesale SG&A for the first quarter of 2017 was $15.9 million for both the first quarter of 2017 and 2016. SG&A as a percentage of sales decreased to 25.7% as compared to 26.7% for the first quarter of 2016. This decrease in SG&A as a percentage of sales was primarily due to lower freight and warehousing costs. Operating income was $5.9 million or 9.5% of sales as compared to $4.4 million or 7.4% of sales in the prior year quarter.

 

“Sales of our domestically produced products grew by 13% in the quarter driving our overall 4.0% wholesale segment increase,” added Mr. Spilman. “In fact, domestically manufactured or finished and assembled goods represented 71% of our wholesale shipments. Consumers continue to gravitate to the customizable elements of our product range and our domestic manufacturing facilities continue to be the beneficiaries of this growing trend. When coupled with the interior design skills of our in-store designers, these products particularly resonate with customers seeking a personalized home furnishings solution. Domestic upholstery sales grew 8.8% and domestic wood revenue increased 28% for the period. This propelled our wholesale segment to a 34% improvement in operating income with a corresponding 9.5% profit margin or 210 basis points better than last year. The ongoing refinement of our store merchandise lineup continues to bear fruit as wholesale shipments to our retail stores grew 6.7%. Although our non-store shipments declined by 3.2%, primarily due to the loss of a major independent customer in mid-2016, we are encouraged by recent order trends outside the stores and by the early success of our new Club Level motion program that was introduced last year.

 

 
 

 

   

Retail Segment

 

Net sales for the 60 Company-owned Bassett Home Furnishings stores were $61.6 million for both the first quarter of 2017 and 2016. Comparable store sales increased $0.6 million or 1.0% offset by a $0.6 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 3.7% for the first quarter of 2017 as compared to the first quarter of 2016.

 

The consolidated retail operating loss for the first quarter of 2017 was $1.3 million as compared to an operating profit of $0.3 million for the first quarter of 2016, a decrease of $1.6 million. The 56 comparable stores generated an operating loss of $0.2 million for the quarter, or (0.4)% of sales, as compared to a profit of $1.0 million, or 1.8% of sales, for the prior year quarter. Gross margins for comparable stores were 49.2% for the first quarter of 2017 compared to 49.9% for the first quarter of 2016 due to increased clearance activity at lower margins to make room for a significant product rollout during the quarter.  SG&A expenses for comparable stores increased $1.2 million to $29.2 million or 49.6% of sales as compared to 48.1% of sales for the first quarter of 2016. The increase in SG&A as a percentage of sales was primarily due to increased advertising and marketing costs and store occupancy costs.

 

“Our corporate retail team pulled out positive quarterly written and delivered sales comps despite a rocky start,” said Mr. Spilman. “A number of new initiatives are underway as we seek to grow comparable store sales for the seventh consecutive year. After months of research, we have adjusted our marketing mix to cut back on a portion of television advertising in the local markets in favor of a more robust direct mail program. Tied to key promotional periods throughout the year, we will utilize several printed formats to target new opportunities and reach our existing consumer more purposefully in brand enhancing catalogs and mailers. In concert with our new print strategy is the heightened level of digital engagement that we have undertaken with our customers. We are producing more digital content that we intend to enhance Bassett products through communication of quality of materials, workmanship and heritage. Another exciting retail initiative is the expansion of our accessory program. Building on our success in the rug category, we have revamped our lighting, decorative mirror, and window treatment assortments. Each of these categories has a new merchandising strategy that will be showcased through visual templates that will soon be tested in 30% of our store locations. All of these efforts are designed to further elevate our styling point of view and to fully deliver on the notion of being a one-stop shop for beautifully designed interiors.”

 

 
 

 

   

Logistical Services Segment

 

Revenue for Zenith was $22.3 million for the first quarter of 2017 as compared to $24.7 million for 2016, a decrease of $2.4 million or (9.7)%. This decrease was due to $3.3 million in lower revenue from one significant non-Bassett customer partially offset by increases in revenue from other customers. Zenith operating expenses for the first quarter of 2017 were $22.6 million as compared to $23.9 million a decrease of $1.3 million or 5.4%. Decreases in purchased third-party freight were partially offset by higher fuel costs and increased fixed costs associated with the expansion and modernization of the transportation equipment fleet over the course of fiscal 2016. In addition, Zenith incurred approximately $0.1 million in start-up costs during the first quarter of 2017 associated with the opening of new home delivery centers in Philadelphia, Pennsylvania and Cincinnati, Ohio. This resulted in an operating loss of $0.2 million or (0.9)% for 2017 as compared to operating income of $0.7 million or 2.8%. The decrease in freight volume resulted in lower overall load factors for the over-the-road freight business thus making it more costly for Zenith to meet its delivery targets.

 

“The over the road freight, warehousing, and home delivery services that Zenith provides Bassett is fundamental to the speed to market capability that differentiates our store experience,” commented Mr. Spilman. “These capabilities have been and continue to be recognized as best of class in our space by numerous other furniture manufacturers and retailers that engage Zenith for their logistics solution. We believe that the coast to coast platform that Zenith has architected will become increasingly relevant and valuable as a vital cog in the future of Bassett and of the industry in general.”

 

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 first fiscal quarter of 2017 , 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

 
   

February 25, 2017

   

February 27, 2016

 
           

Percent of

           

Percent of

 
   

Amount

   

Net Sales

   

Amount

   

Net Sales

 
                                 

Sales revenue:

                               

Furniture and accessories

  $ 93,698             $ 92,402          

Logistics

    12,194               14,471          

Total sales revenue

    105,892       100.0 %     106,873       100.0 %
                                 

Cost of furniture and accessories sold

    41,898       39.6 %     41,986       39.3 %
                                 

Selling, general and administrative expenses excluding new store pre-opening costs

    58,524       55.3 %     58,957       55.2 %

New store pre-opening costs

    806       0.8 %     139       0.1 %

Income from operations

    4,664       4.4 %     5,791       5.4 %
                                 

Other loss, net

    (733 )     -0.7 %     (657 )     -0.6 %

Income before income taxes

    3,931       3.7 %     5,134       4.8 %
                                 

Income tax provision

    1,070       1.0 %     1,900       1.8 %

Net income

  $ 2,861       2.7 %   $ 3,234       3.0 %
                                 

Basic earnings per share

  $ 0.27             $ 0.30          
                                 

Diluted earnings per share

  $ 0.27             $ 0.30          

 

 
 

 

   

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands)

 

   

(Unaudited)

         
   

February 25, 2017

   

November 26, 2016

 
Assets                

Current assets

               

Cash and cash equivalents

  $ 23,518     $ 35,144  

Short-term investments

    23,125       23,125  

Accounts receivable, net

    18,470       18,358  

Inventories, net

    55,473       53,215  

Other current assets

    9,572       10,727  

Total current assets

    130,158       140,569  
                 

Property and equipment, net

    106,840       104,655  
                 

Other long-term assets

               

Deferred income taxes, net

    7,932       8,071  

Goodwill and other intangible assets

    17,592       17,360  

Other

    7,127       7,612  

Total long-term assets

    32,651       33,043  

Total assets

  $ 269,649     $ 278,267  
                 

Liabilities and Stockholders’ Equity

               

Current liabilities

               

Accounts payable

  $ 18,416     $ 21,281  

Accrued compensation and benefits

    12,152       13,602  

Customer deposits

    26,158       25,181  

Dividends payable

    -       3,218  

Current portion of long-term debt

    3,320       3,290  

Other accrued liabilities

    9,818       10,441  

Total current liabilities

    69,864       77,013  
                 

Long-term liabilities

               

Post employment benefit obligations

    12,748       12,760  

Long-term debt

    733       3,821  

Other long-term liabilities

    3,796       3,968  

Total long-term liabilities

    17,277       20,549  
                 
                 

Stockholders’ equity

               

Common stock

    53,601       53,615  

Retained earnings

    131,178       129,388  

Additional paid-in-capital

    224       255  

Accumulated other comprehensive loss

    (2,495 )     (2,553 )

Total stockholders' equity

    182,508       180,705  

Total liabilities and stockholders’ equity

  $ 269,649     $ 278,267  

 

 
 

 

 

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows - unaudited

(In thousands)

 

   

Quarter Ended

 
   

February 25, 2017

   

February 27, 2016

 

Operating activities:

               

Net income

  $ 2,861     $ 3,234  

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

               

Depreciation and amortization

    3,351       2,817  

Deferred income taxes

    103       803  

Excess tax benefits from stock-based compensation

    327       -  

Other, net

    413       294  

Changes in operating assets and liabilities :

               

Accounts receivable

    110       1,509  

Inventories

    (1,915 )     2,357  

Other current and long-term assets

    1,155       (1,326 )

Customer deposits

    977       (715 )

Accounts payable and accrued liabilities

    (5,305 )     (6,553 )

Net cash provided by operating activities

    2,077       2,420  
                 

Investing activities:

               

Purchases of property and equipment

    (5,610 )     (8,568 )

Acquisition of retail licensee store

    (655 )     -  

Other

    226       20  

Net cash used in investing activities

    (6,039 )     (8,548 )
                 

Financing activities:

               

Cash dividends

    (4,290 )     (3,146 )

Proceeds from the exercise of stock options

    221       -  

Other issuance of common stock

    -       84  

Repurchases of common stock

    (26 )     (1,774 )

Taxes paid related to net share settlement of equity awards

    (474 )     -  

Repayments of notes payable

    (3,095 )     (4,395 )

Proceeds from equipment loans

    -       4,204  

Net cash used in financing activities

    (7,664 )     (5,027 )

Change in cash and cash equivalents

    (11,626 )     (11,155 )

Cash and cash equivalents - beginning of period

    35,144       36,268  

Cash and cash equivalents - end of period

  $ 23,518     $ 25,113  

 

 
 

 

   

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES

Segment Information - unaudited

(In thousands)

 

 

   

Quarter Ended

 
   

February 25, 2017

   

February 27, 2016

 

Net Sales

               

Wholesale

  $ 61,975     $ 59,576  

Retail - Company-owned stores

    61,593       61,595  

Logistical services

    22,334       24,679  

Inter-company eliminations:

               

Furniture and accessories

    (29,870 )     (28,769 )

Logistical services

    (10,140 )     (10,208 )

Consolidated

  $ 105,892     $ 106,873  
                 

Operating Income

               

Wholesale

  $ 5,893     $ 4,398  

Retail

    (1,343 )     316  

Logistical services

    (226 )     744  

Inter-company elimination

    340       333  

Consolidated

  $ 4,664     $ 5,791  

 

 
 

 

 

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES

Rollforward of BHF Store Count

 

 

   

November 26,

                           

February 25,

 
   

2016

   

Opened*

   

Closed*

   

Transfers

   

2017

 
                                         

Company-owned stores

    59       1       (1 )     1       60  

Licensee-owned stores

    31       -       (1 )     (1 )     29  
                                         

Total

    90       1       (2 )     -       89  

 

 

* 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

 
   

Quarter Ended

   

Quarter Ended

 
   

February 25, 2017

   

February 27, 2016

 
           

Percent of

           

Percent of

 
   

Amount

   

Net Sales

   

Amount

   

Net Sales

 
                                 

Net sales

  $ 58,829       100.0 %   $ 58,245       100.0 %
                                 

Cost of sales

    29,882       50.8 %     29,193       50.1 %
                                 

Gross profit

    28,947       49.2 %     29,052       49.9 %
                                 

Selling, general and administrative expense*

    29,180       49.6 %     28,005       48.1 %
                                 

Income (loss) from operations

  $ (233 )     -0.4 %   $ 1,047       1.8 %

 

 

   

All Other Stores

 
   

Quarter Ended

   

Quarter Ended

 
   

February 25, 2017

   

February 27, 2016

 
           

Percent of

           

Percent of

 
   

Amount

   

Net Sales

   

Amount

   

Net Sales

 
                                 

Net sales

  $ 2,764       100.0 %   $ 3,350       100.0 %
                                 

Cost of sales

    1,577       57.1 %     2,122       63.3 %
                                 

Gross profit

    1,187       42.9 %     1,228       36.7 %
                                 

Selling, general and administrative expense

    1,491       53.9 %     1,820       54.3 %

Pre-opening store costs**

    806       29.2 %     139       4.1 %
                                 

Loss from operations

  $ (1,110 )     -40.2 %   $ (731 )     -21.7 %

 

*

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 possesion and store opening date, employee payroll and training costs prior to store opening  and other various expenses incurred prior to store opening.