Bassett Announces Fiscal First Quarter Results

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Bassett Announces Fiscal First Quarter Results

BASSETT, Va., March 31, 2022 (GLOBE NEWSWIRE) -- Bassett Furniture Industries, Inc. (Nasdaq: BSET) announced today its results of operations for its first quarter ended February 26, 2022.

Fiscal 2022 First Quarter Highlights of Continuing Operations
(Dollars in millions)

  Sales   Operating Income
  1st Qtr   Dollar %   1st Qtr % of   1st Qtr % of
  2022 2021   Change Change
  2022 Sales   2021 Sales
Consolidated (1) $ 117.9 $ 101.7   $ 16.2 15.9 %   $ 6.5 5.5 %   $ 5.6 5.5 %
Wholesale $ 83.5 $ 70.3   $ 13.2 19.0 %   $ 3.4 4.1 %   $ 4.8 6.8 %
Retail $ 64.1 $ 60.4   $ 3.7 6.1 %   $ 3.4 5.3 %   $ 1.1 1.8 %
(1) Our consolidated results include certain intercompany eliminations. See Table 4, “Segment Information” below for an illustration of the effects of these intercompany eliminations on our consolidated sales and operating income (loss).

Although incoming wholesale orders remained relatively strong for our first quarter of 2022, we began to make progress in reducing the enormous backlog that has ballooned during the eighteen months of the pandemic that preceded the start of our fiscal year. Consolidated revenue grew by 16% and wholesale shipments increased by 19% in the quarter. Operating income of $6.5 million was 16% ahead of last year primarily thanks to a strong showing in our corporate retail division. Diluted earnings per share of $0.44 compared to $0.37 for last year represented a 19% increase.

The big story for Bassett’s first quarter, of course, was the sale of the assets of our Zenith Freight Lines subsidiary to J.B. Hunt Transport Services, Inc. for approximately $87 million. Subsequently, we announced the declaration of a $1.50 per share special dividend that will be paid to shareholders on April 6, 2022. In our income statement, we will classify Zenith results as “Income from Discontinued Operations,” meaning that Bassett is back to being a pure play furniture manufacturer, wholesaler and retailer. Zenith went out with a bang in its final full quarter under Bassett ownership, recording a net profit of $1.3 million. For the most part, the past four weeks have been “business as usual,” as J.B. Hunt, coupled with the previous Zenith staff, continues to run our former distribution centers and transport our products to our Bassett Home Furnishings stores and to certain independent Bassett accounts. Once again, we are excited about our new partnership with J.B. Hunt as we prepare to manufacture a new product lineup that will be stocked in a new Regional Fulfillment Center opening in Florida later this spring. All eyes will be on our ability to offer rapid service to our Florida stores and open market customers, which we believe can significantly drive new sales in the future. We are pleased that Zenith’s founder, Jack Hawn, will stay on and work with J.B. Hunt and Bassett in a consultative role to help us realize our vision of operating through a national network of Regional Fulfillment Centers. Jack and his wife, Debbie, founded Zenith in 1973 and grew it into the premier less than truckload (“LTL”) furniture transportation company in the country. Their work ethic and good nature has endeared them to the team at Bassett and their expertise led to a successful closing chapter of Bassett’s ownership of Zenith.

Incoming wholesale orders were down 6.8% compared to 2021 but remained robust in comparison to the past few years. 90% of the order shortfall to last year came in our Club Level motion segment, where we still have a large backlog and where we have been most affected by rising container prices. Orders for our domestic upholstery and our outdoor products grew compared to 2021 and remain strong. Wood orders declined slightly, particularly with our imported wood products that have been susceptible to COVID-related factory shutdowns in Vietnam. Our inability to keep pace with the incessant inflationary pressures that we are experiencing cost us between 150 to 200 basis points in our consolidated operating margins for the quarter. The material cost in our upholstery operations was the biggest culprit as practically every raw material involved with manufacturing a sofa, chair or sectional has continued to escalate in price over the past eighteen months. Recognizing this, we are reluctantly implementing our sixth wholesale price increase in the new inflationary world of the last 15 months.

Corporate retail profits, on the other hand, tripled to $3.4 million in the period as higher gross margins and leverage from delivering our order backlog combined to produce better results. We also enjoyed a strong Presidents Day promotion to end the quarter, thus providing for the likelihood of continued strong retail deliveries for the foreseeable future. We are also busy evaluating our real estate portfolio of owned and leased locations. Current plans call for the remodeling of three stores in 2022 while opening one new store and closing another. We also plan to sell the real estate and building in one of our locations this year while purchasing another in a new market.

On the whole, we were pleased with the quarter although the aforementioned vulnerability that we have experienced regarding cost pressure remains frustrating. As we wind down our backlog over the upcoming months, the relationship between our invoice price and our production costs will more closely align. Concurrently, we plan to capitalize on the market share that we have gained in the open market and the improved operating model in our retail stores to make 2022 another strong year for Bassett.

Robert H. Spilman, Jr., Chairman and CEO

About Bassett Furniture Industries, Inc.
Bassett Furniture Industries, Inc. (NASDAQ:BSET), is a leading manufacturer and marketer of high quality home furnishings. With 96 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. Bassett’s retail strategy includes stylish, custom-built furniture that features 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 and a logistics business specializing in home furnishings. For more information, visit the Company’s website at (BSET-E)

Certain of the statements in this release, particularly those preceded by, followed by or including the words “believes,” “plans,” “expects,” “anticipates,” “intends,” “should,” “estimates,” or similar expressions, or those relating to or anticipating financial results or changes in operations for periods beyond the end of the first fiscal quarter of 2022, 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 (including, without limitation, the effects on revenue, supply and demand resulting from the duration and extent of the COVID-19 pandemic) and future events on the retail demand for home furnishings and the ability of Bassett’s customers and consumers to obtain credit; the success of marketing, logistics, retail and other initiatives; 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.

Table 1
Condensed Consolidated Statements of Income - unaudited
(In thousands, except for per share data)
  Quarter Ended
  February 26, 2022   February 27, 2021
    Percent of     Percent of
  Amount Net Sales   Amount Net Sales
Net sales of furniture and accessories $ 117,864   100.0 %   $ 101,655   100.0 %
Cost of furniture and accessories sold   60,471   51.3 %     48,252   47.5 %
     Gross profit   57,393   48.7 %     53,403   52.5 %
Selling, general and administrative expenses   50,915   43.2 %     47,842   47.1 %
   Income from operations   6,478   5.5 %     5,561   5.5 %
Other income (loss), net   (629 ) -0.5 %     (299 ) -0.3 %
Income from continuing operations before income taxes   5,849   5.0 %     5,262   5.2 %
Income tax expense   1,558   1.3 %     1,564   1.5 %
Income from continuing operations   4,291   3.6 %     3,698   3.6 %
Income from discontinued operations, net of tax   1,282         313    
Net income $ 5,573       $ 4,011    
Basic and diluted earnings per share:          
Income from continuing operations $ 0.44       $ 0.37    
Income from discontinued operations   0.13         0.03    
Basic earnings per share $ 0.57       $ 0.40    

Table 2
Condensed Consolidated Balance Sheets
(In thousands)
Assets   February 26, 2022   November 27, 2021
Current assets        
    Cash and cash equivalents   $ 31,880     $ 34,374  
    Short-term investments     17,715       17,715  
    Accounts receivable, net     25,603       20,567  
    Inventories, net     81,679       78,004  
    Recoverable income taxes     6,696       8,379  
    Current assets of discontinued operations held for sale     61,888       11,064  
    Other current assets     11,016       10,181  
Total current assets     236,477       180,284  
Property and equipment, net     69,303       69,168  
Other long-term assets        
    Deferred income taxes, net     3,073       3,189  
    Goodwill and other intangible assets     14,340       14,354  
    Right of use assets under operating leases     94,761       95,955  
    Long-term assets of discontinued operations held for sale     -       52,757  
    Other     6,103       5,953  
Total long-term assets     118,277       172,208  
Total assets   $ 424,057     $ 421,660  
Liabilities and Stockholders’ Equity        
Current liabilities        
    Accounts payable   $ 24,377     $ 23,988  
    Accrued compensation and benefits     10,924       12,639  
    Customer deposits     54,491       51,492  
    Current portion of operating lease obligations     20,051       20,235  
    Current liabilities of discontinued operations held for sale     29,892       16,095  
    Other current liabilities and accrued expenses     10,609       9,770  
Total current liabilities     150,344       134,219  
Long-term liabilities        
    Post employment benefit obligations     13,268       12,968  
    Long-term portion of operating lease obligations     93,333       94,845  
    Long-term liabilities of discontinued operations held for sale   -       16,210  
    Other long-term liabilities     689       686  
Total long-term liabilities     107,290       124,709  
Stockholders’ equity        
     Common stock     48,640       48,811  
     Retained earnings     119,557       115,631  
     Additional paid-in-capital     -       113  
     Accumulated other comprehensive loss     (1,774 )     (1,823 )
Total stockholders' equity     166,423       162,732  
Total liabilities and stockholders’ equity   $ 424,057     $ 421,660  

Table 3
Consolidated Statements of Cash Flows - unaudited
(In thousands)
    Three Months Ended
    February 26, 2022   February 27, 2021
Operating activities:        
Net income   $ 5,573     $ 4,011  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:        
Depreciation and amortization     3,655       3,331  
Gain on lease modification     -       (20 )
Net (gain) loss on disposals of property and equipment     (8 )     (4 )
Deferred income taxes     116       826  
Other, net     778       274  
Changes in operating assets and liabilities        
Accounts receivable     (4,609 )     (2,380 )
Inventories     (3,675 )     (8,050 )
Other current and long-term assets     781       (768 )
Right of use assets under operating leases     6,559       6,340  
Customer deposits     2,999       4,912  
Accounts payable and other liabilities     (2,194 )     3,584  
Obligations under operating leases     (7,109 )     (7,072 )
Net cash provided by operating activities     2,866       4,984  
Investing activities:        
Purchases of property and equipment     (2,424 )     (895 )
Proceeds from sale of property and equipment     9       8  
Other     (465 )     (302 )
           Net cash used in investing activities     (2,880 )     (1,189 )
Financing activities:        
Cash dividends     (1,374 )     (3,718 )
Proceeds from the exercise of stock options         -  
Other issuance of common stock     93       83  
Repurchases of common stock     (765 )     (534 )
Taxes paid related to net share settlement of equity awards     -       (219 )
Repayments of finance lease obligations     (434 )     (173 )
            Net cash used in financing activities     (2,480 )     (4,561 )
Change in cash and cash equivalents     (2,494 )     (766 )
Cash and cash equivalents - beginning of period     34,374       45,799  
Cash and cash equivalents - end of period   $ 31,880     $ 45,033  

Table 4
Segment Information - unaudited
(In thousands)
      Quarter Ended  
      February 26, 2022     February 27, 2021
Sales Revenue            
Wholesale sales of furniture and accessories   $ 83,485   $ 70,264
Less: Sales to retail segment     (29,728)     (29,004)
Wholesale sales to external customers     53,757     41,260
Retail sales of furniture and accessories     64,107     60,395
Consolidated net sales of furniture and accessories   $ 117,864   $ 101,655
Operating Income (Loss)            
Wholesale   $ 3,385   $ 4,797
Retail     3,350     1,094
Inter-company elimination     (257)     (330)
Consolidated   $ 6,478   $ 5,561

J. Michael Daniel 
Senior Vice President and  
Chief Financial Officer 
(276) 629-6614 – Investors

Peter D. Morrison
Vice President of Communications 
(276) 629-6450 – Media

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Source: Bassett Furniture Industries, Incorporated