Bassett Announces Fiscal Second Quarter Results

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Bassett Announces Fiscal Second Quarter Results

BASSETT, Va., July 01, 2021 (GLOBE NEWSWIRE) -- Bassett Furniture Industries, Inc. (Nasdaq: BSET) announced today its results of operations for its second quarter ended May 29, 2021.

Fiscal 2021 Second Quarter Highlights
(Dollars in millions)

  Sales   Operating Income (Loss)
  2nd Qtr   Dollar %   2nd Qtr % of   2nd Qtr % of
  2021 2020   Change Change 2021 Sales   2020 Sales
Consolidated (1) $ 124.1 $ 63.8   $ 60.3 94.4 %   $ 8.4 6.8 %   $ (31.2 ) -48.9 %
                       
Wholesale $ 76.0 $ 33.1   $ 42.9 129.7 %   $ 5.4 7.0 %   $ (7.4 ) -22.3 %
                       
Retail $ 62.5 $ 33.2   $ 29.3 88.4 %   $ 1.7 2.6 %   $ (9.2 ) -27.6 %
                       
Logistical Services $ 22.2 $ 15.3   $ 7.0 45.8 %   $ 1.3 5.8 %   $ (1.8 ) -12.1 %
                       
(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).      
                       

Consolidated revenue of $124.1 million for our second quarter represented a 94% increase as compared to the pandemic impacted quarter in 2020 and 15% as compared to 2019. Similarly, strong wholesale orders of $96.0 million for the period increased by 172% versus 2020 and by 51% compared to the pre-pandemic 2019 second quarter. As we battle an extremely tight labor market and continued supply chain disruptions, we strive to chip away at our huge order backlog that grew by another $19 million over the three months. Adding to the complexity is the inflationary raw material spiral that we have confronted this year, leading to our unprecedented action of levying three general price increases since our fiscal year began in December. Amidst this unsettled environment, we were pleased to record an $8.4 million operating profit compared to last year’s loss. EPS advanced to $0.60 per share for the quarter against the COVID-19 affected loss of ($2.04) in 2020.

Again, our obvious focus is centered on the reduction of our backlog and returning to a semblance of normalcy in our service levels as soon as possible. Although our cancellation rate has not spiked significantly to date, it is a natural concern. At the recent High Point Furniture Market, we were actually thanked several times for our ability to deliver goods more quickly than the apparent current industry standard, which underscores just how compromised lead times actually are today. Aside from working massive amounts of overtime, the early June opening of our new upholstery production facility in Newton, NC will provide some immediate relief to a portion of the situation. With the polyurethane foam shortage largely behind us, our current raw material bottlenecks lie in the thousands of yards of decorative fabrics that our suppliers owe us. Our production managers have done a great job in shuffling our daily schedules to produce what they can based on the materials that they actually possess. Notwithstanding all the complications of the post-pandemic economy, our wholesale team produced a 7.0% operating margin for the period as our wood, upholstery, and outdoor divisions turned in performances significantly better than 2020 and 2019.

Another aspect of the current disorder is the state of the industry’s logistics model. The strong business that has characterized the past 13 months has overwhelmed the furniture trucking segment. There is currently a dearth of warehouse space, warehouse labor, and over the road trailers to handle shipping backlogs. Consequently, even after the goods have been manufactured, there are accompanying lags in logistics service that could represent several weeks of further delay. Exacerbating this state of affairs is the global shortage of shipping containers that continues to plague our sector. Our Zenith Logistics team has performed at a high level in dealing with the cumulative effect of these daily challenges by generating $1.3 million of operating profit for the quarter despite spiraling warehousing labor costs and procuring over 400 trailers on short term leases to combat the equipment shortage. Longer term we are motivated by prospects of our recent regional warehouse model that is showing great promise. Over the past six months we have experimented with keeping some of our best sellers closer to the U.S. population centers for quicker delivery. When we have been able to have these goods in inventory, we have seen significant upticks in rates of sale, which bodes well for our plan to expand this model as product availability becomes normalized.

As mentioned, wholesale orders increased dramatically during the quarter with all channels showing growth. Leading the way was our Bassett Design Center (BDC) network, part of our open market wholesale business, with increases of 212% and 87%, respectively, compared to 2020 and 2019. Another big part of the overall open market increase was the continuing rise of the Bassett Club Level program, which grew by 328% versus 2019. Dedicated Bassett-branded distribution in the form of the Bassett Home Furnishings network and BDC’s represented 67% of wholesale sales for the period. Once again, our corporate retail division was not able to deliver goods to the home at the rate that they were sold in the stores. Our digital outreach strategies continued to bear fruit as visitors to our website grew by 51% in the quarter. Store traffic, which has declined for the past few years, has held steady since business returned after the stores reopened last May. Still, our corporate retail turned in a profit of $1.6 million while continuing to add to its already large order backlog. Finally, we are excited by the combined results of the Lane Venture and Bassett Outdoor sales strategies as they combined for a 122% increase to 2020 and 124% to 2019. Much of the new business came from our Alabama metal facility that we purchased in 2019.

Summing it all up for the quarter, we wrote more wholesale business than we had in many years, back to when we operated a much larger domestic manufacturing footprint in the pre-globalization days. While retiring $2.4 million of stock and paying our quarterly dividend, we ended May with $63.5 million of cash and short-term investments and no debt. There are many cost pressures and raw material lead times remain long. But we have a very large backlog and our most recent big sales event around Memorial Day was very strong. Taking all of those positives and negatives into account, we remain encouraged concerning our prospects for the remainder of 2021.

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 97 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 bassettfurniture.com. (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 second fiscal quarter of 2021, 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
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations - unaudited
(In thousands, except for per share data)
                       
                       
  Quarter Ended   Six Months Ended
  May 29, 2021   May 30, 2020   May 29, 2021   May 30, 2020
    Percent of     Percent of     Percent of     Percent of
  Amount Net Sales   Amount Net Sales   Amount Net Sales   Amount Net Sales
                       
Sales revenue:                      
  Furniture and accessories $ 109,997       $ 53,000       $ 211,652       $ 151,942    
  Logistical services   14,062         10,801         26,080         23,979    
     Total sales revenue   124,059   100.0 %     63,801   100.0 %     237,732   100.0 %     175,921   100.0 %
                       
Cost of furniture and accessories sold   52,911   42.6 %     29,452   46.2 %     101,163   42.6 %     74,722   42.5 %
                       
Selling, general and administrative expenses   50,001   40.3 %     37,730   59.1 %     97,843   41.2 %     90,027   51.2 %
Cost of logistical services   12,768   10.3 %     12,643   19.8 %     24,326   10.2 %     24,986   14.2 %
Asset impairment charges   -   0.0 %     12,184   19.1 %     -   0.0 %     12,184   6.9 %
Goodwill impairment charge   -   0.0 %     1,971   3.1 %     -   0.0 %     1,971   1.1 %
Litigation expense   -   0.0 %     1,050   1.6 %     -   0.0 %     1,050   0.6 %
   Income (loss) from operations   8,379   6.8 %     (31,229 ) -48.9 %     14,400   6.1 %     (29,019 ) -16.5 %
                       
Other loss, net   (332 ) -0.3 %     (765 ) -1.2 %     (669 ) -0.3 %     (1,127 ) -0.6 %
Income (loss) before income taxes   8,047   6.5 %     (31,994 ) -50.1 %     13,731   5.8 %     (30,146 ) -17.1 %
                       
Income tax provision (benefit)   2,073   1.7 %     (11,642 ) -18.2 %     3,746   1.6 %     (11,004 ) -6.3 %
Net income (loss) $ 5,974   4.8 %   $ (20,352 ) -31.9 %   $ 9,985   4.2 %   $ (19,142 ) -10.9 %
                       
Basic earnings (loss) per share $ 0.60       $ (2.04 )     $ 1.01       $ (1.92 )  
                       
Diluted earnings (loss) per share $ 0.60       $ (2.04 )     $ 1.01       $ (1.92 )  
                       
                       
    25.76 %                    


Table 2
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
    (Unaudited)    
Assets   May 29, 2021   November 28, 2020
Current assets        
    Cash and cash equivalents   $ 45,776     $ 45,799  
    Short-term investments     17,715       17,715  
    Accounts receivable, net     25,882       22,340  
    Inventories, net     67,301       54,886  
    Recoverable income taxes     7,789       9,666  
    Other current assets     12,008       10,272  
Total current assets     176,471       160,678  
         
Property and equipment, net     92,581       90,917  
         
Other long-term assets        
    Deferred income taxes, net     3,362       4,587  
    Goodwill and other intangible assets     23,637       23,827  
Right of use assets under operating leases     116,357       116,903  
    Other     6,071       5,637  
Total long-term assets     149,427       150,954  
Total assets   $ 418,479     $ 402,549  
         
Liabilities and Stockholders’ Equity        
Current liabilities        
    Accounts payable   $ 28,522     $ 23,426  
    Accrued compensation and benefits     14,124       16,964  
Customer deposits     47,911       39,762  
Current portion of operating lease obligations     27,358       27,078  
Other current liabilities and accrued expenses     12,534       11,141  
Total current liabilities     130,449       118,371  
         
Long-term liabilities        
    Post employment benefit obligations     12,398       12,089  
    Long-term portion of operating lease obligations     109,832       111,972  
   Other long-term liabilities     5,538       2,087  
Total long-term liabilities     127,768       126,148  
         
         
Stockholders’ equity        
     Common stock     49,262       49,714  
     Retained earnings     112,325       109,710  
     Accumulated other comprehensive loss     (1,325 )     (1,394 )
Total stockholders' equity     160,262       158,030  
Total liabilities and stockholders’ equity   $ 418,479     $ 402,549  
         


Table 3  
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES  
Consolidated Statements of Cash Flows - unaudited  
(In thousands)  
           
    Six Months Ended  
    May 29, 2021   May 30, 2020  
Operating activities:          
Net income (loss)   $ 9,985     $ (19,142 )  
Adjustments to reconcile net income (loss) to net cash provided by (used in)          
  operating activities:          
Depreciation and amortization     6,893       7,239    
Gain on lease modification     -       (152 )  
Asset impairment charges     -       12,184    
Goodwill impairment charges     -       1,971    
Inventory valuation charges     1,100       2,936    
Bad debt valuation charges (recoveries)     (43 )     1,074    
Deferred income taxes     1,201       (521 )  
Other, net     255       673    
Changes in operating assets and liabilities          
Accounts receivable     (3,399 )     2,483    
Inventories     (13,515 )     883    
Other current and long-term assets     25       (9,091 )  
Right of use assets under operating leases     12,558       14,810    
Customer deposits     8,149       (2,150 )  
Accounts payable and other liabilities     2,775       (2,670 )  
Obligations under operating leases     (13,934 )     (16,274 )  
          Net cash provided by (used in) operating activities     12,050       (5,747 )  
           
Investing activities:          
Purchases of property and equipment     (3,483 )     (1,791 )  
Proceeds from sale of property and equipment     96       2,345    
Purchase of investments     -       (241 )  
Other     (335 )     (211 )  
           Net cash provided by (used in) investing activities     (3,722 )     102    
           
Financing activities:          
Cash dividends     (4,954 )     (1,258 )  
Proceeds from the exercise of stock options     42       -    
Other issuance of common stock     172       157    
Repurchases of common stock     (2,925 )     (1,241 )  
Taxes paid related to net share settlement of equity awards     (219 )     (215 )  
Repayments of finance lease obligations     (467 )     (50 )  
            Net cash used in financing activities     (8,351 )     (2,607 )  
Change in cash and cash equivalents     (23 )     (8,252 )  
Cash and cash equivalents - beginning of period     45,799       19,687    
           
Cash and cash equivalents - end of period   $ 45,776     $ 11,435    
           

 

Table 4
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Segment Information - unaudited
(In thousands)
                 
    Quarter Ended   Six Months Ended
    May 29, 2021   May 30, 2020   May 29, 2021   May 30, 2020
Sales Revenue                
Wholesale sales of furniture and accessories   $ 76,034     $ 33,128     $ 146,298     $ 98,145  
Less: Sales to retail segment     (28,520 )     (13,299 )     (57,524 )     (45,220 )
Wholesale sales to external customers     47,514       19,829       88,774       52,925  
Retail sales of furniture and accessories     62,483       33,171       122,878       99,017  
Consolidated net sales of furniture and accessories   109,997       53,000       211,652       151,942  
                 
Logistical services revenue     22,244       15,259       42,325       36,574  
Less: Services to wholesale segment     (8,182 )     (4,458 )     (16,245 )     (12,595 )
Logistical services to external customers     14,062       10,801       26,080       23,979  
Total sales revenue   $ 124,059     $ 63,801     $ 237,732     $ 175,921  
                 
Operating Income (Loss)                
Wholesale   $ 5,359     $ (7,381 )   $ 10,156     $ (4,668 )
Retail     1,652       (9,170 )     2,746       (10,419 )
Logistical services     1,294       (1,842 )     1,753       (1,007 )
Inter-company elimination     74       2,369       (255 )     2,280  
Asset impairment charges     -       (12,184 )     -       (12,184 )
Goodwill impairment charge     -       (1,971 )     -       (1,971 )
Litigation expense     -       (1,050 )     -       (1,050 )
Consolidated   $ 8,379     $ (31,229 )   $ 14,400     $ (29,019 )
                 

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

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


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Source: Bassett Furniture Industries, Incorporated