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Bassett Announces Third Quarter 2007 Results
BASSETT, Va., Oct 4, 2007 (PrimeNewswire via COMTEX News Network) -- Bassett Furniture Industries Inc. (Nasdaq:BSET) announced today its results of operations for its fiscal quarter ended August 25, 2007.
Sales for the third quarter of 2007 were $70.5 million down 9% from $77.6 million for the third quarter of 2006. This shortfall is primarily due to continued soft furniture retail conditions, which have impacted both retail sales and wholesale shipments. Gross margins for the third quarter of 2007 were 35% compared to 30% for the third quarter of 2006 due primarily to a shift in product mix from domestic to imported, improved retail margins and a change in classification of invoiced freight on wholesale shipments (see below). Selling, general and administrative expenses increased primarily due to spending to support the Company's key retail initiatives and the change in classification of invoiced freight as noted above. The Company reported net income of $0.7 million, or $0.06 per share, as compared to net income of $0.1 million, or $0.01 per share, in the third quarter of 2006.
The Bassett Furniture retail store program had 132 stores (103 licensed and 29 Company-owned) in operation at the end of the third quarter. No stores were opened during the quarter and one store was closed. Last month, the Company unveiled a new store prototype opening a new Company-owned store in Atlanta and a remodeled store in Charlotte. The prototype was created to allow a more stylish, residential feel while highlighting Bassett's custom manufacturing capabilities. The Company expects three new licensee-owned stores to open in the next three to four months incorporating this prototype.
"Our industry continues to suffer from sluggish consumer demand coupled with a weak housing market and a growing consumer credit crunch. Industry conditions remain difficult and our results for the third quarter reflect that," said Robert H. Spilman Jr., Bassett president and chief executive officer. "Although business conditions are tough, we are excited about our recently announced retail strategies. Our dealers' reception of our new lines introduced in September have been extremely positive. We also believe that the new prototype recently introduced in Atlanta and Charlotte will reinforce both our commitment to elevating the visual appeal of our stores while highlighting our custom furniture capabilities."
Wholesale Segment
Net sales for the wholesale segment were $58.5 million for the third quarter of 2007, 13% below the $67.2 million level attained in the third quarter of 2006. This shortfall is partially offset by $1.0 million of reported revenue due to a change in the company's invoicing practices with respect to freight charges for wholesale shipments to retailers. During July, the Company began invoicing these customers on a fully landed basis such that the dealer invoice price includes the freight charge for delivery. For the first nine months of 2007, approximately 73% of wholesale shipments were to Bassett stores compared to 70% for the first nine months of 2006. Additionally, approximately 47% of wholesale shipments in the first nine months were imported products compared to 44% for the first nine months of 2006. Gross margins for the wholesale segment were 24.4% for the third quarter of 2007 as compared to 23.2% for 2006. As expected, gross margins have been favorably impacted by an increased mix of higher margin imported product. In addition, margins have been negatively impacted by the wind-down costs and inventory markdowns associated with the closure of the Bassett plant and lower volumes in the Company's two domestic production facilities. The Company expects improved wholesale operating results in the fourth quarter of 2007 from a full quarter of improved product mix coupled with aggressive cost control. With the continued difficult furniture retail environment, the Company will continue to assess and adjust its wholesale cost structure to match associated demand.
Retail Segment
Bassett's 29 corporate stores continued to experience soft conditions at retail with sales of $21.1 million in the third quarter of 2007 as compared to $20.1 million in the third quarter of 2006 with sales increases primarily resulting from additional Company-owned stores. Comparable store sales (sales for stores open for longer than one year) for Company-owned stores increased 2% for the year as compared to 2006. Gross margins for the quarter increased by over five percentage points due to improved pricing and promotional strategies, coupled with less clearance sales activity as compared to 2006. The Company believes that the combination of new product introductions, store prototype retrofits, better hiring and training of design consultants and continued improved marketing efforts will lead to the further improvement of retail operating results.
Other Income and Income Taxes
Other income for the third quarter was $0.8 million as compared to $1.2 million for 2006. This reflects lower levels of investment income due to overall market conditions. The Company's Alternative Asset Fund did record positive earnings for the quarter, however, below the historical levels of 2006 and the first half of 2007. The Company also recorded a significant tax benefit during the third quarter of 2007 due to changes in the projected full year pretax losses.
Balance Sheet and Cash Flow
Accounts receivable have increased $2.5 million during the first nine months of 2007, due to the slower pace of collections from certain store licensees related in part to the overall retail environment. The Company continually assesses its levels of bad debt reserves and increased those reserves by $0.8 million during the third quarter of 2007. Although the Company believes it has adequate reserves for bad debts, it will continue to work with its dealers to help limit bad debt exposure. Some of these actions expected to be taken could result in three to four licensed store closings over the next several months. Inventories have decreased $4.8 million for the year due to lower business levels and improved inventory management.
The Company is committed to maintaining the overall strength of its balance sheet. With its $78.2 million investment portfolio and relatively low levels of debt, the Company continues to invest in retail growth and has continued to pay quarterly dividends to shareholders. The Company used $6.7 million of cash from operations during the first nine months of 2007 and paid $7.1 million in regular quarterly dividends. These cash uses were primarily funded through sales of investments netting an approximate $4.5 million, $6.1 million of dividends received from an affiliate and a $2.0 million increase in borrowings under its revolving credit facility. With $6.0 million outstanding, the $40 million revolving credit facility matures November 30, 2007 and is presented as a current liability in the consolidated balance sheet. The Company is in the process of finalizing an extension of the credit agreement and expects to have the amended facility in place by the middle of October 2007.
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 more than 130 Bassett stores, Bassett has leveraged its strong brand name in furniture into a growing network of corporate and licensed stores that focus on providing consumers with a friendly environment for buying furniture and accessories. The most significant growth vehicle 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. 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 third quarter of fiscal 2007, 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: economic, competitive, governmental and other factors identified in Bassett's filings with the Securities and Exchange Commission, and the effects of national and global economic or other conditions and future events on the retail demand for home furnishings.
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income - Unaudited
(In thousands, except for per share data)
(Restated)
13 Weeks Ended 13 Weeks Ended
August 25, 2007 August 26, 2006
----------------- -----------------
Percent Percent
of Net of Net
Amount Sales Amount Sales
----------------- -----------------
Net sales $ 70,497 100.0% $ 77,560 100.0%
Cost of sales 45,847 65.0% 54,226 69.9%
----------------- -----------------
Gross profit 24,650 35.0% 23,334 30.1%
----------------- -----------------
Selling, general and
administrative 27,123 38.5% 24,854 32.0%
Income (loss) from operations (2,473) -3.5% (1,520) -2.0%
Other income, net 785 1.1% 1,175 1.5%
----------------- -----------------
Income (loss) before income
taxes (1,688) -2.4% (345) -0.4%
Income tax (provision) benefit 2,364 3.4% 402 0.5%
----------------- -----------------
Net income $ 676 1.0% $ 57 0.1%
================= =================
Basic earnings per share: $ 0.06 $ 0.01
========= =========
Diluted earnings per share: $ 0.06 $ 0.01
========= =========
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income - Unaudited
(In thousands, except for per share data)
(Restated)
39 Weeks Ended 39 Weeks Ended
August 25, 2007 August 26, 2006
----------------- -----------------
Percent Percent
of Net of Net
Amount Sales Amount Sales
----------------- -----------------
Net sales $219,349 100.0% $251,712 100.0%
Cost of sales 148,442 67.7% 173,264 68.8%
----------------- -----------------
Gross profit 70,907 32.3% 78,448 31.2%
----------------- -----------------
Selling, general and
administrative 79,005 36.0% 77,947 31.0%
Restructuring and impaired
asset charges 5,544 2.5% -- 0.0%
Lease exit costs 1,934 0.9% -- 0.0%
----------------- -----------------
Operating Income (loss) (15,576) -7.1% 501 0.2%
Other income, net 4,477 2.0% 5,974 2.4%
----------------- -----------------
Income (loss) before income
taxes (11,099) -5.1% 6,475 2.6%
Income tax (provision) benefit 5,168 2.4% (1,405) -0.6%
----------------- -----------------
Net income (loss) $ (5,931) -2.7% $ 5,070 2.0%
----------------- -----------------
Basic earnings (loss) per
share: $ (0.50) $ 0.43
========= =========
Diluted earnings (loss) per
share: $ (0.50) $ 0.43
========= =========
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
(Unaudited)
Assets August 25, 2007 November 25, 2006
--------------- -----------------
Current assets
Cash and cash equivalents $ 4,360 $ 6,051
Accounts receivable, net 40,704 38,253
Inventories 44,049 48,880
Deferred income taxes 4,915 6,391
Assets held for sale -- 1,091
Other current assets 10,297 6,812
--------------- -----------------
Total current assets 104,325 107,478
--------------- -----------------
Property and equipment, net 52,026 58,925
--------------- -----------------
Investments 78,193 78,617
Retail real estate 31,200 33,501
Notes receivable, net 14,296 13,391
Deferred income taxes 11,081 5,657
Other 13,429 12,368
--------------- -----------------
148,199 143,534
--------------- -----------------
Total assets $ 304,550 $ 309,937
=============== =================
Liabilities and Stockholders'
Equity
Current liabilities
Accounts payable $ 18,954 $ 16,927
Customer deposits 7,594 8,310
Short-term revolving debt 6,000 --
Other accrued liabilities 20,915 18,323
--------------- -----------------
Total current liabilities 53,463 43,560
--------------- -----------------
Long-term liabilities
Post employment benefit
obligations 15,051 15,263
Long-term revolving debt -- 4,000
Real estate notes payable 19,022 19,522
Distributions in excess of
affiliate earnings 13,427 11,726
Other long-term liabilities 1,517 --
--------------- -----------------
49,017 50,511
--------------- -----------------
Commitments and Contingencies
Stockholders' equity
Common stock 59,032 59,018
Retained earnings 138,515 151,535
Additional paid-in-capital 2,100 1,993
Accumulated other comprehensive
income 2,423 3,320
--------------- -----------------
Total stockholders' equity 202,070 215,866
--------------- -----------------
Total liabilities and
stockholders' equity $ 304,550 $ 309,937
=============== =================
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - Unaudited
(In thousands)
Nine Months Ended
----------------------------------
As restated
August 25, 2007 August 26, 2006
--------------- ---------------
Operating activities:
Net income (loss) $ (5,931) $ 5,070
Adjustments to reconcile net
income (loss) to net cash
used in operating activities:
Depreciation and amortization 6,864 6,886
Equity in undistributed income of
investments and unconsolidated
affiliated companies (6,358) (7,193)
Provision for restructuring and
asset impairment costs 5,544 --
Provision for lease exit costs 1,934 --
Realized income from investments (2,393) (1,844)
Net loss from sales of property
and equipment 33 --
Provision for losses on trade
accounts receivable 2,205 2,633
Deferred income taxes (3,693) (238)
Changes in post employment
benefit obligations (18) (407)
Cash received on licensee notes
for operating activities 100 28
Changes in operating assets and
liabilities (exclusive of assets
acquired in business
combinations):
Accounts receivable (9,660) (7,707)
Inventories 5,465 (1,897)
Other current assets (3,283) 828
Accounts payable and accrued
liabilities 2,487 (3,496)
--------------- ---------------
Net cash used in operating
activities (6,704) (7,337)
--------------- ---------------
Investing activities:
Purchases of property and
equipment (2,842) (2,712)
Purchases of retail real estate (40) (3,552)
Proceeds from sales of property
and equipment 3,111 1,826
Proceeds from sales of investments 13,134 18,227
Purchases of investments (8,590) (11,678)
Dividends from an affiliate 6,091 6,559
Proceeds from sale of certain
assets of Weiman division -- 1,300
Net cash received (paid) on
licensee notes 920 (465)
Other, net (322) (304)
--------------- ---------------
Net cash provided by investing
activities 11,462 9,201
--------------- ---------------
Financing activities:
Borrowings under revolving
credit facility 2,000 5,000
Repayments of long-term debt (770) (372)
Repayments of real estate notes
payable (500) (372)
Issuance of common stock 385 510
Repurchases of common stock (476) (910)
Cash dividends (7,088) (7,088)
--------------- ---------------
Net cash provided by (used in)
financing activities (6,449) (3,232)
--------------- ---------------
Change in cash and cash
equivalents (1,691) (1,368)
Cash and cash equivalents -
beginning of period 6,051 7,109
--------------- ---------------
Cash and cash equivalents - end
of period $ 4,360 $ 5,741
=============== ===============
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Segment Information - Unaudited
(In thousands)
13 Weeks Ended 39 Weeks Ended
---------------------- ----------------------
(Restated) (Restated)
August 25, August 26, August 25, August 26,
2007 2006 2007 2006
---------------------- ----------------------
Net Sales
Wholesale $ 58,482 $ 67,190 $ 184,216 $ 218,919
Retail 21,075 20,102 63,614 62,905
Inter-company
elimination (9,060) (9,732) (28,481) (30,112)
---------------------- ----------------------
Consolidated $ 70,497 $ 77,560 $ 219,349 $ 251,712
====================== ======================
Operating Income (loss)
Wholesale $ 555 $ 2,433 $ 157 $ 9,623
Retail (2,898) (3,846) (8,023) (8,692)
Inter-company
elimination (130) (107) (232) (430)
Restructuring and
impaired asset charges -- -- (5,544) --
Lease exit costs -- -- (1,934) --
---------------------- ----------------------
Consolidated $ (2,473) $ (1,520) $ (15,576) $ 501
====================== ======================
BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Reconciliation of Net Income as Reported
to Net Income as Adjusted (Unaudited)
(In thousands, except for per share data)
(Restated)
39 Weeks Ended Per 39 Weeks Ended Per
August 25, 2007 Share August 26, 2006 Share
-----------------------------------------------
Net income (loss)
as reported $ (5,931) $(0.50) $ 5,070 $ 0.43
Restructuring &
impaired asset
charges, net of
taxes (a) 3,382 0.29 -- --
Lease exit costs,
net of taxes (a) 1,180 0.10 -- --
Net income (loss) as
adjusted $ (1,369) $(0.11) $ 5,070 $ 0.43
===============================================
(a) Adjustments are net of income taxes at a 39% effective tax rate
The Company has included the "as adjusted" information because it
uses, and believes that others may use, such information in comparing
the Company's operating results from period to period. However, the
items excluded in determining the "as adjusted" information are
significant components in understanding and assessing the Company's
overall financial performance for the periods covered.
Restatement of Financial Statements
As more fully discussed in our 2006 Form 10-K, the fiscal 2006 quarterly financial information was restated based on our review of the accounting treatment associated with our acquisition of three retail licensee operations in fiscal 2005 and the classification of certain notes receivable activity in the statement of cash flows. The effects of those restatements on the financial statements for the quarter and nine months ended August 26, 2006 included herein are summarized below:
Increase (Decrease)
----------------------------------
Quarter Ended Nine Months Ended
August 26, 2006 August 26, 2006
----------------------------------
Gross profit $ (627) $ (1,176)
Operating income (627) (929)
Net income (376) (558)
Cash flow from operations $ -- $ 28
Cash flow from investing activities -- (28)
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SOURCE: Bassett Furniture
Bassett Furniture Industries Inc.
Investors:
Barry C. Safrit, S.V.P., CFO
(276) 629-6757
Fax: (276) 629-6332
Media:
Jay S. Moore, Dir. of Communications
(276) 629-6450
Fax: (276) 629-6418
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