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Bassett Announces Fiscal Fourth Quarter Results

/EIN News/ -- BASSETT, Va., Jan. 21, 2016 (GLOBE NEWSWIRE) -- Bassett Furniture Industries, Inc. (Nasdaq:BSET) announced today its results of operations for its fiscal quarter ended November 28, 2015.

Fiscal 2015 Fourth Quarter Highlights

  • Consolidated sales were $115.6 million for the fourth quarter of 2015 compared to $94.7 million for the fourth quarter of 2014, an increase of 22%.  Excluding the sales from the recently acquired Zenith Freight Lines, LLC (“Zenith”), consolidated sales increased 7.0%.
  • Operating income for the quarter was $8.7 million or 7.5% of sales as compared to $6.8 million or 7.1% of sales for the prior year quarter.  Excluding the effects of Zenith, operating income would have been $7.3 million or 7.2% of sales.
  • Wholesale sales were $64.5 million for the fourth quarter of 2015 compared to $60.7 million for the fourth quarter of 2014, an increase of 6.3%.  Wholesale operating profit was $4.1 million or 6.4% of sales as compared to $4.3 million or 7.1% of sales for the prior year quarter.
  • Company-owned store sales increased 6.6%, including a comparable store sales increase of 6.7%, compared to the prior year quarter. Comparable store operating income was $2.7 million or 4.2% of sales for the current year quarter as compared to $2.2 million or 3.6% of sales for the prior year quarter.  Total retail operating income was $2.2 million or 3.3% of sales for the quarter as compared to operating income of $2.1 million or 3.3% of sales for the prior year quarter.
  • Zenith, acquired in the first quarter of 2015, generated operating income of $1.4 million on sales of $25.6 million or 5.5% of sales.
  • Net income for the quarter increased to $5.7 million, or $0.52 per diluted share, as compared to $3.6 million, or $0.35 per diluted share, for the prior year quarter, representing a 56% increase in net income over the prior year quarter.

“Fiscal 2015 proved to be another strong year of sales and earnings growth for Bassett,” commented Robert H. Spilman Jr., president and chief executive officer.  “Several operational milestones were accomplished in driving consolidated net revenue to $431 million, a 27% increase compared to 2014, resulting in a 72% increase in operating income to $26.0 million, or 6.0% of sales.  Robust comparable store growth of 13% propelled our corporate retail group to a $6.2 million operating profit, our first ever annual profit in that division.  The acquisition of Zenith Freight Lines, LLC that took place last February solidified the future of our industry leading service proposition and contributed $3.5 million of operating profit to the final ten months of the year.  Largely driven by strong retail growth, our upholstery division posted a 14% sales gain and improved divisional operating profit by 22%.  Finally, our start-up solid wood custom dining line, Bench Made, exceeded our sales plan and became profitable in the third month of operation. We believe that this strong performance of the integrated components of our business in 2015 underscores the opportunity that further expansion of our retail footprint and product assortment affords us in the future.

“For the fourth quarter, consolidated revenue grew by 22% to $116 million and operating profit increased by 29% to $8.7 million,” continued Spilman.  “Net income for the quarter was $5.7 million and $20.4 million for the year.  Net income for the year, excluding restructuring expenses, gains on the Zenith acquisition, and income from the CDSOA distribution was $14.8 million.  Reported earnings per share for the year was $1.88 as compared to $0.87 for 2014.  Excluding the effects of the previously mentioned items, earnings per share for 2015 was $1.36.

“Over the course of 2015, we invested almost $9 million in cash toward the Zenith acquisition and spent another $14 million on capital expenditures to expand and improve the overall business,” said Spilman.  “In addition, the Company returned $7.9 million of capital to our shareholders in the form of dividends and share repurchases.  Thanks to the generation of over $32 million of operational cash flow, we were able to make these investments and distributions and end the year with $59 million of cash and investments on the balance sheet.  We expect to invest a larger amount on new store expansion in 2016 and beyond.

“Primarily through organic growth and partially due to the Zenith acquisition, Bassett’s revenues have increased almost $200 million over the last five years,” added Spilman.  “Accompanying this growth has been a five-fold increase in annual operating profit.  We look ahead to 2016 not only in the context of the next 12 months but also with the long term performance and growth of the business in mind.  In this regard, we are currently considering several locations for new store expansion over the next three years, with at least three of these planned to open in fiscal 2016.  We continue to evaluate all stores in our fleet and plan to close three underperforming stores this year as well.  Building on our five year track record of comparable store sales increases, we plan several new initiatives to continue this trend.  Among other internet enhancements, we plan to unveil a new custom furniture visualizer in March designed to faster convey our capabilities to the e-commerce customer.  Also extremely significant is the second phase of our store assortment makeover that began with the introduction of new wood items and finishes last spring.  We are planning to move to a living area centric floor plan that will focus more on the upholstery products that are driving our sales today complemented by both imported and domestically produced entertainment and occasional furnishings.  This effort will entail the discounting of existing products and the introduction of an array of new items slated for an early May store debut.”

Wholesale Segment

Net sales for the wholesale segment were $64.5 million for the fourth quarter of 2015 as compared to $60.7 million for the fourth quarter of 2014, an increase of $3.8 million or 6.3%.  Increased wholesale shipments to both the Bassett Home Furnishings store network and the open market (outside the Bassett Home Furnishings store network) drove the increase in wholesale sales. Gross margins for the wholesale segment increased to 33.9% for the fourth quarter of 2015 from 33.7% for the fourth quarter of 2014.  Wholesale SG&A increased $1.4 million to $17.7 million for the fourth quarter of 2015 as compared to $16.3 million for the fourth quarter of 2014. SG&A as a percentage of sales increased to 27.4% as compared to 26.7% for the fourth quarter of 2014. This increase in SG&A was primarily driven by increased legal costs associated with an on-going environmental clean-up case that we believe will be settled in early 2016 and increased advertising costs largely due to the timing of the Labor Day promotional period as compared to the prior year.  Operating income was $4.1 million or 6.4% of sales as compared to $4.3 million or 7.1% of sales in the prior year.

“Wholesale sales grew by 6% in the quarter,” said Spilman.  “Shipments of $252 million for the year represented a 13% growth rate and produced an 11% operating profit increase.  Our upholstery division completed another stellar year with plans to begin production in a new manufacturing facility in Grand Prairie, Texas in early March.  The new plant will begin by producing a portion of the upholstery assortment for customers and stores in the Texas area and west.  Domestic wood production grew by 31% for the year thanks to double digit growth in our existing casual dining program and the new volume from our Bench Made line.

“As we previously announced, we renewed our partnership with HGTV through 2019,” Spilman added. “While the HGTV HOME Design Studio is an important point of differentiation for our stores and is playing a key role in our improved comparable store sales, the open market HGTV Furniture Collections of imported wood products was not as successful.  We discontinued this line in 2015 which resulted in significant wholesale discounting over the course of the year to liquidate that inventory.  Excluding sales from the HGTV Furniture Collections product line, our core wood sales actually increased modestly.”

Retail Segment

Net sales for the 60 Company-owned Bassett Home Furnishings stores were $66.3 million for the fourth quarter of 2015 as compared to $62.2 million for the fourth quarter of 2014, an increase of $4.1 million or 6.6%. The increase was primarily due to a $4.1 million or 6.7% increase in 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 10% for the fourth quarter of 2015 as compared to the fourth quarter of 2014.  Written sales were positively affected by a stronger Thanksgiving promotional weekend than in the prior year coupled with a shift in the promotional calendar due to Labor Day being a week later in our fiscal quarter as compared to 2014.

The consolidated retail operating profit for the fourth quarter of 2015 was $2.2 million as compared to $2.1 million for the fourth quarter of 2014, an improvement of $0.1 million.  The 59 comparable stores generated operating income of $2.7 million for the quarter, or 4.2% of sales, as compared to $2.2 million, or 3.5% of sales, for the prior year quarter.  Gross margins for comparable stores were 50.3% for the fourth quarter of 2015 compared to 50.5% for the fourth quarter of 2014.  SG&A expenses for comparable stores increased $1.4 million to $30.4 million or 46.1% of sales as compared to 46.9% of sales for the fourth quarter of 2014.  The decrease in SG&A as a percentage of sales is primarily due to greater leverage of fixed costs due to higher sales volumes for the comparable stores. 

“Although our streak of five consecutive quarters of double digit comparable store sales increases ended in the fourth quarter, we were nevertheless pleased with posting a 7% comparable gain for the period,” continued Spilman.  “In the larger context, the aforementioned $6.2 million operating profit that our retail team turned in for 2015 was a significant achievement.  And the $2.2 million operating profit in the fourth quarter was our best retail quarter ever.  Profitability has been achieved by reaching the sales levels that have sufficiently leveraged our cost structure as retail SG&A fell 260 basis points for the year.  Looking ahead, we are concentrating on strategies to further raise the average unit volume of our store fleet, which has increased by 50% over the past five years.  These efforts include enhanced internet marketing, changes in our furniture assortment and visual presentation, and further and more purposeful integration of our accessory offering into our selling strategy.”

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 93 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, 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 600 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 fourth fiscal quarter of 2015, 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   Year Ended
  November 28, 2015   November 29, 2014   November 28, 2015   November 29, 2014
  Amount Percent of
Net Sales
  Amount Percent of
Net Sales
  Amount Percent of
Net Sales
  Amount Percent of
Net Sales
                       
Sales revenue:                      
Furniture and accessories $   101,283       $   94,720       $   387,405       $   340,738    
Logistics     14,272           -           43,522           -    
Total sales revenue     115,555     100.0 %       94,720     100.0 %       430,927     100.0 %       340,738     100.0 %
                       
Cost of furniture and accessories sold     45,615     39.5 %  *      42,883     45.3 %       179,291     41.6 %  *      158,317     46.5 %
                       
Selling, general and administrative expenses excluding new store pre-opening costs     60,847     52.7 %  *      45,082     47.6 %       224,050     52.0 %  *      166,073     48.7 %
New store pre-opening costs     387     0.3 %       -     0.0 %       623     0.1 %       1,217     0.4 %
Lease exit costs     -     0.0 %       -     0.0 %       419     0.1 %       -     0.0 %
Asset impairment charges     -     0.0 %       -     0.0 %       106     0.0 %       -     0.0 %
Management restructuring costs     -     0.0 %       -     0.0 %       449     0.1 %       -     0.0 %
Income from operations     8,706     7.5 %       6,755     7.1 %       25,989     6.0 %       15,131     4.4 %
                       
Remeasurement gain on acquisition of affiliate     -     0.0 %       -     0.0 %       7,212     1.7 %       -     0.0 %
Income from Continued Dumping & Subsidy Offset Act     90     0.1 %       -     0.0 %       1,156     0.3 %       -     0.0 %
Income from unconsolidated affiliated company     -     0.0 %       -     0.0 %       220     0.1 %       -     0.0 %
Interest expense     (171 )   -0.1 %       -     0.0 %       (607 )   -0.1 %       -     0.0 %
Other loss, net     (626 )   -0.5 %       (472 )   -0.5 %       (2,102 )   -0.5 %       (524 )   -0.2 %
Income before income taxes     7,999     6.9 %       6,283     6.6 %       31,868     7.4 %       14,607     4.3 %
                       
Income tax provision     2,317     2.0 %       2,634     2.8 %       11,435     2.7 %       5,308     1.6 %
Net income $   5,682     4.9 %   $   3,649     3.9 %   $   20,433     4.7 %   $   9,299     2.7 %
                       
Basic earnings per share $   0.53       $   0.35       $   1.91       $   0.88    
                       
Diluted earnings per share $   0.52       $   0.35       $   1.88       $   0.87    
                       
                       
*  Because it is a service company, all operating costs for Zenith are included in consolidated Selling, general and administrative expenses. The acquisition of Zenith has the effect of reducing consolidated Cost of furniture and accessories sold as a percentage of sales and increasing Selling, general and administrative expenses as a percentage of sales as compared to the prior year. For comparative purposes only, Cost of furniture and accessories sold would have been 45.0% and 46.3% and Selling, general and adminstrative expenses would have been 46.8% and 47.2% of sales for the quarter and year ended November 28, 2015, respectively,  excluding the effects of Zenith.
 


BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
    (Unaudited)    
Assets   November 28, 2015   November 29, 2014
Current assets        
Cash and cash equivalents    $   36,268     $   26,673  
Short-term investments       23,125         23,125  
Accounts receivable, net       21,197         15,228  
Inventories, net       59,896         57,272  
Other current assets        6,798         7,796  
Total current assets       147,284         130,094  
         
Property and equipment, net       96,104         74,812  
         
Other long-term assets        
Deferred income taxes, net       13,471         14,969  
Goodwill and other intangible assets       17,682         1,730  
Other       8,002         19,141  
Total long-term assets       39,155         35,840  
Total assets   $   282,543     $   240,746  
         
Liabilities and Stockholders’ Equity        
Current liabilities        
Accounts payable   $   20,916     $   22,251  
Accrued compensation and benefits       14,345         8,931  
Customer deposits       23,999         22,202  
Dividends payable       2,184         2,102  
Current portion of long-term debt       5,273         316  
Other accrued liabilities       13,133         10,971  
Total current liabilities       79,850         66,773  
         
Long-term liabilities        
Post employment benefit obligations       12,694         11,498  
Long-term debt       8,500         1,902  
Other long-term liabilities       4,133         3,741  
Total long-term liabilities       25,327         17,141  
         
         
Stockholders’ equity        
Common stock       54,580         52,467  
Retained earnings       120,904         106,339  
Additional paid-in-capital       4,560         -  
Accumulated other comprehensive loss       (2,678 )       (1,974 )
Total stockholders' equity       177,366         156,832  
Total liabilities and stockholders’ equity   $   282,543     $   240,746  
         


BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - unaudited
(In thousands)
 
    Year Ended
    November 28, 2015   November 29, 2014
Operating activities:        
Net income   $   20,433     $   9,299  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:        
Depreciation and amortization       10,137         7,316  
Equity in undistributed income of investments and unconsolidated affiliated companies       (220 )       (661 )
Non-cash asset impairment charges       106         -  
Non-cash portion of lease exit costs       419         -  
Remeasurement gain on acquisition of affiliate       (7,212 )       -  
Tenant improvement allowances received from lessors       1,283         3,060  
Deferred income taxes       1,930         544  
Collateral deposited with insurance carrier       -         (1,150 )
Other, net       2,082         264  
Changes in operating assets and liabilities         
Accounts receivable       (2,354 )       775  
Inventories       (2,624 )       (4,203 )
Other current and long-term assets        1,494         1,548  
Customer deposits       1,796         5,912  
Accounts payable and accrued liabilities       5,128         7,257  
Net cash provided by operating activities       32,398         29,961  
         
Investing activities:        
Purchases of property and equipment       (13,974 )       (17,980 )
Proceeds from sale of retail  real estate and property and equipment       2,981         5,157  
Cash paid for business acquisition, net of cash acquired       (7,323 )       -  
Capital contribution to affiliate       (1,345 )       -  
Proceeds from maturity of short-term investments       -         5,000  
Proceeds from sale of interest in affiliate       -         2,348  
Cash received on notes receivable and other       -         320  
Net cash used in investing activities       (19,661 )       (5,155 )
         
Financing activities:        
Cash dividends        (5,786 )       (5,155 )
Proceeds from the exercise of stock options       4,031         297  
Other issuance of common stock       325         311  
Repurchases of common stock       (2,071 )       (5,602 )
Taxes paid related to net share settlement of equity awards       (178 )       (489 )
Excess tax benefits from stock-based compensation       1,998         300  
Repayments of notes payable       (2,768 )       (528 )
Proceeds from equipment loans       1,307         -  
Net cash used in financing activities       (3,142 )       (10,866 )
Change in cash and cash equivalents       9,595         13,940  
Cash and cash equivalents - beginning of period       26,673         12,733  
    .   .
Cash and cash equivalents - end of period   $   36,268     $   26,673  
         


BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES 
Segment Information - unaudited
(In thousands)
 
    Quarter Ended   Year Ended
    November 28, 2015   November 29, 2014   November 28, 2015   November 29, 2014
Net Sales                
Wholesale   $   64,505     $   60,654     $   252,180     $   223,993  
Retail - Company-owned stores       66,266         62,230         249,379         216,631  
Logistical services       25,643         -         77,250         -  
Inter-company eliminations:                
Furniture and accessories       (29,488 )       (28,164 )       (114,154 )       (99,886 )
Logistical services       (11,371 )       -         (33,728 )       -  
Consolidated   $   115,555     $   94,720     $   430,927     $   340,738  
                 
Operating Income (Loss)                
Wholesale   $   4,100     $   4,299     $   15,618     $   14,120  
Retail       2,203         2,077         6,170         (528 )
Logistical services       1,439         -         3,528         -  
Inter-company elimination       964         379         1,647         1,539  
Lease exit costs       -         -         (419 )       -  
Asset impairment charges       -         -         (106 )       -  
Management restructuring costs       -         -         (449 )       -  
Consolidated   $   8,706     $   6,755     $   25,989     $   15,131  
                                 


BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES 
Rollforward of BHF Store Count
 
 
    November 29,     November 28,
    2014 Opened* Closed* 2015
           
Company-owned stores     60   1     (1 )   60
Licensee-owned stores     34   1     (2 )   33
           
Total     94   2     (3 )   93
           
           
* 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)
 
  59  Comparable Stores   53  Comparable Stores
  Quarter Ended   Quarter Ended   Year Ended   Year Ended
  November 28, 2015   November 29, 2014   November 28, 2015   November 29, 2014
  Amount Percent of
Net Sales
  Amount Percent of
Net Sales
  Amount Percent of
Net Sales
  Amount Percent of
Net Sales
                       
Net sales $   65,999     100.0 %   $   61,872     100.0 %   $   225,444     100.0 %   $   199,048     100.0 %
                       
Cost of sales     32,815     49.7 %       30,640     49.5 %       112,629     50.0 %       99,457     50.0 %
                       
Gross profit     33,184     50.3 %       31,232     50.5 %       112,815     50.0 %       99,591     50.0 %
                       
Selling, general and administrative expense*     30,437     46.1 %       29,039     46.9 %       105,347     46.7 %       97,325     48.9 %
                       
Income from operations $   2,747     4.2 %   $   2,193     3.6 %   $   7,468     3.3 %   $   2,266     1.1 %
                       
                       
  All Other Stores   All Other Stores
  Quarter Ended   Quarter Ended   Year Ended   Year Ended
  November 28, 2015   November 29, 2014   November 28, 2015   November 29, 2014
  Amount Percent of
Net Sales
  Amount Percent of
Net Sales
  Amount Percent of
Net Sales
  Amount Percent of
Net Sales
                       
Net sales $   266     100.0 %   $   359     100.0 %   $   23,935     100.0 %   $   17,583     100.0 %
                       
Cost of sales     129     48.5 %       188     52.4 %       11,747     49.1 %       8,717     49.6 %
                       
Gross profit     137     51.5 %       171     47.6 %       12,188     50.9 %       8,866     50.4 %
                       
Selling, general and administrative expense     294     110.5 %       287     79.9 %       12,863     53.7 %       10,443     59.4 %
Pre-opening store costs**     387     145.5 %       -     0.0 %       623     2.6 %       1,217     6.9 %
                       
Loss from operations $   (544 )   -204.5 %   $   (116 )   -32.3 %   $   (1,298 )   -5.4 %   $   (2,794 )   -15.9 %
 
*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.
 


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

Jay S. Moore
Director of Communications
(276) 629-6450 – Media