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Bassett Announces Fiscal Third Quarter Results

BASSETT, Va., Sept. 29, 2016 (GLOBE NEWSWIRE) -- Bassett Furniture Industries, Inc. (Nasdaq:BSET) announced today its results of operations for its fiscal quarter ended August 27, 2016.

Fiscal 2016 Third Quarter Highlights

  • Consolidated sales were $104.7 million for the third quarter of 2016 compared to $111.0 million for the third quarter of 2015, a decrease of 5.7%. 
  • Operating income for the quarter was $7.5 million or 7.2% of sales as compared to $7.7 million or 6.9% of sales for the prior year quarter.
  • Wholesale sales were $58.3 million for the third quarter of 2016 compared to $62.2 million for the third quarter of 2015, a decrease of 6.2%.  Wholesale operating profit for the quarter was $5.6 million or 9.8% of sales as compared to $3.8 million or 6.1% of sales for the prior year quarter. Wholesale operating income for the current quarter includes $1.4 million for the settlement of the Polyurethane Foam Antitrust Litigation.
  • Company-owned store sales were $61.2 million for the third quarter of 2016 compared to $62.0 million for the third quarter of 2015, a decrease of 1.3%.  This included a comparable store sales decrease of 0.9% compared to the prior year quarter. Comparable store operating income was $1.5 million or 2.4% of sales for the current year quarter as compared to $2.5 million or 4.3% of sales for the prior year quarter.  Total retail operating income was $0.8 million or 1.3% of sales for the quarter as compared to $2.0 million or 3.3% of sales for the prior year quarter.  Comparable store written sales for the quarter increased 7.9%.   
  • Revenue for Zenith was $23.0 million for the third quarter of 2016 compared to $23.7 million for the third quarter of 2015, a 2.8% decrease.  Zenith’s operating profit for the quarter was $0.7 million or 2.9% of sales as compared to $1.1 million or 4.5% of sales for the prior year quarter.
  • Net income for the quarter was $4.2 million or $0.38 per diluted share as compared to $4.3 million or $0.39 per diluted share for the prior year quarter.

“Despite facing an environment of weaker demand for home furnishings during our third quarter, our level of profitability remained intact while consolidated sales declined by 5.7%,” said Robert H. Spilman, Jr., Chairman and CEO.  “We were especially encouraged by the 7.9% comparable store written sales gain that we posted in the period.  With our factories running efficiently and our inventory levels in good shape, we are positioned to service our Labor Day sales and meet demand for the historically stronger fall selling season.”

Wholesale Segment                                                                                        

Net sales for the wholesale segment were $58.3 million for the third quarter of 2016 as compared to $62.2 million for the third quarter of 2015, a decrease of $3.9 million or 6.2%.  This decrease was driven by lower shipments to the open market (outside the Bassett Home Furnishings network) while shipments to the Bassett Home Furnishings network were essentially flat compared to the prior year period. The decrease in sales to the open market was primarily due to lower sales of imported product primarily from the discontinuation of our relationship with a significant customer and loss of sales from the HGTV Home Collection brand, exited late in 2015.  Gross margins for the wholesale segment were 35.4% for the third quarter of 2016 as compared to 33.5% for the third quarter of 2015.  This increase is primarily due to the $1.4 million settlement of the Polyurethane Foam Antitrust Litigation.  Excluding the effects of the legal settlement, the gross margin would have been 33.0%.  This decrease is due primarily to lower margins in domestic wood operations associated with introduction of new products into the growing Bench Made line.  Wholesale SG&A for the third quarter of 2016 was $15.0 million as compared to $17.0 million for the prior year period. SG&A as a percentage of sales decreased to 25.7% as compared to 27.4% for the third quarter of 2015. This decrease in SG&A as a percentage of sales was primarily driven by lower bad debt costs and incentive compensation expenses.  Operating income was $5.6 million or 9.8% of sales as compared to $3.8 million or 6.1% of sales in the prior year.

“Our domestically produced products accounted for 69% of wholesale sales for the quarter as consumers continue to gravitate to the custom options and high levels of service that characterize our casual dining, Bench Made, and custom upholstery product lines,” continued Spilman.  “Our wholesale sales decline was primarily attributable to sales of imported products to customers outside of our store network, most notably one major account that we discontinued our relationship with earlier in the year.  We will be introducing a new range of motion upholstery products designed specifically for non-Bassett store markets at the upcoming High Point furniture market in three weeks.  Additionally, we are excited about our upcoming late fall retail product launch as we plan to build on the successful spring introduction that drove our written comparable store sales gains this summer.”

Retail Segment

Net sales for the 59 Company-owned Bassett Home Furnishings stores were $61.2 million for the third quarter of 2016 as compared to $62.0 million for the third quarter of 2015, a decrease of $0.8 million or 1.3%. The decrease was due to a $0.5 million or 0.9% decrease in comparable store sales along with a $0.3 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 7.9% for the third quarter of 2016 as compared to the third quarter of 2015. 

The consolidated retail operating profit for the third quarter of 2016 was $0.8 million as compared to $2.0 million for the third quarter of 2015, a decline of $1.2 million.  The 56 comparable stores generated operating income of $1.5 million for the quarter, or 2.4% of sales, as compared to $2.5 million, or 4.3% of sales, for the prior year quarter. Gross margins for comparable stores were 50.2% for the third quarter of 2016 compared to 50.4% for the third quarter of 2015.  SG&A expenses for comparable stores increased $0.8 million to $28.4 million or 47.8% of sales as compared to 46.1% of sales for the third quarter of 2015. This increase in SG&A as a percentage of sales was primarily driven by higher advertising and promotional costs along with increased health care costs. 

“Corporate retail profitability was affected by several factors in the quarter as delivered comparable sales declined by (0.9%),” added Spilman.  “In addition to higher advertising and financing expenses designed to drive sales, our new store opening costs increased significantly as we begin a period of growth that will accelerate in 2017.  Our Hunt Valley, Maryland location opened during the last week of the quarter.  We have opened two new stores in fiscal 2016 and closed three locations as leases have expired.  Next year, we plan to open five to six new locations and reposition four others.  Finally, we are focused on continuing our third quarter written sales momentum and extending our 5+ year run of comparable store growth.  To this end, we currently have initiatives underway to improve our in-store visual presentation and better communicate our custom capabilities to the consumer.”

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 third fiscal quarter of 2016, 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     Nine Months Ended
  August 27, 2016     August 29, 2015     August 27, 2016     August 29, 2015
    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 $ 91,465         $ 97,107         $ 276,857         $ 286,122    
Logistics   13,247           13,904           41,395           29,250    
Total sales revenue   104,712     100.0 %       111,011     100.0 %       318,252     100.0 %       315,372     100.0 %
                             
Cost of furniture and accessories sold   40,091     38.3 %       44,824     40.4 %       124,496     39.1 %       133,676     42.4 %
                             
Selling, general and administrative expenses excluding                            
new store pre-opening costs   56,800     54.2 %       58,303     52.5 %       173,845     54.6 %       163,203     51.7 %
New store pre-opening costs   281     0.3 %       192     0.2 %       727     0.2 %       236     0.1 %
Lease exit costs   -     0.0 %       -     0.0 %       -     0.0 %       419     0.1 %
Asset impairment charges   -     0.0 %       -     0.0 %       -     0.0 %       106     0.0 %
Management restructuring costs   -     0.0 %       -     0.0 %       -     0.0 %       449     0.1 %
Income from operations   7,540     7.2 %       7,692     6.9 %       19,184     6.0 %       17,283     5.5 %
                             
Remeasurement gain on acquisition of affiliate   -     0.0 %       -     0.0 %       -     0.0 %       7,212     2.3 %
Income from Continued Dumping & Subsidy Offset Act   -     0.0 %       -     0.0 %       -     0.0 %       1,066     0.3 %
Other loss, net   (647 )   -0.6 %       (472 )   -0.4 %       (1,904 )   -0.6 %       (1,692 )   -0.5 %
Income before income taxes   6,893     6.6 %       7,220     6.5 %       17,280     5.4 %       23,869     7.6 %
                             
Income tax provision   2,728     2.6 %       2,954     2.7 %       6,496     2.0 %       9,118     2.9 %
Net income $ 4,165     4.0 %     $ 4,266     3.8 %     $ 10,784     3.4 %     $ 14,751     4.7 %
                             
Basic earnings per share $ 0.39         $ 0.39         $ 1.00         $ 1.38    
                             
Diluted earnings per share $ 0.38         $ 0.39         $ 0.99         $ 1.36    
                                             

/EIN News/ --

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
    (Unaudited)      
Assets   August 27, 2016     November 28, 2015
Current assets          
Cash and cash equivalents   $ 28,051       $ 36,268  
Short-term investments     23,125         23,125  
Accounts receivable, net     19,302         21,197  
Inventories, net     53,413         59,896  
Other current assets     11,519         6,798  
Total current assets     135,410         147,284  
           
Property and equipment, net     105,595         96,104  
           
Other long-term assets          
Deferred income taxes, net     9,006         13,471  
Goodwill and other intangible assets     17,440         17,682  
Other     8,048         8,002  
Total long-term assets     34,494         39,155  
Total assets   $ 275,499       $ 282,543  
           
Liabilities and Stockholders’ Equity          
Current liabilities          
Accounts payable   $ 19,569       $ 20,916  
Accrued compensation and benefits     11,927         14,345  
Customer deposits     20,132         23,999  
Dividends payable     -         2,184  
Current portion of long-term debt     5,003         5,273  
Other accrued liabilities     11,077         13,133  
Total current liabilities     67,708         79,850  
           
Long-term liabilities          
Post employment benefit obligations     12,634         12,694  
Long-term debt     9,077         8,500  
Other long-term liabilities     3,915         4,133  
Total long-term liabilities     25,626         25,327  
           
Stockholders’ equity          
Common stock     54,114         54,580  
Retained earnings     128,635         120,904  
Additional paid-in-capital     1,924         4,560  
Accumulated other comprehensive loss     (2,508 )       (2,678 )
Total stockholders' equity     182,165         177,366  
Total liabilities and stockholders’ equity   $ 275,499       $ 282,543  
                   


BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - unaudited
(In thousands)
           
    Nine Months Ended
    August 27, 2016     August 29, 2015
Operating activities:          
Net income   $ 10,784       $ 14,751  
Adjustments to reconcile net income to net cash provided by          
(used in) operating activities:          
Depreciation and amortization     8,866         7,302  
Equity in undistributed income of investments and unconsolidated          
affiliated companies     -         (220 )
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     590         933  
Deferred income taxes     4,360         3,778  
Excess tax benefits from stock-based compensation     87         2,008  
Other, net     256         1,445  
Changes in operating assets and liabilities          
Accounts receivable     2,334         (751 )
Inventories     6,483         (8,165 )
Other current and long-term assets     (4,721 )       (21 )
Customer deposits     (3,867 )       (3,196 )
Accounts payable and accrued liabilities     (6,207 )       2,158  
Net cash provided by operating activities     18,965         13,335  
           
Investing activities:          
Purchases of property and equipment     (18,955 )       (11,283 )
Proceeds from sale of retail  real estate and property and equipment     632         2,952  
Cash paid for business acquisition, net of cash acquired     -         (7,323 )
Capital contribution to affiliate     -         (1,345 )
Net cash used in investing activities     (18,323 )       (16,999 )
           
Financing activities:           
Cash dividends     (5,238 )       (4,806 )
Proceeds from the exercise of stock options     114         4,018  
Other issuance of common stock     182         254  
Repurchases of common stock     (3,989 )       (1,374 )
Taxes paid related to net share settlement of equity awards     (77 )       (178 )
Repayments of notes payable     (7,235 )       (1,630 )
Proceeds from equipment loans     7,384         1,307  
Net cash used in financing activities     (8,859 )       (2,409 )
Change in cash and cash equivalents     (8,217 )       (6,073 )
Cash and cash equivalents - beginning of period     36,268         26,673  
Cash and cash equivalents - end of period   $ 28,051       $ 20,600  
                   


BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Segment Information - unaudited
(In thousands)
                       
    Quarter Ended     Nine Months Ended
    August 27, 2016     August 29, 2015     August 27, 2016     August 29, 2015
Net Sales                      
Wholesale   $ 58,303       $ 62,165       $ 177,785       $ 187,675  
Retail - Company-owned stores     61,216         62,009         184,754         183,113  
Logistical services     22,991         23,650         71,480         51,607  
Inter-company eliminations:                      
Furniture and accessories     (28,054 )       (27,067 )       (85,682 )       (84,666 )
Logistical services     (9,744 )       (9,746 )       (30,085 )       (22,357 )
Consolidated   $ 104,712       $ 111,011       $ 318,252       $ 315,372  
                       
Operating Income                      
Wholesale   $ 5,648       $ 3,795       $ 14,380       $ 11,518  
Retail     768         2,037         1,465         3,967  
Logistical services     674         1,070         2,079         2,089  
Inter-company elimination     450         790         1,260         683  
Lease exit costs     -         -         -         (419 )
Asset impairment charges     -         -         -         (106 )
Management restructuring costs     -         -         -         (449 )
Consolidated   $ 7,540       $ 7,692       $ 19,184       $ 17,283  
                       


BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Rollforward of BHF Store Count
         
           
    November 28,     August 27,
    2015 Opened* Closed* 2016
           
Company-owned stores   60 2   (3 ) 59
Licensee-owned stores   33 -   (1 ) 32
           
Total   93 2   (4 ) 91
           
           
* 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       56  Comparable Stores
  Quarter Ended     Quarter Ended       Nine Months Ended     Nine Months Ended
  August 27, 2016     August 29, 2015       August 27, 2016     August 29, 2015
    Percent of       Percent of         Percent of       Percent of
  Amount Net Sales     Amount Net Sales       Amount Net Sales     Amount Net Sales
                               
Net sales $ 59,371     100.0 %     $ 59,884     100.0 %       $ 176,425     100.0 %     $ 175,849     100.0 %
                               
Cost of sales   29,568     49.8 %       29,717     49.6 %         88,545     50.2 %       87,490     49.8 %
                               
Gross profit   29,803     50.2 %       30,167     50.4 %         87,880     49.8 %       88,359     50.2 %
                               
Selling, general and administrative expense*   28,353     47.8 %       27,621     46.1 %         84,088     47.7 %       83,237     47.3 %
                               
Income from operations $ 1,450     2.4 %     $ 2,546     4.3 %       $ 3,792     2.1 %     $ 5,122     2.9 %
                               
                               
  All Other Stores       All Other Stores
  Quarter Ended     Quarter Ended       Nine Months Ended     Nine Months Ended
  August 27, 2016     August 29, 2015       August 27, 2016     August 29, 2015
    Percent of       Percent of         Percent of       Percent of
  Amount Net Sales     Amount Net Sales       Amount Net Sales     Amount Net Sales
                               
Net sales $ 1,845     100.0 %     $ 2,125     100.0 %       $ 8,329     100.0 %     $ 7,264     100.0 %
                               
Cost of sales   910     49.3 %       1,151     54.2 %         4,889     58.7 %       3,942     54.3 %
                               
Gross profit   935     50.7 %       974     45.8 %         3,440     41.3 %       3,322     45.7 %
                               
Selling, general and administrative expense   1,336     72.4 %       1,291     60.8 %         5,040     60.5 %       4,241     58.4 %
Pre-opening store costs**   281     15.2 %       192     9.0 %         727     8.7 %       236     3.2 %
                               
Loss from operations $ (682 )   -37.0 %     $ (509 )   -24.0 %       $ (2,327 )   -27.9 %     $ (1,155 )   -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 possession 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