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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
AmountNet Sales AmountNet Sales AmountNet Sales AmountNet 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


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,
2015Opened*Closed*2016
Company-owned stores 602 (3)59
Licensee-owned stores 33- (1)32
Total 932 (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
AmountNet Sales AmountNet Sales AmountNet Sales AmountNet 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
AmountNet Sales AmountNet Sales AmountNet Sales AmountNet 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

Source:Bassett Furniture Industries, Inc.