Bassett Announces Fiscal First Quarter Results

Posted: 04/04/2013 9:31PM

 

BASSETT, Va. - Bassett Furniture Industries, Inc. (Nasdaq:BSET) announced today its results of operations for its fiscal quarter ended March 2, 2013.

Fiscal 2013 First Quarter Highlights

• Consolidated sales for the first quarter of 2013 increased 31% as compared to the first quarter of 2012

• Operating profit for the quarter was $2.4 million versus $0.2 million for the prior year quarter

• Wholesale sales increased 27% compared to the prior year quarter

• Company-owned store delivered sales increased 29% compared to the prior year quarter which included a 16% increase from the 48 comparable stores

• Due to the Company's fiscal calendar, the first quarter of 2013 consisted of 14 weeks while the first quarter of 2012 consisted of 13 weeks

On a consolidated basis, the Company reported net sales for the first quarter of 2013 of $79.8 million, an increase of $18.9 million, or 31%, over the first quarter of 2012. As noted above, the first quarter of 2013 consisted of 14 weeks while the first quarter of 2012 consisted of 13 weeks. On an average weekly basis, consolidated net sales increased 22%. Operating income increased to $2.4 million from $0.2 million driven primarily by higher sales in both the wholesale and retail segments. This was partially offset by higher selling, general and administrative expenses due primarily to the increased number of Company-owned stores, planned higher marketing and advertising costs to drive continued sales growth, and increased health care costs due to higher claim experience. The Company recorded net income of $1.0 million or $0.09 per diluted share for the first quarter of 2013 compared to a net loss of $(0.6) million or $(0.05) per diluted share in the first quarter of 2012.

"The sales momentum that we enjoyed at the end of 2012 continued during the first quarter of 2013 as we posted an exciting 31% increase in consolidated revenue," commented Robert H. Spilman, Jr., President and Chief Executive Officer. "Allowing for the extra week in this year's fiscal calendar, the Company grew revenue by 22% on a normalized basis. The same factors that propelled our business during the second half of last year drove this quarter's increase — improving sales in our Bassett Home Furnishings stores and market share gains with independent retailers. Operating profit continued to improve as both our wholesale and retail segments posted markedly better results than a year ago. These positive trends combined with our financial strength make us well positioned to continue to grow our top line and further enhance operating performance in the future."

Wholesale Segment

Net sales for the wholesale segment were $54.0 million for the first quarter of 2013 as compared to $42.6 million for the first quarter of 2012, an increase of $11.4 million or 27%. On an average weekly basis (normalizing for the extra week in the first quarter of 2013), wholesale net sales increased 18%. Wholesale shipments increased due to a 47% increase in wholesale sales outside the BHF store network and a 17% increase in shipments to the BHF store network. Gross margins for the wholesale segment were 33.4% for the first quarter of 2013 as compared to 31.8% for the first quarter of 2012. This increase was primarily due to higher margins in the upholstery operations as increased sales volumes provided greater leverage of fixed costs, partially offset by increased health care costs due to higher claim experience. Wholesale SG&A increased $3.3 million to $15.0 million for the first quarter of 2013 as compared to $11.7 million for the first quarter of 2012. SG&A costs as a percentage of sales increased to 27.8% as compared to 27.5% for the first quarter of 2012. Profit improvement from leveraging fixed SG&A costs through higher sales volumes was offset by planned increased marketing and advertising costs to drive continued sales growth.

"Both our upholstery and wood operations grew nicely in the quarter as a number of our recent product introductions are selling well at retail," added Spilman. "To drive volume and increase consumer awareness, we spent more heavily on sales promotions and on national advertising in association with our partnership with the HGTV television network. We believe that these investments in marketing are bearing fruit in the form of increasing market share. On a normalized basis, our upholstery and wood operations grew at the rate of 18% and 14% respectively in the quarter. As a result, wholesale operating income was 64% greater than the same period a year ago. Continued growth in our domestic custom assortment as well as our offshore cut and sew program were the major contributors to our gains in upholstery. And despite the industry wide challenges that the casegoods segment has experienced in recent years, we were gratified to see our new wood product introductions drive a double digit sales increase for the second consecutive quarter."

Retail Segment

Net sales for Company-owned stores were $50.0 million for the first quarter of 2013 as compared to $38.8 million for the first quarter of 2012, an increase of $11.2 million or 29%. The increase was comprised of a $6.1 million or 16% increase in comparable store sales along with a $5.1 million increase in non-comparable store sales. On an average weekly basis (normalizing for the extra week in the first quarter of 2013), comparable store sales increased 7.6%.

While the Company does not recognize sales until goods are delivered to the customer, management tracks written sales (the dollar value of sales orders taken, rather than delivered) as a key store performance indicator. Written sales for comparable stores increased by 20% for the first quarter of 2013 as compared to the first quarter of 2012. On an average weekly basis, written sales for comparable stores increased by 12%.

Operating results for the Company-owned stores improved from a loss of $1.0 million in the first quarter of 2012 to a loss of $0.6 million in the first quarter of 2013. This improvement was primarily driven by the increased sales noted above. Gross margins were slightly lower at 47.8% for the quarter as compared to 48.1% for the prior year quarter. SG&A expense increased $4.8 million, primarily due to increased store count and higher sales volumes. As a percentage of sales, SG&A decreased to 48.9% for the quarter as compared to 50.7% for the same quarter last year, primarily due to greater leverage of fixed costs from higher sales. This improvement was partially offset by increased health care costs due to higher claim experience and incremental management and overhead costs as the Company-owned network continues to grow. Refer to the accompanying schedule of Supplemental Retail Information for results of operations for the Company's retail segment by comparable and all other stores.

The following table summarizes the changes in store count during the first quarter of 2013:


November 24, New Stores Stores March 2,

2012 Stores Acquired Closed 2013






Company-owned stores 53 1 -- -- 54
Licensee-owned stores 33 1 -- (1) 33






Total 86 2 -- (1) 87

"The progress that our corporate retail group has exhibited over the past several reporting periods continued during the first quarter as our operating loss was reduced by 43%," continued Spilman. "The conversion of our in store design centers to the HGTV Design Studio at Bassett played a large part in our 7.6% same store sales increase, which comes on top of a 9.1% same store sales increase last year. Consumers are responding to our HGTV marketing campaign and are buying more with each transaction, signifying growth in our in home "makeover" capability, a key point of differentiation for Bassett stores. The quarter ended with the opening of a new store in a fashionable home furnishings shopping district in Dallas. The second quarter will see a repositioned Hartford, CT location come on line as well as the opening of a new small store in Raleigh, NC. We are also at the front end of the relocation process of several of our first generation stores. We look forward to moving these stores to locations that are more suitable to the Bassett of 2013. We believe that our new generation stores in better situated real estate will garner improved financial performance in these individual locations."

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income - unaudited
(In thousands, except for per share data)









14 Weeks Ended 13 Weeks Ended

March 2, 2013 February 25, 2012


Percent of
Percent of

Amount Net Sales Amount Net Sales





Net sales $ 79,849 100.0% $ 60,968 100.0%





Cost of sales 38,489 48.2% 29,297 48.1%





Gross profit 41,360 51.8% 31,671 51.9%





Selling, general and administrative expense 38,996 48.8% 31,028 50.9%
Restructuring and asset impairment charges -- 0.0% 236 0.4%
Lease exit costs -- 0.0% 228 0.4%





Operating income 2,364 3.0% 179 0.3%





Other loss, net 668 0.8% 1,247 2.0%
Income (loss) before income taxes 1,696 2.1% (1,068) -1.8%





Income tax expense (benefit) 716 0.9% (472) -0.8%
Net income (loss) $ 980 1.2% $ (596) -1.0%





Basic earnings (loss) per share $ 0.09
$ (0.05)





Diluted earnings (loss) per share $ 0.09
$ (0.05)



BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets - Unaudited
(In thousands)



Assets March 2, 2013 November 24, 2012
Current assets

Cash and cash equivalents $ 47,159 $ 45,566
Accounts receivable, net 14,838 15,755
Inventories 57,807 57,916
Deferred income taxes, net 6,952 6,832
Other current assets 5,251 6,439
Total current assets 132,007 132,508



Property and equipment, net 56,738 56,624



Other long-term assets

Retail real estate 12,610 12,736
Deferred income taxes, net 10,280 10,485
Other 15,352 14,827
Total long-term assets 38,242 38,048
Total assets $ 226,987 $ 227,180



Liabilities and Stockholders' Equity

Current liabilities

Accounts payable $ 18,427 $ 22,405
Accrued compensation and benefits 6,742 6,926
Customer deposits 15,955 12,253
Dividends payable -- 542
Other accrued liabilities 11,107 10,454
Total current liabilities 52,231 52,580



Long-term liabilities

Post employment benefit obligations 11,501 11,577
Real estate notes payable 2,991 3,053
Other long-term liabilities 2,291 2,690
Total long-term liabilities 16,783 17,320






Stockholders' equity

Common stock 54,236 54,184
Retained earnings 104,757 104,319
Additional paid-in-capital 184 --
Accumulated other comprehensive loss (1,204) (1,223)
Total stockholders' equity 157,973 157,280
Total liabilities and stockholders' equity $ 226,987 $ 227,180



BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - unaudited
(In thousands)




14 Weeks Ended 13 Weeks Ended

March 2, 2013 February 25, 2012
Operating activities:

Net income (loss) $ 980 $ (596)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation and amortization 1,434 1,316
Equity in undistributed income of investments and unconsolidated affiliated companies (114) (16)
Provision for restructuring and asset impairment charges -- 236
Non-cash portion of lease exit costs -- 228
Other than temporary impairment of investments -- 806
Deferred income taxes 171 20
Other, net (102) (341)
Changes in operating assets and liabilities

Accounts receivable 860 894
Inventories 109 (930)
Other current assets (1,120) (439)
Accounts payable and accrued liabilities (250) (2,472)
Net cash provided by (used in) operating activities 1,968 (1,294)



Investing activities:

Purchases of property and equipment (2,621) (1,918)
Proceeds from sale of property and equipment 955 5
Proceeds from sale of interest in affiliate 2,348 1,410
Proceeds from sales of investments -- 398
Purchases of investments -- (396)
Other 2 2
Net cash provided by (used in) investing activities 684 (499)



Financing activities:

Repayments of real estate notes payable (59) (49)
Issuance of common stock 320 39
Repurchases of common stock (236) (646)
Cash dividends (1,084) (6,063)
Net cash used in financing activities (1,059) (6,719)
Change in cash and cash equivalents 1,593 (8,512)
Cash and cash equivalents - beginning of period 45,566 69,601
Cash and cash equivalents - end of period $ 47,159 $ 61,089



BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Segment Information - unaudited
(In thousands)




14 Weeks Ended 13 Weeks Ended

March 2, 2013 February 25, 2012
Net Sales

Wholesale $ 53,960 $ 42,611
Retail 49,957 38,816
Inter-company elimination (24,068) (20,459)
Consolidated $ 79,849 $ 60,968



Operating Income (Loss)

Wholesale $ 3,001 $ 1,831
Retail (571) (999)
Inter-company elimination (66) (189)
Restructuring and asset impairment charges -- (236)
Lease exit costs -- (228)
Consolidated $ 2,364 $ 179



BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
Supplemental Retail Information---unaudited
(In thousands)






48 Comparable Stores

14 Weeks Ended 13 Weeks Ended

March 2, 2013 February 25, 2012


Percent of
Percent of

Amount Net Sales Amount Net Sales





Net sales $ 44,353 100.0% $ 38,270 100.0%





Cost of sales 23,146 52.2% 19,846 51.9%





Gross profit 21,207 47.8% 18,424 48.1%





Selling, general and administrative expense* 21,315 48.1% 19,083 49.9%





Income (loss) from operations $ (108) -0.3% $ (659) -1.8%











All Other Stores

14 Weeks Ended 13 Weeks Ended

March 2, 2013 February 25, 2012


Percent of
Percent of

Amount Net Sales Amount Net Sales





Net sales $ 5,604 100.0% $ 546 100.0%





Cost of sales 2,937 52.4% 301 55.1%





Gross profit 2,667 47.6% 245 44.9%





Selling, general and administrative expense 3,130 55.9% 585 107.1%





Loss from operations $ (463) -8.3% $ (340) -62.2%





*Comparable store SG&A includes retail corporate overhead and administrative costs.

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