BASSETT, Va., -- Bassett Furniture Industries, Inc. announced today its results of operations for its fiscal quarter ended November 28, 2009.
Sales for the quarter ended November 28, 2009 were $59.5 million as compared to $61.7 million for the quarter ended November 29, 2008, a decrease of 3.5%. Gross margins for the fourth quarter of 2009 and 2008 were 46.5% and 40.0%, respectively. The margin increase over 2008 was primarily from a greater mix of the Company's sales through the retail segment, as well as improved margins in both the wholesale and retail segments. Selling, general and administrative expenses, excluding bad debt and notes receivable valuation charges, decreased $2.3 million for the fourth quarter of 2009 as compared to the comparable quarter of 2008 primarily due to lower spending. The Company also recorded $2.2 million of bad debt and notes receivable valuation charges during the fourth quarter of 2009 as compared to $5.8 million for the fourth quarter of 2008, a $3.6 million decrease. The Company reported net income of $2.6 million, or $0.22 per share, for the quarter ended November 28, 2009, as compared to a net loss of $37.8 million, or $3.24 per share, for the quarter ended November 29, 2008.
The results for the quarter ended November 28, 2009 included a $1.7 million tax benefit associated with a one-time carryback of net operating losses due to a recent change in tax law and $1.6 million of proceeds from the Continued Dumping & Subsidy Offset Act (CDSOA) and unusual pretax charges of $1.1 million associated with the closure of the Company's fiberboard manufacturing facility in Bassett, Va., $0.5 million associated with the impairment of remaining goodwill and $0.4 million associated with the update to certain assumptions around existing lease termination accruals. The results for the quarter ended November 29, 2008 included $2.1 million of proceeds from the CDSOA, a $23.4 million charge to write-off substantially all of the Company's deferred tax assets, a $3.8 million pretax charge to write-off goodwill and other intangibles and a $3.1 million pretax charge associated with other than temporary impairments of the marketable securities portfolio. Excluding these items, net income for the quarter ended November 28, 2009 would have been $1.2 million as compared to a net loss of $9.7 million for the quarter ended November 29, 2008. See the attached Reconciliation of Net Income (Loss) as Reported to Net Income (Loss) as Adjusted to compare quarter over quarter results without these items.
"The Company's ongoing focus on expense reduction and working capital management began to bear fruit in the fourth quarter as we were able to post a modest profit," said Robert H. Spilman Jr., president and chief executive officer. "More importantly, perhaps, we produced $6.1 million of operating cash flow for the quarter. This marks the Company's third consecutive quarter generating positive operating cash.
"Our industry remains in the grasp of a brutal sales slump," Mr. Spilman continued. "Until consumers begin to feel significantly better about the state of the economy and the safety of their jobs, we must continue to concentrate on finding ways to successfully operate at reduced sales levels. Consequently, we will once again make positive cash flow the key benchmark for 2010 as we fight for all of the market share we can garner."
Wholesale Segment
Net sales for the wholesale segment were $44.8 million for the fourth quarter of 2009 as compared to $51.3 million for the fourth quarter of 2008, a decrease of 12.7%. Approximately 50% of wholesale shipments during the fourth quarter of 2009 were imported products compared to 53% for the fourth quarter of 2008. Gross margins for the wholesale segment were 32.5% for the fourth quarter of 2009 as compared to 27.7% for the fourth quarter of 2008. Wholesale SG&A, excluding bad debt and notes receivable valuation charges, decreased $3.1 million during the fourth quarter of 2009 as compared to the fourth quarter of 2008 due primarily to lower sales and continued cost cutting measures. The Company recorded $2.2 million of bad debt and notes receivable valuation charges for the fourth quarter of 2009 as compared to $5.7 million for the fourth quarter of 2008. This significant decrease in charges is primarily due to the Company working diligently with its licensees to control increases in accounts receivable exposure.
"Once again, we have made progress in reducing the expense structure of our wholesale operations," Mr. Spilman added. "Furthermore, we were able to improve our wholesale margins during the second half of 2009 by streamlining our product assortment, reducing wholesale inventory markdowns, aggressively managing labor costs, and experiencing lower ocean freight expenses. The previously announced closing of our fiberboard operations will also strengthen our overall wholesale margins going forward and will mitigate some of the inflationary pressure that we are beginning to feel in the early part of 2010.
"Nevertheless, our near term objective in the wholesale division is to slow top-line attrition and ultimately return to growing the business," continued Mr. Spilman. "We believe that wholesale growth is key to the long-term success of the Company. While difficult, we believe that the emphasis on our custom upholstery and dining programs, our home entertainment offerings, and achieving greater penetration within our targeted channels of distribution will enable us to accomplish our internal goals in 2010."
Retail Segment
During the year ended November 28, 2009, the Company acquired nine stores from licensees, one of which was acquired during the fourth quarter of 2009. In addition, the Company closed four under-performing stores. The total Company-owned store count as of November 28, 2009 was 36, of which 26 were comparable stores (stores owned and operated by the Company longer than one year).
The total Company-owned store network had net sales of $27.5 million for the fourth quarter of 2009, as compared to $22.6 million in the fourth quarter of 2008, an increase of 21.4%. The increase was comprised of a $7.7 million increase from stores acquired in 2009, offset by a $1.8 million decrease from stores closed in 2009 and a $1.0 million decrease from a decline in comparable store sales of 4.8%.
Gross margins for the Company-owned store network were 48.8% for the fourth quarter of 2009 as compared to 45.9% for the fourth quarter of 2008. Gross margins as compared to the third quarter of 2009 increased by 3.7 percentage points as the Company performed a network-wide inventory reduction sale in the third quarter which resulted in lower gross margins. Margins for the fourth quarter have also increased due to improved pricing and promotional strategies. As a percentage of sales, SG&A decreased 6.1 percentage points to 51.6% due to continued cost containment efforts during the quarter. Total retail operating losses decreased $1.9 million from the fourth quarter of 2008 to $0.8 million for the fourth quarter of 2009. On a comparable store basis, retail operating losses were reduced by 69% to $0.5 million.
"Our corporate retail team continued to improve the operations of the Company-owned stores," said Mr. Spilman. "They reduced the network's loss by 70% or $1.9 million for the quarter when compared to the prior year quarter. This was accomplished primarily through new pricing strategies that improved gross margins by 290 basis points and continued cost containment efforts that lowered SG&A by 610 basis points. Looking forward, the Company will continue to acquire licensee stores when that course of action represents the most sensible business outcome. The performance in the fourth quarter gives us more confidence that these acquisitions can ultimately be accomplished without significant damage to the operating performance of the Company."
Balance Sheet and Cash Flow
The Company generated $6.1 million in operating cash flow during the fourth quarter of 2009 through improved inventory management and continued cost cutting efforts. Cash flow from operations for the year ended November 28, 2009 was $4.2 million, as compared to $19.0 million operating cash used for the year ended November 29, 2008. The Company increased its overall cash position for the year ended November 28, 2009 by $19.4 million primarily through $19.3 million of net investment redemptions, $4.2 million of operating cash flow and $3.7 million in dividends from the investment in the International Home Furnishings Center (IHFC), partially offset by dividend payments of $1.1 million and net payments on the Company's revolving credit facility of $4.0 million.
In addition to the $23.2 million of cash on-hand, the Company has investments of $14.9 million, consisting of $13.9 million in marketable securities and $1.0 million in the Alternative Asset Fund. In anticipation of a debt refinancing for IHFC, it is likely that dividend distributions will decrease or be eliminated for 2010. The Company does not believe that this will be materially detrimental to its overall liquidity. With the current level of cash on-hand coupled with the investment holdings and the $4.7 million of availability on the revolver, the Company believes it has sufficient liquidity to fund operations for the foreseeable future.
Subsequent to November 28, 2009, the Company extended the maturity date of two store mortgages by one year to December 2010. In connection with these extensions, the lenders required the Company to make $1.1 million of additional principal payments in January 2010. There were no other significant modifications to the mortgages. The Company also has another $2.4 million store mortgage that currently matures in March of 2010. Although there can be no assurance, the Company plans to refinance or obtain an extension prior to the maturity date.
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 approximately 105 Bassett stores, 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 750 upholstery fabrics, free in-home design visits, and coordinated decorating accessories. For more information, visit the Company's website at bassettfurniture.com. (BSET-E)
Source: Basset Furniture Industries
Sales for the quarter ended November 28, 2009 were $59.5 million as compared to $61.7 million for the quarter ended November 29, 2008, a decrease of 3.5%. Gross margins for the fourth quarter of 2009 and 2008 were 46.5% and 40.0%, respectively. The margin increase over 2008 was primarily from a greater mix of the Company's sales through the retail segment, as well as improved margins in both the wholesale and retail segments. Selling, general and administrative expenses, excluding bad debt and notes receivable valuation charges, decreased $2.3 million for the fourth quarter of 2009 as compared to the comparable quarter of 2008 primarily due to lower spending. The Company also recorded $2.2 million of bad debt and notes receivable valuation charges during the fourth quarter of 2009 as compared to $5.8 million for the fourth quarter of 2008, a $3.6 million decrease. The Company reported net income of $2.6 million, or $0.22 per share, for the quarter ended November 28, 2009, as compared to a net loss of $37.8 million, or $3.24 per share, for the quarter ended November 29, 2008.
The results for the quarter ended November 28, 2009 included a $1.7 million tax benefit associated with a one-time carryback of net operating losses due to a recent change in tax law and $1.6 million of proceeds from the Continued Dumping & Subsidy Offset Act (CDSOA) and unusual pretax charges of $1.1 million associated with the closure of the Company's fiberboard manufacturing facility in Bassett, Va., $0.5 million associated with the impairment of remaining goodwill and $0.4 million associated with the update to certain assumptions around existing lease termination accruals. The results for the quarter ended November 29, 2008 included $2.1 million of proceeds from the CDSOA, a $23.4 million charge to write-off substantially all of the Company's deferred tax assets, a $3.8 million pretax charge to write-off goodwill and other intangibles and a $3.1 million pretax charge associated with other than temporary impairments of the marketable securities portfolio. Excluding these items, net income for the quarter ended November 28, 2009 would have been $1.2 million as compared to a net loss of $9.7 million for the quarter ended November 29, 2008. See the attached Reconciliation of Net Income (Loss) as Reported to Net Income (Loss) as Adjusted to compare quarter over quarter results without these items.
"The Company's ongoing focus on expense reduction and working capital management began to bear fruit in the fourth quarter as we were able to post a modest profit," said Robert H. Spilman Jr., president and chief executive officer. "More importantly, perhaps, we produced $6.1 million of operating cash flow for the quarter. This marks the Company's third consecutive quarter generating positive operating cash.
"Our industry remains in the grasp of a brutal sales slump," Mr. Spilman continued. "Until consumers begin to feel significantly better about the state of the economy and the safety of their jobs, we must continue to concentrate on finding ways to successfully operate at reduced sales levels. Consequently, we will once again make positive cash flow the key benchmark for 2010 as we fight for all of the market share we can garner."
Wholesale Segment
Net sales for the wholesale segment were $44.8 million for the fourth quarter of 2009 as compared to $51.3 million for the fourth quarter of 2008, a decrease of 12.7%. Approximately 50% of wholesale shipments during the fourth quarter of 2009 were imported products compared to 53% for the fourth quarter of 2008. Gross margins for the wholesale segment were 32.5% for the fourth quarter of 2009 as compared to 27.7% for the fourth quarter of 2008. Wholesale SG&A, excluding bad debt and notes receivable valuation charges, decreased $3.1 million during the fourth quarter of 2009 as compared to the fourth quarter of 2008 due primarily to lower sales and continued cost cutting measures. The Company recorded $2.2 million of bad debt and notes receivable valuation charges for the fourth quarter of 2009 as compared to $5.7 million for the fourth quarter of 2008. This significant decrease in charges is primarily due to the Company working diligently with its licensees to control increases in accounts receivable exposure.
"Once again, we have made progress in reducing the expense structure of our wholesale operations," Mr. Spilman added. "Furthermore, we were able to improve our wholesale margins during the second half of 2009 by streamlining our product assortment, reducing wholesale inventory markdowns, aggressively managing labor costs, and experiencing lower ocean freight expenses. The previously announced closing of our fiberboard operations will also strengthen our overall wholesale margins going forward and will mitigate some of the inflationary pressure that we are beginning to feel in the early part of 2010.
"Nevertheless, our near term objective in the wholesale division is to slow top-line attrition and ultimately return to growing the business," continued Mr. Spilman. "We believe that wholesale growth is key to the long-term success of the Company. While difficult, we believe that the emphasis on our custom upholstery and dining programs, our home entertainment offerings, and achieving greater penetration within our targeted channels of distribution will enable us to accomplish our internal goals in 2010."
Retail Segment
During the year ended November 28, 2009, the Company acquired nine stores from licensees, one of which was acquired during the fourth quarter of 2009. In addition, the Company closed four under-performing stores. The total Company-owned store count as of November 28, 2009 was 36, of which 26 were comparable stores (stores owned and operated by the Company longer than one year).
The total Company-owned store network had net sales of $27.5 million for the fourth quarter of 2009, as compared to $22.6 million in the fourth quarter of 2008, an increase of 21.4%. The increase was comprised of a $7.7 million increase from stores acquired in 2009, offset by a $1.8 million decrease from stores closed in 2009 and a $1.0 million decrease from a decline in comparable store sales of 4.8%.
Gross margins for the Company-owned store network were 48.8% for the fourth quarter of 2009 as compared to 45.9% for the fourth quarter of 2008. Gross margins as compared to the third quarter of 2009 increased by 3.7 percentage points as the Company performed a network-wide inventory reduction sale in the third quarter which resulted in lower gross margins. Margins for the fourth quarter have also increased due to improved pricing and promotional strategies. As a percentage of sales, SG&A decreased 6.1 percentage points to 51.6% due to continued cost containment efforts during the quarter. Total retail operating losses decreased $1.9 million from the fourth quarter of 2008 to $0.8 million for the fourth quarter of 2009. On a comparable store basis, retail operating losses were reduced by 69% to $0.5 million.
"Our corporate retail team continued to improve the operations of the Company-owned stores," said Mr. Spilman. "They reduced the network's loss by 70% or $1.9 million for the quarter when compared to the prior year quarter. This was accomplished primarily through new pricing strategies that improved gross margins by 290 basis points and continued cost containment efforts that lowered SG&A by 610 basis points. Looking forward, the Company will continue to acquire licensee stores when that course of action represents the most sensible business outcome. The performance in the fourth quarter gives us more confidence that these acquisitions can ultimately be accomplished without significant damage to the operating performance of the Company."
Balance Sheet and Cash Flow
The Company generated $6.1 million in operating cash flow during the fourth quarter of 2009 through improved inventory management and continued cost cutting efforts. Cash flow from operations for the year ended November 28, 2009 was $4.2 million, as compared to $19.0 million operating cash used for the year ended November 29, 2008. The Company increased its overall cash position for the year ended November 28, 2009 by $19.4 million primarily through $19.3 million of net investment redemptions, $4.2 million of operating cash flow and $3.7 million in dividends from the investment in the International Home Furnishings Center (IHFC), partially offset by dividend payments of $1.1 million and net payments on the Company's revolving credit facility of $4.0 million.
In addition to the $23.2 million of cash on-hand, the Company has investments of $14.9 million, consisting of $13.9 million in marketable securities and $1.0 million in the Alternative Asset Fund. In anticipation of a debt refinancing for IHFC, it is likely that dividend distributions will decrease or be eliminated for 2010. The Company does not believe that this will be materially detrimental to its overall liquidity. With the current level of cash on-hand coupled with the investment holdings and the $4.7 million of availability on the revolver, the Company believes it has sufficient liquidity to fund operations for the foreseeable future.
Subsequent to November 28, 2009, the Company extended the maturity date of two store mortgages by one year to December 2010. In connection with these extensions, the lenders required the Company to make $1.1 million of additional principal payments in January 2010. There were no other significant modifications to the mortgages. The Company also has another $2.4 million store mortgage that currently matures in March of 2010. Although there can be no assurance, the Company plans to refinance or obtain an extension prior to the maturity date.
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 approximately 105 Bassett stores, 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 750 upholstery fabrics, free in-home design visits, and coordinated decorating accessories. For more information, visit the Company's website at bassettfurniture.com. (BSET-E)
Source: Basset Furniture Industries
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