Bassett Furniture saw a sales increase of 31 percent for the second quarter.
Bassett Furniture saw a sales increase of 31 percent for the second quarter.

BASSETT, VA -- Bassett Furniture Industries, Inc. (Nasdaq:BSET) announced its results of operations for its fiscal quarter ended May 30, 2015.

Fiscal 2015 Second Quarter Highlights

  • Consolidated sales were $111.6 million for the second quarter of 2015 compared to $85.2 million for the second quarter of 2014, an increase of 31%. Excluding the sales from the acquisition of Zenith Freight Lines, LLC ("Zenith"), consolidated sales increased 17%.
  • Operating income for the quarter, excluding the effects of $0.4 million in charges associated with management restructuring costs, was $7.2 million or 6.4% of sales as compared to $3.9 million or 4.6% of sales for the prior year quarter. Excluding the effects of Zenith, operating income would have been $6.2 million or 6.2% of sales.
  • Wholesale sales were $66.7 million for the second quarter of 2015 compared to $56.2 million for the second quarter of 2014, an increase of 19%. Wholesale operating profit was $4.8 million or 7.2% of sales as compared to $4.3 million or 7.6% of sales for the prior year quarter.
  • Company-owned store delivered sales increased 20%, including a comparable store sales increase of 17%, compared to the prior year quarter. Comparable store operating income was $2.1 million or 3.4% of sales for the current year quarter as compared to $0.1 million for the prior year quarter, a $2.0 million improvement. Total retail operating income was $2.0 million or 3.1% of sales for the quarter as compared to a loss of $0.7 million for the prior year quarter. 
  • Zenith, acquired in the first quarter of 2015, generated operating income of $1.0 million on sales of $22.0 million or 4.7% of sales.
  • Received a $1.1 million distribution from U.S. Customs and Border Protection as part of the Continued Dumping and Subsidy Offset Act of 2000 ("CDSOA").
  • Net income for the quarter increased to $4.5 million or $0.42 per diluted share as compared to $2.6 million or $0.24 per diluted share for the prior year. Excluding the CDSOA funds mentioned above, net income would have been $3.9 million or $0.36 per diluted share.

"We continued to improve the execution of our strategy in the second quarter as consolidated revenue increased by 31%", commented Robert H. Spilman, Jr. President and CEO. "Across the board, our business segments grew sales and increased profits. Propelled by our store network and independent dealers, wholesale sales grew by 19%. The 17% comparable store sales growth turned in by our corporate retail division marked the fourth consecutive quarter of double digit gains and the successful integration of our recently acquired Zenith Freight Lines, LLC significantly contributed to our operating results. In short, we managed our integrated business model at higher levels of efficiency producing operating income growth of 84% to $7.2 million (excluding $0.4 million of management restructuring charges) or 6.4% of sales. We will continue to seek to wring out further improvement in our operations as we enter the slower summer months prior to the historically strong fall selling season."

Wholesale Segment                                                                                        

Net sales for the wholesale segment were $66.7 million for the second quarter of 2015 as compared to $56.2 million for the second quarter of 2014, an increase of $10.5 million or 19%. This sales increase was driven by a 27% increase in shipments to the Bassett Home Furnishings store network and a 6.8% increase in open market shipments (outside the Bassett Home Furnishings store network). Gross margins for the wholesale segment decreased to 32.8% for the second quarter of 2015 as compared to 33.9% for the second quarter of 2014 caused largely by increased discounting of wood products as the Company is implementing a significant makeover of its imported wood furniture line. Wholesale SG&A increased $2.3 million to $17.1 million for the second quarter of 2015 as compared to $14.8 million for the second quarter of 2014. SG&A as a percentage of sales decreased to 25.6% as compared to 26.3% for the second quarter of 2014 primarily due to greater leverage of fixed costs from higher sales volumes. Operating income was $4.8 million or 7.2% of sales as compared to $4.3 million or 7.6% of sales in the prior year quarter.

"Our merchandising programs continue to resonate with consumers inside our stores and with our open market dealers", continued Spilman. "Our upholstery division performed at record levels of revenue and profitability during the quarter. The HGTV Design Studio at Bassett custom upholstery products remain the anchor of our assortment in Bassett Home Furnishings stores. We are currently negotiating an extension of our licensing agreement with HGTV and have plans to extend the reach of this successful effort to our best independent dealers this fall. We are excited about our HGTV Design Studio at Bassett Custom Sale that will be promoted this fall and will allow all of our participating dealers to advertise on national cable and the web simultaneously for the first time. On the wood side, retail sales of our recently introduced Bench Made collection have exceeded our internal plan and we intend to broaden the assortment this fall. Wood margins, however, were down from last year due to heavier discounting of discontinued products and higher container freight costs."

Retail Segment

Net sales for the 59 Company-owned Bassett Home Furnishings stores were $63.9 million for the second quarter of 2015 as compared to $53.3 million for the second quarter of 2014, an increase of $10.6 million or 20%. The increase was primarily due to a $9.0 million or 17% increase in comparable store sales coupled with a $1.6 million increase in non-comparable store sales primarily from 2 new stores opened in the last 15 months. 

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 15% for the second quarter of 2015 as compared to the second quarter of 2014. 

The consolidated retail operating profit for the second quarter of 2015 was $2.0 million as compared to a loss of $0.7 million for the second quarter of 2014, an increase of $2.7 million. The 57 comparable stores generated operating income of $2.0 million for the quarter, or 3.4% of sales, as compared to $0.1 million, or 0.1% of sales, for the prior year quarter. Gross margins for comparable stores were 49.8% for the second quarter of both 2015 and 2014. SG&A expenses for comparable stores increased $2.5 million to $28.1 million or 46.4% of sales as compared to 49.7% of sales for the second 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. 

Losses associated with non-comparable stores were $0.1 million for the quarter as compared to $0.7 million for the prior year quarter. This decrease is primarily from $0.5 million of pre-opening costs recognized in the second quarter of 2014 as compared to less than $0.1 million for the current year quarter.

The Company plans to continue opening new stores, primarily in underpenetrated markets where it currently has stores.  The Company and certain licensees are actively engaged in site selection and lease negotiations for several new stores. One new corporate store in Woodland Hills, California is expected to open during 2015 with another new store in Dulles, Virginia scheduled to open during the first half of fiscal 2016. The Company also expects two new licensee stores to open over the remainder of fiscal 2015. The Company completed store relocations in San Antonio and Southlake, Texas during the first quarter of 2015 and expects to relocate the Newport News, Virginia store during the first quarter of 2016. During the second quarter of 2015, the Company closed an underperforming store in Memphis, Tennessee which was announced in the first quarter of 2015.         

"The strong sales produced by our corporate retail team resulted in a $2.0 million operating profit for the division, an increase of $2.7 million from a year earlier", said Spilman. "The majority of the improvement came from the leverage of SGA expenses from increased sales, although we did incur $0.7 million less in store opening costs due to fewer stores opening in the period. During the quarter we remodeled one of our Atlanta stores and another in Palm Beach, FL. We also began construction on a new location in an exciting new lifestyle center in Woodland Hills, CA that will open this September. Also, an existing Bassett licensee will open a new store in Livingston, NJ in August. Another significant development in the quarter was the extensive new product rollout that hit our floors prior to Memorial Day. Utilizing our sourcing, manufacturing, and logistics capabilities, we were able to deliver complete room settings to cohesively reset as much as 20% of our retail space. Although our sales have been robust as of late, we strive to keep our presentation crisp and to offer our spin on the relevant home furnishings trends of today. A product launch of this magnitude usually takes place prior to Labor Day, but we planned this accelerated launch over a year ago. Our next major effort will take place in December in preparation for our annual New Year's event."

 

 

 

 

 

 

 

 

 

 

 

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income - unaudited

(In thousands, except for per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

Six Months Ended

 

May 30, 2015

 

May 31, 2014

May 30, 2015

 

May 31, 2014

 

 

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

 $ 99,467

 

 

 $ 85,185

 

 $ 189,015

 

 

 $ 160,832

 

Logistics

 12,086

 

 

 --

 

 15,345

 

 

 --

 

Total sales revenue

 111,553

100.0%

 

 85,185

100.0%

 204,360

100.0%

 

 160,832

100.0%

 

 

 

 

 

 

 

 

 

 

 

Cost of furniture and accessories sold

 46,921

42.1%

 * 

 39,872

46.8%

 88,851

43.5%

 * 

 75,266

46.8%

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses excludingnew store pre-opening costs

 57,425

51.5%

 * 

 40,901

48.0%

 104,900

51.3%

 * 

 79,481

49.4%

New store pre-opening costs

 44

0.0%

 

 521

0.6%

 44

0.0%

 

 1,108

0.7%

Lease exit costs

 --

0.0%

 

 --

0.0%

 419

0.2%

 

 --

0.0%

Asset impairment charges

 --

0.0%

 

 --

0.0%

 106

0.1%

 

 --

0.0%

Management restructuring costs

 449

0.4%

 

 --

0.0%

 449

0.2%

 

 --

0.0%

Income from operations

 6,714

6.0%

 

 3,891

4.6%

 9,591

4.7%

 

 4,977

3.1%

 

 

 

 

 

 

 

 

 

 

 

Remeasurement gain on acquisition of affiliate

 --

0.0%

 

 --

0.0%

 7,212

3.5%

 

 --

0.0%

Income from Continued Dumping & Subsidy Offset Act

 1,066

1.0%

 

 --

0.0%

 1,066

0.5%

 

 --

0.0%

Other income (loss), net

 (597)

-0.5%

 

 (272)

-0.3%

 (1,220)

-0.6%

 

 13

0.0%

Income before income taxes

 7,183

6.4%

 

 3,619

4.2%

 16,649

8.1%

 

 4,990

3.1%

 

 

 

 

 

 

 

 

 

 

 

Income tax provision

 2,654

2.4%

 

 1,068

1.3%

 6,164

3.0%

 

 1,596

1.0%

Net income

 $ 4,529

4.1%

 

 $ 2,551

3.0%

 $ 10,485

5.1%

 

 $ 3,394

2.1%

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 $ 0.42

 

 

 $ 0.24

 

 $ 0.99

 

 

 $ 0.32

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share

 $ 0.42

 

 

 $ 0.24

 

 $ 0.98

 

 

 $ 0.31

 

 

 

 

 

 

 

 

 

 

 

 

* 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 47.2% and 47.0% and Selling, general and adminstrative expenses would have been 46.7% and 47.9% of sales for the quarter and six months ended May 30, 2015, respectively, excluding the effects of Zenith.

 

 

 

 

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands)

 

(Unaudited)

 

Assets

May 30, 2015

November 29, 2014

Current assets

 

 

Cash and cash equivalents

 $ 22,467

 $ 26,673

Short-term investments

 23,125

 23,125

Accounts receivable, net

 20,346

 15,228

Inventories, net

 62,978

 57,272

Deferred income taxes, net

 5,339

 5,268

Other current assets

 10,414

 7,796

Total current assets

 144,669

 135,362

 

 

 

Property and equipment, net

 95,864

 74,812

 

 

 

Other long-term assets

 

 

Deferred income taxes, net

 5,418

 9,701

Goodwill and other intangible assets

 17,842

 1,730

Other

 8,190

 19,141

Total long-term assets

 31,450

 30,572

Total assets

 $ 271,983

 $ 240,746

 

 

 

Liabilities and Stockholders' Equity

 

 

Current liabilities

 

 

Accounts payable

 $ 24,776

 $ 22,251

Accrued compensation and benefits

 10,571

 8,931

Customer deposits

 22,965

 22,202

Dividends payable

 --

 2,102

Current portion of long-term debt

 4,428

 316

Other accrued liabilities

 11,579

 10,971

Total current liabilities

 74,319

 66,773

 

 

 

Long-term liabilities

 

 

Post employment benefit obligations

 11,398

 11,498

Long-term debt

 10,748

 1,902

Other long-term liabilities

 3,756

 3,741

Total long-term liabilities

 25,902

 17,141

 

 

 

Stockholders' equity

 

 

Common stock

 54,355

 52,467

Retained earnings

 115,149

 106,339

Additional paid-in-capital

 4,158

 --

Accumulated other comprehensive loss

 (1,900)

 (1,974)

Total stockholders' equity

 171,762

 156,832

Total liabilities and stockholders' equity

 $ 271,983

 $ 240,746

 

 

 

 

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows - unaudited

(In thousands)

 

 

 

 

Six Months Ended

 

May 30, 2015

May 31, 2014

Operating activities:

 

 

Net income

 $ 10,485

 $ 3,394

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

Depreciation and amortization

 4,729

 3,438

Equity in undistributed income of investments and unconsolidated affiliated companies

 (220)

 (343)

Provision for restructuring and asset impairment charges

 106

 --

Non-cash portion of lease exit costs

 419

 --

Re-measurement gain on acquisition of affiliate

 (7,212)

 --

Tenant improvement allowances received from lessors

 330

 1,270

Deferred income taxes

 4,212

 (160)

Other, net

 1,018

 421

Changes in operating assets and liabilities

 

 

Accounts receivable

 (1,490)

 1,015

Inventories

 (5,706)

 367

Other current and long-term assets

 (2,121)

 1,451

Customer deposits

 763

 3,122

Accounts payable and accrued liabilities

 3,882

 (156)

Net cash provided by (used in) operating activities

 9,195

 13,819

 

 

 

Investing activities:

 

 

Purchases of property and equipment

 (7,942)

 (12,209)

Proceeds from sale of retail real estate and property and equipment

 2,952

 1,407

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

Other

 --

 188

Net cash used in investing activities

 (13,658)

 (3,266)

Financing activities:

 

 

Cash dividends

 (3,777)

 (3,480)

Proceeds from the exercise of stock options

 2,993

 --

Other issuance of common stock

 171

 147

Repurchases of common stock

 (255)

 (2,930)

Excess tax benefits from stock-based compensation

 1,032

 --

Repayments of notes payable

 (1,214)

 (141)

Proceeds from equipment loans

 1,307

 --

Net cash used in financing activities

 257

 (6,404)

Change in cash and cash equivalents

 (4,206)

 4,149

Cash and cash equivalents - beginning of period

 26,673

 12,733

Cash and cash equivalents - end of period

 $ 22,467

 $ 16,882

 

 

 

 

 

 

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES

Segment Information - unaudited

(In thousands)

 

 

 

 

 

 

Quarter Ended

Six Months Ended

 

May 30, 2015

May 31, 2014

May 30, 2015

May 31, 2014

Net Sales

 

 

 

 

Wholesale

 $ 66,705

 $ 56,184

 $ 125,510

 $ 107,270

Retail - Company-owned stores

 63,921

 53,290

 121,104

 100,414

Logistical services

 21,958

 --

 27,957

 --

Inter-company eliminations:

 

 

 

 

Furniture and accessories

 (31,159)

 (24,289)

 (57,600)

 (46,852)

Logistical services

 (9,872)

 --

 (12,611)

 --

Consolidated

 $ 111,553

 $ 85,185

 $ 204,360

 $ 160,832

 

 

 

 

 

Operating Income (Loss)

 

 

 

 

Wholesale

 $ 4,796

 $ 4,257

 $ 7,723

 $ 6,605

Retail

 1,971

 (666)

 1,929

 (2,438)

Logistical services

 1,027

 --

 1,019

 --

Inter-company elimination

 (631)

 300

 (106)

 810

Management restructuring costs

 (449)

 --

 (449)

 --

Lease exit costs

 --

 --

 (419)

 --

Asset impairment charges

 --

 --

 (106)

 --

Consolidated

 $ 6,714

 $ 3,891

 $ 9,591

 $ 4,977

 

 

 

 

 

 

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES

Rollforward of BHF Store Count

 

 

 

 

 

 

 

 

 

 

 

November 30,

 

 

May 30,

 

2014

Opened*

Closed*

2015

 

 

 

 

 

Company-owned stores

 60

 --

 (1)

 59

Licensee-owned stores

 34

 --

 (1)

 33

 

 

 

 

 

Total

 94

 --

 (2)

 92

 

 

 

 

 

 

 

 

 

 

* 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)

 

 

 

 

 

 

 

 

 

 

57 Comparable Stores

53 Comparable Stores

 

Quarter Ended

Quarter Ended

Six Months Ended

Six Months Ended

 

May 30, 2015

May 31, 2014

May 30, 2015

May 31, 2014

 

 

Percent of

 

Percent of

 

Percent of

 

Percent of

 

Amount

Net Sales

Amount

Net Sales

Amount

Net Sales

Amount

Net Sales

 

 

 

 

 

 

 

 

 

Net sales

 $ 60,608

100.0%

 $ 51,597

100.0%

 $ 109,317

100.0%

 $ 93,894

100.0%

 

 

 

 

 

 

 

 

 

Cost of sales

 30,416

50.2%

 25,899

50.2%

 54,703

50.0%

 47,062

50.1%

 

 

 

 

 

 

 

 

 

Gross profit

 30,192

49.8%

 25,698

49.8%

 54,614

50.0%

 46,832

49.9%

 

 

 

 

 

 

 

 

 

Selling, general and administrative expense*

 28,113

46.4%

 25,644

49.7%

 52,063

47.6%

 47,220

50.3%

 

 

 

 

 

 

 

 

 

Income from operations

 $ 2,079

3.4%

 $ 54

0.1%

 $ 2,551

2.4%

 $ (388)

-0.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

All Other Stores

All Other Stores

 

Quarter Ended

Quarter Ended

Six Months Ended

Six Months Ended

 

May 30, 2015

May 31, 2014

May 30, 2015

May 31, 2014

 

 

Percent of

 

Percent of

 

Percent of

 

Percent of

 

Amount

Net Sales

Amount

Net Sales

Amount

Net Sales

Amount

Net Sales

 

 

 

 

 

 

 

 

 

Net sales

 $ 3,313

100.0%

 $ 1,693

100.0%

 $ 11,787

100.0%

 $ 6,520

100.0%

 

 

 

 

 

 

 

 

 

Cost of sales

 1,748

52.8%

 929

54.9%

 5,861

49.7%

 3,231

49.6%

 

 

 

 

 

 

 

 

 

Gross profit

 1,565

47.2%

 764

45.1%

 5,926

50.3%

 3,289

50.4%

 

 

 

 

 

 

 

 

 

Selling, general and administrative expense

 1,629

49.2%

 963

56.9%

 6,504

55.2%

 4,231

64.9%

Pre-opening store costs**

 44

1.3%

 521

30.8%

 44

0.4%

 1,108

17.0%

 

 

 

 

 

 

 

 

 

Loss from operations

 $ (108)

-3.3%

 $ (720)

-42.6%

 $ (622)

-5.3%

 $ (2,050)

-31.3%

 

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