BASSETT, VA -- Bassett Furniture Industries, Inc. announced today its results of operations for its fiscal quarter ended Nov. 24, 2012.
Fiscal 2012 Fourth Quarter Highlights
• Consolidated sales for the fourth quarter 2012 increased 21% as compared to the fourth quarter 2011
• Operating profit for the fourth quarter was $2.5 million versus $1.1 million for the fourth quarter last year
• Wholesale sales increased 18% compared to the fourth quarter 2011
• Company-owned store delivered sales increased 24% overall compared to the fourth quarter 2011 which included a 15% increase from the 48 comparable stores
• Repurchased 128,000 shares using $1.4 million of cash
• Declared a regular quarterly dividend totaling $0.6 million or $0.05 per share
• Paid a special dividend of $13.7 million or $1.25 per share
On a consolidated basis, the Company reported net sales for the fourth quarter of 2012 of $76.8 million, an increase of $13.5 million, or 21%, from sales levels attained in the fourth quarter of 2011. Operating income increased to $2.5 million from $1.1 million driven primarily by higher sales in both the wholesale and retail segments. This was offset by higher selling, general and administrative expenses due primarily to the increased number of Company-owned stores, higher marketing and advertising costs associated with the introduction of the new HGTV Design Studios at the retail stores, and increased health care costs due to higher than normal claim activity. Included in the Company's net income is a net tax benefit of $14.2 million which was primarily due to a $16.0 million reduction of certain valuation reserves against the Company's deferred tax assets. As a result, the Company recorded net income of $16.9 million or $1.55 per diluted share for the fourth quarter of 2012 compared to $0.6 million or $0.06 per diluted share in the fourth quarter of 2011.
"We were pleased to post a 21% increase in consolidated revenue for the fourth quarter of 2012," said Robert H. Spilman, Jr., president and CEO. "A very strong showing by our corporate retail unit coupled with significant gains in our open market sales efforts drove the top line improvement. And, despite incurring a large unfavorable employee health insurance adjustment, quarterly operating income increased 127% to $2.5 million."
"As 2012 unfolded, our revenue improved, ultimately ending with a 6.5% sales gain for the year," continued Spilman. "Several factors behind this trend continue to provide momentum as we head into 2013. First, we are operating a much healthier retail network that is no longer plagued by the store closings of the past few years. Second, recent Bassett product line introductions have been very successful at retail. Third, our effort to grow our business outside of the store footprint continues to take hold as sales grew 38% in this channel in the quarter. Finally, we are encouraged by the initial sales results of the HGTV Design Studio at Bassett products in our Bassett Home Furnishings (BHF) store network. This assortment of custom upholstery was a major driver behind our 15% fourth quarter comparable store increase. Both the HGTV Design Studio at Bassett and the HGTV Home open market product lines will be aggressively promoted in 2013 and we look forward to fully realizing the sales that the investment in this partnership will generate."
Wholesale Segment
Net sales for the wholesale segment were $51.8 million for the fourth quarter of 2012 as compared to $43.7 million for the fourth quarter of 2011, an increase of 18%. Wholesale shipments increased due to a 38% increase in wholesale sales outside the BHF store network and an 11% increase in shipments to the BHF store network. Gross margins for the wholesale segment were 32.7% for the fourth quarter of 2012 as compared to 33.7% for the fourth quarter of 2011. This decrease was due primarily to greater discounts on certain discontinued products and increased health care costs due to higher than normal claim activity, partially offset by improvements from greater leverage of fixed costs. Wholesale SG&A increased $2.5 million to $15.1 million for the fourth quarter of 2012 as compared to $12.6 million for the fourth quarter of 2011. SG&A costs as a percentage of sales were flat at 29% for the fourth quarter of 2012 as compared to the fourth quarter of 2011 as the profit improvement from leveraging fixed SG&A costs was offset by increased marketing and advertising costs associated with the rollout of the HGTV product lines.
"Overall wholesale sales increased 18% to $51.8 million, with upholstery sales growing by 19% for the quarter while our wood division posted a 16% gain," said Spilman. "The increase in volume and resulting efficiencies enabled both our upholstery and wood operations to post improved levels of profitability at the divisional level in spite of the aforementioned health care charges. However, increases in SG&A spending from increased promotional allowances and new HGTV national advertising expense resulted in a 9% decline in wholesale operating income to $1.9 million. We plan to better leverage these marketing costs in 2013 with growth generated from five to seven new Bassett stores, continued gains in open market sales, and increased revenues from the full rollout of the HGTV partnership."
Retail Segment
Company-owned stores had sales of $48.8 million for the fourth quarter of 2012 as compared to $39.4 million for the fourth quarter of 2011, an increase of 24%. The increase was comprised of a $5.9 million or 15% increase in comparable store sales along with a $3.5 million increase in non-comparable store sales. 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 14% for the fourth quarter of 2012 as compared to the fourth quarter of 2011.
Operating income for the Company-owned stores improved to $0.4 million in the fourth quarter of 2012 as compared to a loss of $0.6 million for the fourth quarter of 2011. This improvement was primarily driven by the sales increases noted above. Gross margins were essentially flat at 48.0% for the fourth quarter of 2012 as compared to 47.9% for the fourth quarter of 2011. SG&A expense increased $3.6 million, primarily due to increased store count. As a percentage of sales, SG&A decreased to 47% for the fourth quarter of 2012 compared to 49% for the same quarter last year, primarily due to greater leverage of fixed costs from higher sales. 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 year ended November 24, 2012:
| November 26, 2011 |
New Stores |
Stores Acquired |
Stores Closed |
November 242012 | |
| Licensee-owned stores | 39 | -- | (3) | (3) | 33 |
| Company-owned stores | 49 | 3 | 3 | (2) | 53 |
| Total | 88 | 3 | -- | (5) |
86 |
"The fourth quarter was the best ever in our corporate retail division as we generated sales of $48.8 million, an overall increase of 24%," said Spilman. "The strong gain in comparable store sales helped produce a retail operating profit of $0.4 million, a $1.0 million improvement from last year. 2012 marked another year of solid improvement for our corporate retail division as witnessed by our year-over-year 9% comparable store sales increase and the 54% decrease in corporate store losses. The combination of a strong product assortment, good looking stores, highly trained designers, effective marketing programs, and superior levels of customer service has matured our proposition into a unique experience in our industry that is resonating with consumers. In 2013, we look forward to opening five to seven new stores and repositioning two others into better retail locations. Finally, we will test a new small store concept designed to better highlight our industry leading custom upholstery capabilities."
Balance Sheet and Cash Flow
The Company generated $1.0 million in cash from operating activities for the three months ended November 24, 2012 as compared with cash generated in operations of $6.9 million for the three months ended November 26, 2011. This decrease was primarily due to increases in accounts receivable and inventory as a result of increased volume and operating activity in the fourth quarter of 2012. Capital expenditures for the fourth quarter of 2012 were $2.1 million primarily related to the expansion and remodeling in the Company-owned store network. The Company also repurchased 128,000 shares of common stock using $1.4 million in cash and paid $0.6 million in regular dividends and $13.7 million in special dividends during the quarter.
| BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES | ||||||||||||
| Condensed Consolidated Statements of Income - unaudited | ||||||||||||
| (In thousands, except for per share data) | ||||||||||||
| Quarter Ended November 24, 2012 |
Quarter Ended November 26, 2011 |
Year Ended November 24, 2012 |
Year Ended November 26, 2011 |
|||||||||
Amount |
Percent of Net Sales |
Amount |
Percent of Net Sales |
Amount |
Percent of Net Sales |
Amount |
Percent of Net Sales |
|||||
| Net sales | $ 76,812 | 100.0% | $ 63,266 | 100.0% | $ 269,672 | 100.0% | $ 253,208 | 100.0% | ||||
| Cost of sales | 36,640 | 47.7% | 29,996 | 47.4% | 128,350 | 47.6% | 125,642 | 49.6% | ||||
| Gross profit | 40,172 | 52.3% | 33,270 | 52.6% | 141,322 | 52.4% | 127,566 | 50.4% | ||||
| Selling, general and administrative expense excluding bad debt and notes receivable valuation charges | 37,697 | 49.1% | 31,370 | 49.6% | 134,796 | 50.0% | 122,023 | 48.2% | ||||
| Bad debt and notes receivable valuation charges (recoveries) | (40) | -0.1% | 374 | 0.6% | 376 | 0.1% | 13,490 | 5.3% | ||||
| Licensee debt cancellation charges | -- | 0.0% | -- | 0.0% | -- | 0.0% | 6,447 | 2.5% | ||||
| Restructuring and asset impairment charges | -- | 0.0% | 418 | 0.7% | 711 | 0.3% | 2,500 | 1.0% | ||||
| Lease exit costs | -- | 0.0% | -- | 0.0% | 359 | 0.1% | 3,728 | 1.5% | ||||
| Operating income (loss) | 2,515 | 3.3% | 1,108 | 1.8% | 5,080 | 1.9% | (20,622) | -8.1% | ||||
| Gain on sale of affiliate | -- | 0.0% | -- | 0.0% | -- | 0.0% | 85,542 | 33.8% | ||||
| Income from Continued Dumping & Subsidy Offset Act | -- | 0.0% | 765 | 1.2% | 9,010 | 3.3% | 765 | 0.3% | ||||
| Other income (loss), net | 163 | 0.2% | (464) | -0.7% | (2,076) | -0.8% | (5,934) | -2.3% | ||||
| Income before income taxes | 2,678 | 3.5% | 1,409 | 2.2% | 12,014 | 4.5% | 59,751 | 23.6% | ||||
| Income tax benefit (expense) | 14,218 | 18.5% | (776) | -1.2% | 14,699 | 5.5% | (4,409) | -1.7% | ||||
| Net income | $ 16,896 | 22.0% | $ 633 | 1.0% | $ 26,713 | 9.9% | $ 55,342 | 21.9% | ||||
| Basic earnings per share | $ 1.57 | $ 0.06 | $ 2.43 | $ 4.84 | ||||||||
| Diluted earnings per share | $ 1.55 | $ 0.06 | $ 2.41 | $ 4.79 | ||||||||
| BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES | ||
| Condensed Consolidated Balance Sheets -Unaudited | ||
| (In thousands) | ||
| Assets | November 24, 2012 | November 26, 2011 |
| Current assets | ||
| Cash and cash equivalents | $ 45,566 | $ 69,601 |
| Accounts receivable, net | 15,755 | 14,756 |
| Inventories | 57,916 | 45,129 |
| Deferred income taxes, net | 6,832 | 393 |
| Other current assets | 6,439 | 10,324 |
| Total current assets | 132,508 | 140,203 |
| Property and equipment | ||
| Cost | 148,157 | 143,824 |
| Less accumulated depreciation | 91,533 | 93,878 |
| Property and equipment, net | 56,624 | 49,946 |
| Long-term assets | ||
| Retail real estate | 12,736 | 16,257 |
| Deferred income taxes, net | 10,484 | 767 |
| Other | 14,828 | 16,001 |
| Total long-term assets | 38,048 | 33,025 |
| Total assets | $ 227,180 | $ 223,174 |
| Liabilities and Stockholders' Equity | ||
| Current liabilities | ||
| Accounts payable | $ 22,405 | $ 18,821 |
| Accrued compensation and benefits | 6,926 | 7,201 |
| Customer deposits | 12,253 | 9,238 |
| Dividends payable | 542 | 6,063 |
| Other accrued liabilities | 10,213 | 10,302 |
| Current portion of real estate notes payable | 241 | 202 |
| Total current liabilities | 52,580 | 51,827 |
| Long-term liabilities | ||
| Post employment benefit obligations | 11,577 | 11,226 |
| Real estate notes payable | 3,053 | 3,662 |
| Other long-term liabilities | 2,690 | 4,024 |
| Total long-term liabilities | 17,320 | 18,912 |
| Stockholders' equity | ||
| Common stock | 54,184 | 56,712 |
| Retained earnings | 104,319 | 96,331 |
| Accumulated other comprehensive loss | (1,223) | (608) |
| Total stockholders' equity | 157,280 | 152,435 |
| Total liabilities and stockholders' equity | $ 227,180 | $ 223,174 |
| BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES | ||
| Consolidated Statements of Cash Flows - unaudited | ||
| (In thousands) | ||
| Year Ended November 24, 2012 |
Year Ended November 26, 2011 |
|
| Operating activities: | ||
| Net income | $ 26,713 | $ 55,342 |
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
| Depreciation and amortization | 5,473 | 5,514 |
| Equity in undistributed income of investments and unconsolidated affiliated companies | (347) | (1,840) |
| Provision for restructuring and asset impairment charges | 711 | 2,500 |
| Non-cash portion of lease exit costs | 359 | 2,228 |
| Licensee debt cancellation charges | -- | 6,447 |
| Provision for lease and loan guarantees | (41) | 1,283 |
| Bad debt and notes receivable valuation charges | 376 | 13,490 |
| Gain on mortgage settlement | -- | (1,305) |
| Gain on sale of affiliate | -- | (85,542) |
| Other than temporary impairment of investments | 806 | -- |
| Impairment and lease exit charges on retail real estate | -- | 4,790 |
| Deferred income taxes | (15,822) | 236 |
| Other, net | 642 | 214 |
| Changes in operating assets and liabilities | ||
| Accounts receivable | (2,967) | 1,034 |
| Inventories | (11,307) | 299 |
| Other current assets | (276) | 2,300 |
| Accounts payable and accrued liabilities | 3,636 | (12,421) |
| Net cash provided by (used in) operating activities | 7,956 | (5,431) |
| Investing activities: | ||
| Purchases of property and equipment | (9,000) | (4,168) |
| Proceeds from sale of property and equipment | 19 | 211 |
| Proceeds from sale of interest in affiliate | 1,410 | 69,152 |
| Release of collateral restrictions on cash equivalents | -- | 11,240 |
| Proceeds from sales of investments | 4,854 | 3,297 |
| Purchases of investments | (1,781) | (3,132) |
| Dividend from affiliate | -- | 3,756 |
| Equity contribution to affiliate | -- | (980) |
| Acquisitions of retail licensee stores | (549) | -- |
| Note receivable payments | 1,240 | 127 |
| Net cash provided by (used in) investing activities | (3,807) | 79,503 |
| Financing activities: | ||
| Repayments of real estate notes payable | (570) | (8,647) |
| Issuance of common stock | 842 | 170 |
| Repurchases of common stock | (7,015) | (2,964) |
| Cash dividends | (21,441) | (695) |
| Payments on other notes | -- | (3,406) |
| Net cash used in financing activities | (28,184) | (15,542) |
| Change in cash and cash equivalents | (24,035) | 58,530 |
| Cash and cash equivalents - beginning of period | 69,601 | 11,071 |
| Cash and cash equivalents - end of period | $ 45,566 | $ 69,601 |
| BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES | ||||||||
| Segment Information - unaudited | ||||||||
| (In thousands) | ||||||||
| Quarter ended November 24, 2012 |
Quarter ended November 26, 2011 |
Year Ended November 24, 2012 |
Year Ended November 26, 2011 |
|||||
| Net Sales | ||||||||
| Wholesale | $ 51,831 | (a) | $ 43,746 | (a) | $ 185,187 | (a) | $ 177,372 | (a) |
| Retail | 48,833 | 39,363 | 171,633 | 147,961 | ||||
| Inter-company elimination | (23,852) | (19,843) | (87,148) | (72,125) | ||||
| Consolidated | $ 76,812 | $ 63,266 | $ 269,672 | $ 253,208 | ||||
| Operating Income (Loss) | ||||||||
| Wholesale | $ 1,925 | (b) | $ 2,110 | (b) | $ 7,500 | (b) | $ (4,394) | (b) |
| Retail | 369 | (584) | (2,067) | (4,495) | ||||
| Inter-company elimination | 221 | -- | 717 | 942 | ||||
| Licensee debt cancellation charge | -- | -- | -- | (6,447) | ||||
| Restructuring and asset impairment charges | -- | (418) | (711) | (2,500) | ||||
| Lease exit costs | -- | -- | (359) | (3,728) | ||||
| Consolidated | $ 2,515 | $ 1,108 | $ 5,080 | $ (20,622) | ||||
| (a) Excludes wholesale shipments for dealers where collectibility is not reasonably assured at time of shipment as follows: | ||||||||
| November 24, 2012 | November 26, 2011 | |||||||
| Quarter ended | $ -- | $ -- | ||||||
| Year ended | -- | 1,678 | ||||||
| (b) Includes bad debt and notes receivable valuation charges (recoveries) as follows: | ||||||||
| November 24, 2012 | November 26, 2011 | |||||||
| Quarter ended | $ (40) | $ 374 | ||||||
| Year ended | 376 | 13,490 | ||||||
| BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES | ||||||||
| Supplemental Retail Information--unaudited | ||||||||
| (In thousands) | ||||||||
| 48 Comparable Stores | 40 Comparable Stores | |||||||
| Quarter Ended November 24, 2012 |
Quarter Ended November 26, 2011 |
Year Ended November 24, 2012 |
Year Ended November 26, 2011 |
|||||
Amount |
Percent of Net Sales |
Amount |
Percent of Net Sales |
Amount |
Percent of Net Sales |
Amount |
Percent of Net Sales |
|
| Net sales | $ 45,020 | 100.0% | $ 39,080 | 100.0% | $ 140,345 | 100.0% | $ 128,580 | 100.0% |
| Cost of sales | 23,411 | 52.0% | 20,205 | 51.7% | 72,470 | 51.6% | 66,400 | 51.6% |
| Gross profit | 21,609 | 48.0% | 18,875 | 48.3% | 67,875 | 48.4% | 62,180 | 48.4% |
| Selling, general and administrative expense* | 21,055 | 46.8% | 19,082 | 48.8% | 67,835 | 48.3% | 64,191 | 49.9% |
| Income (loss) from operations | $ 554 | 1.2% | $ (207) | -0.5% | $ 40 | 0.1% | $ (2,011) | -1.5% |
| All Other Stores | All Other Stores | |||||||
| Quarter Ended November 24, 2012 |
Quarter Ended November 26, 2011 |
Year Ended November 24, 2012 |
Year Ended November 26, 2011 |
|||||
Amount |
Percent of Net Sales |
Amount |
Percent of Net Sales |
Amount |
Percent of Net Sales |
Amount |
Percent of Net Sales |
|
| Net sales | $ 3,813 | 100.0% | $ 283 | 100.0% | $ 31,288 | 100.0% | $ 19,381 | 100.0% |
| Cost of sales | 1,983 | 52.0% | 312 | 110.2% | 16,802 | 53.7% | 11,699 | 60.4% |
| Gross profit | 1,830 | 48.0% | (29) | -10.2% | 14,486 | 46.3% | 7,682 | 39.6% |
| Selling, general and administrative expense | 2,015 | 52.8% | 348 | 123.0% | 16,594 | 53.0% | 10,166 | 52.5% |
| Loss from operations | $ (185) | -4.8% | $ (377) | -133.2% | $ (2,108) | -6.7% | $ (2,484) | -12.9% |
| *Comparable store SG&A includes retail corporate overhead and administrative costs. | ||||||||
Source: Bassett Furniture Industries
Have something to say? Share your thoughts with us in the comments below.