• Bassett Announces Fiscal Second Quarter Results

    Source: Nasdaq GlobeNewswire / 01 Jul 2021 08:00:01   America/Chicago

    BASSETT, Va., July 01, 2021 (GLOBE NEWSWIRE) -- Bassett Furniture Industries, Inc. (Nasdaq: BSET) announced today its results of operations for its second quarter ended May 29, 2021.

    Fiscal 2021 Second Quarter Highlights
    (Dollars in millions)

     Sales Operating Income (Loss)
     2nd Qtr Dollar% 2nd Qtr% of 2nd Qtr% of
     20212020 ChangeChange2021Sales 2020Sales
    Consolidated (1)$124.1$63.8 $60.394.4% $8.46.8% $(31.2)-48.9%
                
    Wholesale$76.0$33.1 $42.9129.7% $5.47.0% $(7.4)-22.3%
                
    Retail$62.5$33.2 $29.388.4% $1.72.6% $(9.2)-27.6%
                
    Logistical Services$22.2$15.3 $7.045.8% $1.35.8% $(1.8)-12.1%
                
    (1) Our consolidated results include certain intercompany eliminations. See Table 4, “Segment Information” below for an illustration
         of the effects of these intercompany eliminations on our consolidated sales and operating income (loss).   
                

    Consolidated revenue of $124.1 million for our second quarter represented a 94% increase as compared to the pandemic impacted quarter in 2020 and 15% as compared to 2019. Similarly, strong wholesale orders of $96.0 million for the period increased by 172% versus 2020 and by 51% compared to the pre-pandemic 2019 second quarter. As we battle an extremely tight labor market and continued supply chain disruptions, we strive to chip away at our huge order backlog that grew by another $19 million over the three months. Adding to the complexity is the inflationary raw material spiral that we have confronted this year, leading to our unprecedented action of levying three general price increases since our fiscal year began in December. Amidst this unsettled environment, we were pleased to record an $8.4 million operating profit compared to last year’s loss. EPS advanced to $0.60 per share for the quarter against the COVID-19 affected loss of ($2.04) in 2020.

    Again, our obvious focus is centered on the reduction of our backlog and returning to a semblance of normalcy in our service levels as soon as possible. Although our cancellation rate has not spiked significantly to date, it is a natural concern. At the recent High Point Furniture Market, we were actually thanked several times for our ability to deliver goods more quickly than the apparent current industry standard, which underscores just how compromised lead times actually are today. Aside from working massive amounts of overtime, the early June opening of our new upholstery production facility in Newton, NC will provide some immediate relief to a portion of the situation. With the polyurethane foam shortage largely behind us, our current raw material bottlenecks lie in the thousands of yards of decorative fabrics that our suppliers owe us. Our production managers have done a great job in shuffling our daily schedules to produce what they can based on the materials that they actually possess. Notwithstanding all the complications of the post-pandemic economy, our wholesale team produced a 7.0% operating margin for the period as our wood, upholstery, and outdoor divisions turned in performances significantly better than 2020 and 2019.

    Another aspect of the current disorder is the state of the industry’s logistics model. The strong business that has characterized the past 13 months has overwhelmed the furniture trucking segment. There is currently a dearth of warehouse space, warehouse labor, and over the road trailers to handle shipping backlogs. Consequently, even after the goods have been manufactured, there are accompanying lags in logistics service that could represent several weeks of further delay. Exacerbating this state of affairs is the global shortage of shipping containers that continues to plague our sector. Our Zenith Logistics team has performed at a high level in dealing with the cumulative effect of these daily challenges by generating $1.3 million of operating profit for the quarter despite spiraling warehousing labor costs and procuring over 400 trailers on short term leases to combat the equipment shortage. Longer term we are motivated by prospects of our recent regional warehouse model that is showing great promise. Over the past six months we have experimented with keeping some of our best sellers closer to the U.S. population centers for quicker delivery. When we have been able to have these goods in inventory, we have seen significant upticks in rates of sale, which bodes well for our plan to expand this model as product availability becomes normalized.

    As mentioned, wholesale orders increased dramatically during the quarter with all channels showing growth. Leading the way was our Bassett Design Center (BDC) network, part of our open market wholesale business, with increases of 212% and 87%, respectively, compared to 2020 and 2019. Another big part of the overall open market increase was the continuing rise of the Bassett Club Level program, which grew by 328% versus 2019. Dedicated Bassett-branded distribution in the form of the Bassett Home Furnishings network and BDC’s represented 67% of wholesale sales for the period. Once again, our corporate retail division was not able to deliver goods to the home at the rate that they were sold in the stores. Our digital outreach strategies continued to bear fruit as visitors to our website grew by 51% in the quarter. Store traffic, which has declined for the past few years, has held steady since business returned after the stores reopened last May. Still, our corporate retail turned in a profit of $1.6 million while continuing to add to its already large order backlog. Finally, we are excited by the combined results of the Lane Venture and Bassett Outdoor sales strategies as they combined for a 122% increase to 2020 and 124% to 2019. Much of the new business came from our Alabama metal facility that we purchased in 2019.

    Summing it all up for the quarter, we wrote more wholesale business than we had in many years, back to when we operated a much larger domestic manufacturing footprint in the pre-globalization days. While retiring $2.4 million of stock and paying our quarterly dividend, we ended May with $63.5 million of cash and short-term investments and no debt. There are many cost pressures and raw material lead times remain long. But we have a very large backlog and our most recent big sales event around Memorial Day was very strong. Taking all of those positives and negatives into account, we remain encouraged concerning our prospects for the remainder of 2021.

    Robert H. Spilman, Jr., Chairman and CEO

    About Bassett Furniture Industries, Inc.
    Bassett Furniture Industries, Inc. (NASDAQ:BSET), is a leading manufacturer and marketer of high quality home furnishings. With 97 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. Bassett’s retail strategy includes stylish, custom-built furniture that features 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 and a logistics business specializing in home furnishings. 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,” “plans,” “expects,” “anticipates,” “intends,” “should,” “estimates,” or similar expressions, or those relating to or anticipating financial results or changes in operations for periods beyond the end of the second fiscal quarter of 2021, 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 (including, without limitation, the effects on revenue, supply and demand resulting from the duration and extent of the COVID-19 pandemic) and future events on the retail demand for home furnishings and the ability of Bassett’s customers and consumers to obtain credit; the success of marketing, logistics, retail and other initiatives; 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.


    Table 1
    BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
    Condensed Consolidated Statements of Operations - unaudited
    (In thousands, except for per share data)
                
                
     Quarter Ended Six Months Ended
     May 29, 2021 May 30, 2020 May 29, 2021 May 30, 2020
      Percent of  Percent of  Percent of  Percent of
     AmountNet Sales AmountNet Sales AmountNet Sales AmountNet Sales
                
    Sales revenue:           
      Furniture and accessories$109,997   $53,000   $211,652   $151,942  
      Logistical services 14,062    10,801    26,080    23,979  
         Total sales revenue 124,059 100.0%  63,801 100.0%  237,732 100.0%  175,921 100.0%
                
    Cost of furniture and accessories sold 52,911 42.6%  29,452 46.2%  101,163 42.6%  74,722 42.5%
                
    Selling, general and administrative expenses 50,001 40.3%  37,730 59.1%  97,843 41.2%  90,027 51.2%
    Cost of logistical services 12,768 10.3%  12,643 19.8%  24,326 10.2%  24,986 14.2%
    Asset impairment charges - 0.0%  12,184 19.1%  - 0.0%  12,184 6.9%
    Goodwill impairment charge - 0.0%  1,971 3.1%  - 0.0%  1,971 1.1%
    Litigation expense - 0.0%  1,050 1.6%  - 0.0%  1,050 0.6%
       Income (loss) from operations 8,379 6.8%  (31,229)-48.9%  14,400 6.1%  (29,019)-16.5%
                
    Other loss, net (332)-0.3%  (765)-1.2%  (669)-0.3%  (1,127)-0.6%
    Income (loss) before income taxes 8,047 6.5%  (31,994)-50.1%  13,731 5.8%  (30,146)-17.1%
                
    Income tax provision (benefit) 2,073 1.7%  (11,642)-18.2%  3,746 1.6%  (11,004)-6.3%
    Net income (loss)$5,974 4.8% $(20,352)-31.9% $9,985 4.2% $(19,142)-10.9%
                
    Basic earnings (loss) per share$0.60   $(2.04)  $1.01   $(1.92) 
                
    Diluted earnings (loss) per share$0.60   $(2.04)  $1.01   $(1.92) 
                
                
      25.76%          


    Table 2
    BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
    Condensed Consolidated Balance Sheets
    (In thousands)
      (Unaudited)  
    Assets May 29, 2021 November 28, 2020
    Current assets    
        Cash and cash equivalents $45,776  $45,799 
        Short-term investments  17,715   17,715 
        Accounts receivable, net  25,882   22,340 
        Inventories, net  67,301   54,886 
        Recoverable income taxes  7,789   9,666 
        Other current assets  12,008   10,272 
    Total current assets  176,471   160,678 
         
    Property and equipment, net  92,581   90,917 
         
    Other long-term assets    
        Deferred income taxes, net  3,362   4,587 
        Goodwill and other intangible assets  23,637   23,827 
    Right of use assets under operating leases  116,357   116,903 
        Other  6,071   5,637 
    Total long-term assets  149,427   150,954 
    Total assets $418,479  $402,549 
         
    Liabilities and Stockholders’ Equity    
    Current liabilities    
        Accounts payable $28,522  $23,426 
        Accrued compensation and benefits  14,124   16,964 
    Customer deposits  47,911   39,762 
    Current portion of operating lease obligations  27,358   27,078 
    Other current liabilities and accrued expenses  12,534   11,141 
    Total current liabilities  130,449   118,371 
         
    Long-term liabilities    
        Post employment benefit obligations  12,398   12,089 
        Long-term portion of operating lease obligations  109,832   111,972 
       Other long-term liabilities  5,538   2,087 
    Total long-term liabilities  127,768   126,148 
         
         
    Stockholders’ equity    
         Common stock  49,262   49,714 
         Retained earnings  112,325   109,710 
         Accumulated other comprehensive loss  (1,325)  (1,394)
    Total stockholders' equity  160,262   158,030 
    Total liabilities and stockholders’ equity $418,479  $402,549 
         


    Table 3 
    BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES 
    Consolidated Statements of Cash Flows - unaudited 
    (In thousands) 
          
      Six Months Ended 
      May 29, 2021 May 30, 2020 
    Operating activities:     
    Net income (loss) $9,985  $(19,142) 
    Adjustments to reconcile net income (loss) to net cash provided by (used in)     
      operating activities:     
    Depreciation and amortization  6,893   7,239  
    Gain on lease modification  -   (152) 
    Asset impairment charges  -   12,184  
    Goodwill impairment charges  -   1,971  
    Inventory valuation charges  1,100   2,936  
    Bad debt valuation charges (recoveries)  (43)  1,074  
    Deferred income taxes  1,201   (521) 
    Other, net  255   673  
    Changes in operating assets and liabilities     
    Accounts receivable  (3,399)  2,483  
    Inventories  (13,515)  883  
    Other current and long-term assets  25   (9,091) 
    Right of use assets under operating leases  12,558   14,810  
    Customer deposits  8,149   (2,150) 
    Accounts payable and other liabilities  2,775   (2,670) 
    Obligations under operating leases  (13,934)  (16,274) 
              Net cash provided by (used in) operating activities  12,050   (5,747) 
          
    Investing activities:     
    Purchases of property and equipment  (3,483)  (1,791) 
    Proceeds from sale of property and equipment  96   2,345  
    Purchase of investments  -   (241) 
    Other  (335)  (211) 
               Net cash provided by (used in) investing activities  (3,722)  102  
          
    Financing activities:      
    Cash dividends  (4,954)  (1,258) 
    Proceeds from the exercise of stock options  42   -  
    Other issuance of common stock  172   157  
    Repurchases of common stock  (2,925)  (1,241) 
    Taxes paid related to net share settlement of equity awards  (219)  (215) 
    Repayments of finance lease obligations  (467)  (50) 
                Net cash used in financing activities  (8,351)  (2,607) 
    Change in cash and cash equivalents  (23)  (8,252) 
    Cash and cash equivalents - beginning of period  45,799   19,687  
          
    Cash and cash equivalents - end of period $45,776  $11,435  
          

     

    Table 4
    BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES
    Segment Information - unaudited
    (In thousands)
             
      Quarter Ended Six Months Ended
      May 29, 2021 May 30, 2020 May 29, 2021 May 30, 2020
    Sales Revenue        
    Wholesale sales of furniture and accessories $76,034  $33,128  $146,298  $98,145 
    Less: Sales to retail segment  (28,520)  (13,299)  (57,524)  (45,220)
    Wholesale sales to external customers  47,514   19,829   88,774   52,925 
    Retail sales of furniture and accessories  62,483   33,171   122,878   99,017 
    Consolidated net sales of furniture and accessories 109,997   53,000   211,652   151,942 
             
    Logistical services revenue  22,244   15,259   42,325   36,574 
    Less: Services to wholesale segment  (8,182)  (4,458)  (16,245)  (12,595)
    Logistical services to external customers  14,062   10,801   26,080   23,979 
    Total sales revenue $124,059  $63,801  $237,732  $175,921 
             
    Operating Income (Loss)        
    Wholesale $5,359  $(7,381) $10,156  $(4,668)
    Retail  1,652   (9,170)  2,746   (10,419)
    Logistical services  1,294   (1,842)  1,753   (1,007)
    Inter-company elimination  74   2,369   (255)  2,280 
    Asset impairment charges  -   (12,184)  -   (12,184)
    Goodwill impairment charge  -   (1,971)  -   (1,971)
    Litigation expense  -   (1,050)  -   (1,050)
    Consolidated $8,379  $(31,229) $14,400  $(29,019)
             

    J. Michael Daniel
    Senior Vice President and
    Chief Financial Officer
    (276) 629-6614 – Investors
    mdaniel@bassettfurniture.com

    Peter D. Morrison
    Vice President of Communications
    (276) 629-6450 – Media


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