GlobeNewswire Inc | Jan 21, 2021 09:00AM EST

January 21, 2021

BASSETT, Va., Jan. 21, 2021 (GLOBE NEWSWIRE) -- Bassett Furniture Industries, Inc. (Nasdaq: BSET) announced today its results of operations for its fourth quarter ended November 28, 2020.

Fiscal 2020 Fourth Quarter Highlights(Dollars in millions)

Sales Operating Income (Loss) 4th Qtr Dollar % 4th % of 4th Qtr % of Qtr 2020 2019 Change Change 2020 Sales 2019 SalesConsolidated ^(1) $ 118.4 $ 113.6 $ 4.7 4.2 % $ 10.0 8.5 % $ (5.6 ) -5.0 % Wholesale $ 67.5 $ 62.5 $ 5.0 8.2 % $ 5.9 8.8 % $ 1.1 1.7 % Retail $ 64.8 $ 70.0 $ (5.2 ) -7.4 % $ 2.5 3.9 % $ (0.6 ) -0.8 % Logistical $ 20.7 $ 19.3 $ 1.4 7.3 % $ 1.2 5.9 % $ 0.3 1.5 %Services (1) Our consolidated results include certain intercompany eliminations. See the?Segment Information? table below for an illustrationof the effects of these intercompany eliminations on our consolidated sales and operating income.

Net income for the fourth quarter of 2020 was $6.5 million or $0.65 per diluted share as compared to a loss of $5.1 million or $0.51 per diluted share for the prior year quarter, and operating income for the fourth quarter of 2020 was $10.0 million as compared to a loss of $5.6 million for the fourth quarter of 2019. Excluding certain charges related to asset impairments and other items in 2019, adjusted operating income was $10.0 million and $1.6 million for the fourth quarters of 2020 and 2019, respectively. Adjusted net income and diluted earnings per share was $6.5 million and $0.65 for the quarter ended November 28, 2020 and $0.7 million and $0.07 for the quarter ended November 30, 2019. See Table 6 of this press release for reconciliations of adjusted operating income, adjusted net income and adjusted diluted earnings per share to operating income, net income and diluted earnings per share and for more information about these non-GAAP financial measures.

The robust sales that we have generated since the late spring began to positively roll through our income statement in the September-November quarter, observed Rob Spilman, Chairman and CEO. Consolidated revenue grew by 4.2% and operating profit of $10.0 million represented a significant increase to last years performance. Still, we continue to face a number of unprecedented externally induced challenges that make operating the business unusually difficult and currently prevent us from fully realizing the financial benefits that are embedded in our huge backlog of orders. Fourth quarter domestic manufacturing production increased by 19% compared to the third quarter primarily due to across the board extended work schedules in our plants. The increased production was more than offset, however, by a 26% acceleration in wholesale orders for the period as compared to the prior year period, leaving us with a $54.9 million backlog; 47% greater than the amount of unfulfilled wholesale orders at the end of our third quarter.

We began to chip away at the backlog to start fiscal 2021 in the month of December, continued Spilman. Unfortunately, the lingering effects of the pandemic are not helping us. Our associates across all of our operating divisions manufacturing, retail, and logistics, are facing greater occurrences of COVID exposure or outright contraction of the virus themselves. Our suppliers of raw materials are experiencing similar situations in their daily operations, exacerbating the long lead times that they are already quoting. On our domestic manufacturing front, this dynamic is particularly problematic in our upholstery operations where service from our decorative fabrics suppliers is causing daily disruption to our production schedule. Moving to our import programs, the worldwide shipping container shortage and our inability to reliably procure space on inbound vessels is pushing the receipt of badly needed sold merchandise out further than we have ever seen. Furthermore, the limited supply of shipping containers has created a bidding war for vessel space, making our established container rates contractual in name only. As a result, we believe that the backlog will gradually decrease over the course of 2021 to a more manageable level as we do not believe the current pace of business is sustainable. Finally, inflation has reared its head over the past 60 days to a pace reminiscent of the 1970s, both on the imported and domestic front. Our price increase instituted in mid-December is only a partial remedy to the fluid dynamics that characterize the pricing marketplace today and we are currently discussing further steps as a result.

Despite the unsettled business environment, we performed very well in the fourth quarter, furthered Spilman. All sales channels and all product categories grew revenue in the period. Particularly strong sales growth came from our Bench Made casegoods assortment, our Club Level motion line, and the Lane Venture division. Corporate retail was profitable in spite of delivered sales once again lagging behind written orders. Our fleet of 34 licensed retail stores turned in a very strong performance. And our traditional account base outside of the retail network, led by our 100 Bassett Design Centers, generated impressive 69% written sales growth in the period. Both of our upholstery and wood operations ran full schedules throughout the quarter, and the resulting efficiencies produced wholesale operating profit of $5.9 million, over five times greater than last year. We navigated the ups and downs of 2020 by instituting a number of structural changes to our business model that will serve us well in the future. Foremost was the adjustment to our overall cost structure, led by a 23% reduction in companywide headcount. Most of the reductions came from our corporate retail segment as we architected a new standard to manage the store network and the accompanying support functions. Our digitally centric marketing strategy drove a 51% increase in quarterly web traffic and an 86% gain in web sales. By disdaining traditional television and adopting a leaner operating paradigm, corporate retail drove SG&A expense down by over 600 bps and turned a profit despite a 7.4% drop in delivered sales. Corporate savings were even higher as reduced business travel, brand marketing, and general expense management combined for a 990 bps reduction in SG&A.

The pressure on our balance sheet in March/April 2020 gave way to a startling recovery fueled by the strong business that we saw in the second half of the year, concluded Spilman. Strong operating cash flow over the last six months of $42.4 million allowed us to reinstate our November dividend to the pre-COVID level of $0.125 per share plus pay a special $0.25 dividend in late December. Year-end cash and equivalents of $63.5 million is over $40 million more than we had at the low point of the 2020 cash crunch. Looking ahead, we plan to invest in technology and our domestic manufacturing and logistics platforms in 2021 while maintaining a strong balance sheet and returning capital to shareholders when appropriate. The leaner, smarter approach to our business that was borne in the early days of the pandemic are lessons learned in 2020 that will not soon be forgotten.

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. Bassetts 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 Companys 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 fourth fiscal quarter of 2020, 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 Bassetts 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 Bassetts 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 1BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIESCondensed Consolidated Statements of Operations - unaudited(In thousands, except for per share data) Quarter Ended Year Ended November 28, 2020 November 30, 2019 November 28, 2020 November 30, 2019 Percent Percent Percent Percent of of of of Amount Net Amount Net Amount Net Amount Net Sales Sales Sales Sales Sales revenue: Furniture $ 105,389 $ 102,315 $ 337,672 $ 403,865 and accessoriesLogistics 12,994 11,322 48,191 48,222 Total 118,383 100.0 % 113,637 100.0 % 385,863 100.0 % 452,087 100.0 %sales revenue Cost offurniture and 50,427 42.6 % 45,291 39.9 % 163,567 42.4 % 179,244 39.6 %accessoriessold Selling,general andadministrative expensesexcludingnew storepre-opening 57,907 48.9 % 66,785 58.8 % 223,314 57.9 % 264,280 58.5 %costsNew storepre-opening - 0.0 % - 0.0 % - 0.0 % 1,117 0.2 %costsAssetimpairment - 0.0 % 4,431 3.9 % 12,184 3.2 % 4,431 1.0 %chargesGoodwillimpairment - 0.0 % 1,926 1.7 % 1,971 0.5 % 1,926 0.4 %chargeLitigation - 0.0 % 700 0.6 % 1,050 0.3 % 700 0.2 %expenseLease exit - 0.0 % 149 0.1 % - 0.0 % 149 0.0 %costsEarlyretirement - 0.0 % - 0.0 % - 0.0 % 835 0.2 %programIncome(loss) from 10,049 8.5 % (5,645 ) -5.0 % (16,223 ) -4.2 % (595 ) -0.1 %operations Other income (133 ) -0.1 % (579 ) -0.5 % (563 ) -0.1 % (1,145 ) -0.3 %(loss), netIncome (loss)before income 9,916 8.4 % (6,224 ) -5.5 % (16,786 ) -4.4 % (1,740 ) -0.4 %taxes Income taxprovision 3,373 2.8 % (1,086 ) -1.0 % (6,365 ) -1.6 % 188 0.0 %(benefit)Net income $ 6,543 5.5 % $ (5,138 ) -4.5 % $ (10,421 ) -2.7 % $ (1,928 ) -0.4 %(loss) Basic earnings(loss) per $ 0.65 $ (0.51 ) $ (1.05 ) $ (0.19 ) share Dilutedearnings (loss) $ 0.65 $ (0.51 ) $ (1.05 ) $ (0.19 ) per share

Table 2BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIESCondensed Consolidated Balance Sheets(In thousands) (Unaudited) Assets November 28, November 30, 2020 2019Current assets Cash and cash equivalents $ 45,799 $ 19,687 Short-term investments 17,715 17,436 Accounts receivable, net 22,340 21,378 Inventories, net 54,886 66,302 Recoverable income taxes 9,666 329 Other current assets 10,272 11,654 Total current assets 160,678 136,786 Property and equipment, net 90,917 101,724 Other long-term assets Deferred income taxes, net 4,587 5,744 Goodwill and other intangible assets 23,827 26,176 Right of use assets under operating leases 116,903 - Other 5,637 5,336 Total long-term assets 150,954 37,256 Total assets $ 402,549 $ 275,766 Liabilities and Stockholders? Equity Current liabilities Accounts payable $ 23,426 $ 23,677 Accrued compensation and benefits 16,964 11,308 Customer deposits 39,762 25,341 Current portion of operating lease 27,078 - obligationsOther current liabilities and accrued 11,141 11,945 expensesTotal current liabilities 118,371 72,271 Long-term liabilities Post employment benefit obligations 12,089 11,830 Long-term portion of operating lease 111,972 - obligationsOther long-term liabilities 2,087 12,995 Total long-term liabilities 126,148 24,825 Stockholders? equity Common stock 49,714 50,581 Retained earnings 109,710 129,130 Additional paid-in-capital - 195 Accumulated other comprehensive loss (1,394 ) (1,236 )Total stockholders' equity 158,030 178,670 Total liabilities and stockholders? equity $ 402,549 $ 275,766

Table 3BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIESConsolidated Statements of Cash Flows - unaudited(In thousands) Year Ended November 28, November 30, 2020 2019Operating activities: Net income (loss) $ (10,421 ) $ (1,928 )Adjustments to reconcile net income to net cash provided by (used in)operating activities: Depreciation and amortization 13,480 13,500 Non-cash asset impairment charges 12,184 4,431 Non-cash goodwill impairment charges 1,971 1,926 Non-cash portion of lease exit costs - 149 Gain on lease modification (1,313 ) - Net (gain) loss on disposals of property and (81 ) 515 equipmentInventory valuation charges 4,922 2,254 Bad debt valuation charges (recoveries) 492 61 Deferred income taxes 2,513 (2,890 )Other, net (51 ) 1,497 Changes in operating assets and liabilities Accounts receivable (1,454 ) (2,616 )Inventories 6,494 (5,196 )Other current and long-term assets (9,324 ) 1,017 Right of use assets under operating leases 32,107 - Customer deposits 14,421 (1,816 )Accounts payable and other liabilities 5,964 (1,095 )Obligations under operating leases (35,229 ) - Net cash provided by (used 36,675 9,809 in) operating activities Investing activities: Purchases of property and equipment (6,029 ) (17,375 )Proceeds from sale of property and equipment 2,345 1,643 Purchase of investments (295 ) - Proceeds from maturity of short-term 16 5,207 investmentsOther 216 (648 )Net cash used in (3,747 ) (11,173 )investing activities Financing activities: Cash dividends (4,544 ) (5,133 )Proceeds from the exercise of stock options - 25 Other issuance of common stock 285 328 Repurchases of common stock (2,208 ) (7,345 )Taxes paid related to net share settlement of (228 ) - equity awardsRepayments of finance lease obligations (121 ) - Repayments of notes payable - (292 )Net cash used in (6,816 ) (12,417 )financing activitiesChange in cash and cash equivalents 26,112 (13,781 )Cash and cash equivalents - beginning of 19,687 33,468 period Cash and cash equivalents - end of period $ 45,799 $ 19,687

Table 4BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIESSegment Information - unaudited(In thousands) Quarter Ended Year Ended November 28, November 30, November 28, November 30, 2020 2019 2020 2019Net Sales Wholesale $ 67,487 $ 62,503 $ 221,075 $ 261,105 Retail -Company-owned 64,783 69,957 211,944 268,693 storesLogistical 20,736 19,331 75,158 80,074 servicesInter-company eliminations:Furniture (26,881 ) (30,144 ) (95,347 ) (125,933 )and accessoriesLogistical (7,742 ) (8,010 ) (26,967 ) (31,852 )servicesConsolidated $ 118,383 $ 113,637 $ 385,863 $ 452,087 Operating Income (Loss)Wholesale $ 5,932 $ 1,057 $ 4,587 $ 11,456 Retail 2,507 (579 ) (9,497 ) (7,009 )Logistical 1,230 281 1,245 1,855 servicesInter-company 380 802 2,647 1,144 eliminationAsset impairment - (4,431 ) (12,184 ) (4,431 )chargesGoodwillimpairment - (1,926 ) (1,971 ) (1,926 )chargeLitigation - (700 ) (1,050 ) (700 )expenseEarly retirement - - - (835 )programLease exit costs - (149 ) - (149 )Consolidated $ 10,049 $ (5,645 ) $ (16,223 ) $ (595 )

Table 5BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIESRollforward of BHF Store Count November 30, November 28, 2019 Opened* Closed* Transfers 2020 Company-owned stores 70 - (7 ) - 63Licensee-owned stores 33 1 - - 34 Total 103 1 (7 ) - 97 * Does not include openings and closures due to relocation of existing stores within a market.

Table 6

Reconciliation of US GAAP to Adjusted Financial Measures (In thousands, except for per share data)

Financial measures in accordance with U.S. GAAP including operating income (loss), net income (loss), and diluted earnings per share have been adjusted below. Bassett uses these adjusted financial measures, both in presenting its results to stockholders and the investment community, and in its internal evaluation and management of the business. The Company believes that these adjusted financial measures and the information they provide are useful to investors because they permit investors to view the Companys performance using the same tools that management uses to gauge progress in achieving its goals. Adjusted measures may also facilitate comparisons to Bassetts historical performance.

Operating income Net income (loss) (loss) 4th QTR 4th QTR 2019 4th QTR 4th QTR 2019 2020 2020 As reported $ 10,049 $ (5,645 ) $ 6,543 $ (5,138 ) Adjustments: Asset impairment - 4,431 - 3,301 charges Goodwill impairment - 1,926 - 1,926 charge Litigation expense - 700 - 522 Lease termination - 149 - 111 charge As adjusted $ 10,049 $ 1,561 $ 6,543 $ 722 Adjusted diluted earnings $ 0.65 $ 0.07 per share

J. Michael DanielSenior Vice President and Chief Financial Officer(276) 629-6614 Investorsmdaniel@bassettfurniture.com

Peter D. MorrisonVice President of Communications(276) 629-6450 Media