GlobeNewswire Inc | Sep 30, 2021 09:00AM EDT

September 30, 2021

BASSETT, Va., Sept. 30, 2021 (GLOBE NEWSWIRE) -- Bassett Furniture Industries, Inc. (Nasdaq: BSET) announced today its results of operations for its third quarter ended August 28, 2021.

Fiscal 2021 Third Quarter Highlights(Dollars in millions)

Sales Operating Income (Loss) 3rd Qtr Dollar % 3rd Qtr % of 3rd Qtr % of 2021 2020 Change Change 2021 Sales 2020 SalesConsolidated ^(1) $ 118.9 $ 91.6 $ 27.3 29.8 % $ 4.5 3.8 % $ 2.7 2.9 % Wholesale $ 73.1 $ 55.4 $ 17.7 32.1 % $ 4.5 6.2 % $ 3.3 6.0 % Retail $ 58.6 $ 48.1 $ 10.5 21.8 % $ 0.9 1.5 % $ (1.6 ) -3.3 % Logistical Services $ 21.2 $ 17.8 $ 3.4 19.1 % $ (0.5 ) -2.4 % $ 1.0 5.6 % (1) Our consolidated results include certain intercompany eliminations. SeeTable 4, ?Segment Information? below for an illustrationof the effects of these intercompany eliminations on our consolidated sales and operating income (loss).

The disruptions that have permeated the furniture industry since the pandemic restart began fifteen months ago remain with us as we hit the homestretch for calendar 2021. Business as usual this year means raw material shortages, escalating labor and commodity costs, severely compromised logistics capabilities, and an unyielding global virus stubbornly persisting at home and in the industrys manufacturing centers in Asia. The frustration of dealing with these dynamics is certainly wearing on the psyche of our associates and on virtually everyone else in the business. Posting consolidated revenue of $118.9 million for the quarter, an increase of 30% compared to last year and 8.7% more than 2019 did not come easily. Although there are many factors that currently encumber our financial performance, our team produced operating income of $4.5 million, 63% more than the June-August period last year and 32% more than in 2019. EPS advanced to $0.31 per share against the $0.22 recorded in 2020. We are persevering through these challenges and are squarely focused on working with our vendors to schedule adequate production to reduce our large wholesale backlog and offer higher levels of service in the near term.

Quarterly wholesale revenue grew by 32% compared to last year and by 17% to 2019. The aforementioned daily upheaval of key elements of our supply chain means we left money on the table during the period, whether that came in the form of reduced production schedules or higher incurred costs. Total inventory now stands at $73.8 million, about $19 million more than at 2020 year end. Over $10 million of that increase came in the form of finished goods, which we are attempting to build to increase shipments. Still, our order backlog of $92.8 million, led by domestic upholstery and outdoor furniture sales, grew by 7.1% in the period as incoming orders once again outpaced shipments. Moving into our fourth quarter, our backlog has continued to grow thanks to our strong three-week Labor Day retail sales event, which mirrored last years results. 2021 and 2020 stand as the best ever years of that holidays promotions. We have been able to ship above our weekly sales for the past two weeks and hope to continue that trend for the remainder of 2021.

We instituted our fourth general price increase of the year on September 13th. The pace of incoming increases from our suppliers has subsided somewhat from earlier in the year but remains significant. Unfortunately, we have not been able to enact price increases on our goods as fast as we have incurred them from our material providers. The most glaring example is the escalation in ocean freight that has quintupled in the past twelve months, which affects not only our imported products but many of the components that are used in our domestic production. During the quarter, the rising prices on container freight ramped up as the availability of space on the giant vessels that move goods from Asia to the U.S. declined. In effect, the shipping companies are conducting daily auctions for space on their vessels, causing container prices to fluctuate wildly from day to day. This was driven, of course, by the fact that the aggregate demand for goods to move into the U.S. has consistently outstripped the supply of cargo space available to move it for most of 2021. Recent demand of containers has been somewhat tempered by Vietnams enactment of Martial Law, which has shut down all manufacturing activity in the country in an attempt to curb the Delta virus. Our information tells us that it will be late October before production fully returns, which will begin to affect our shipments in late Q4 and into fiscal 2022.

Our Zenith Logistics subsidiary suffered a $500k loss for the period compared to last years $1.0 million profit. Zenith is a microcosm of the overall domestic logistics environment in the U.S. today. An acute shortage of warehousing labor, an issue that rarely confronted us prior to the pandemic, is now a very challenging issue. In an attempt to staff our facilities, we have aggressively raised wages to the extent that the labor line on the Zenith P&L rose 700 basis points for the quarter as a percentage of revenue, thus causing our loss. As with our competitors in the transportation space, the labor shortage has caused a massive backup of transportation equipment that has been sitting on yards waiting to be unloaded throughout the country. An additional response that we have made has been leasing several hundred trailers on the open market to keep goods moving, albeit at a higher expense than originally contemplated. The logjam of freight has also backed up our manufacturing schedules as we have simply run out of room in our facilities to store goods before shipment. To compensate, we aggressively raised prices for Zeniths services back in August, too late to arrest the trend for the quarter. The increases that cover these higher costs will begin to run through our financial statements over the next few months and we have made arrangements to acquire more warehousing space as well.

Amidst this litany of challenges, we take solace in the fact that the overall pace of our business has remained strong for the past sixteen months, both at Bassett retail and in our wholesale operations. Our retail sales have remained secure and, coupled with our fixed cost adjustments, produced a profit for corporate retail even though we are not delivering close to as much as we are writing in the stores at the moment. Gross margins for the quarter ran 290 basis points better than last year and are trending to the highest ever. We have not realized the full benefit of our cost reduction program due to the huge undelivered order backlog but this will come into view as the product goes in the customers homes. On the open market front, wholesale sales to the customers outside the Bassett retail network grew by 6.6% and sales of Lane Venture outdoor grew by 42%. The success of our Bassett Design Center network and our Club Level motion program in 2021 has us enthusiastically looking at the future potential of the open market. And the 75% growth rate of our Lane Venture and Bassett Outdoor efforts in 2021 has expanded our thinking about greater outdoor opportunities moving ahead. Working in tandem, our multi-channel strategy is designed to drive wholesale growth and combined to generate $14.6 million of operating profit for the nine months of 2021 to date despite all of the operational headwinds that we have faced.

We are certainly looking beyond the current turmoil to the future with optimism across all channels. We have been investing in upgrades to the plant and equipment in our manufacturing footprint to provide a better work environment for our associates and to improve efficiency. We are formulating a new warehousing and logistics architecture that we should communicate by year end and that will help grow and improve service. Our digital transformation program has been underway for one year and will culminate with a new website platform in mid-2022. We have been working on additional elements to our in-store retail experience that will also debut in late spring next year. Rounding out our capital allocation strategy and against the backdrop of a strong balance sheet came the 12% increase to our quarterly dividend authorized by our Board of Directors in July and the $2.6 million of share repurchases that we made this past quarter. We will maintain our balanced approach to capital allocation as we pursue the opportunities for growth that we have identified and we ultimately return to a semblance of normalcy on the other side of the pandemic.

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. 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 third 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 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 Nine Months Ended August 28, 2021 August 29, 2020 August 28, 2021 August 29, 2020 Percent Percent Percent Percent of of of of Amount Net Amount Net Amount Net Amount Net Sales Sales Sales Sales Sales revenue: Furniture $ 104,870 $ 80,341 $ 316,522 $ 232,283 and accessoriesLogistical 14,036 11,218 40,116 35,197 servicesTotal 118,906 100.0 % 91,559 100.0 % 356,638 100.0 % 267,480 100.0 %sales revenue Cost offurniture and 52,263 44.0 % 38,418 42.0 % 153,426 43.0 % 113,140 42.3 %accessoriessold Selling,general and 47,631 40.1 % 40,198 43.9 % 145,474 40.8 % 130,225 48.7 %administrativeexpensesCost oflogistical 14,522 12.2 % 10,196 11.1 % 38,848 10.9 % 35,182 13.2 %servicesAssetimpairment - 0.0 % - 0.0 % - 0.0 % 12,184 4.6 %chargesGoodwillimpairment - 0.0 % - 0.0 % - 0.0 % 1,971 0.7 %chargeLitigation - 0.0 % - 0.0 % - 0.0 % 1,050 0.4 %expenseIncome(loss) from 4,490 3.8 % 2,747 3.0 % 18,890 5.3 % (26,272 ) -9.8 %operations Other income (347 ) -0.3 % 697 0.8 % (1,016 ) -0.3 % (430 ) -0.2 %(loss), netIncome (loss)before income 4,143 3.5 % 3,444 3.8 % 17,874 5.0 % (26,702 ) -10.0 %taxes Income taxprovision 1,127 0.9 % 1,266 1.4 % 4,873 1.4 % (9,738 ) -3.6 %(benefit)Net income $ 3,016 2.5 % $ 2,178 2.4 % $ 13,001 3.6 % $ (16,964 ) -6.3 %(loss) Basic earnings(loss) per $ 0.31 $ 0.22 $ 1.32 $ (1.70 ) share Dilutedearnings (loss) $ 0.31 $ 0.22 $ 1.32 $ (1.70 ) per share 27.20 %

Table 2BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIESCondensed Consolidated Balance Sheets(In thousands) (Unaudited) Assets August 28, November 28, 2021 2020Current assets Cash and cash equivalents $ 38,611 $ 45,799 Short-term investments 17,715 17,715 Accounts receivable, net 26,769 22,340 Inventories, net 73,827 54,886 Recoverable income taxes 6,778 9,666 Other current assets 13,111 10,272 Total current assets 176,811 160,678 Property and equipment, net 94,489 90,917 Other long-term assets Deferred income taxes, net 3,498 4,587 Goodwill and other intangible assets 23,543 23,827 Right of use assets under operating leases 110,792 116,903 Other 6,900 5,637 Total long-term assets 144,733 150,954 Total assets $ 416,033 $ 402,549 Liabilities and Stockholders? Equity Current liabilities Accounts payable $ 27,951 $ 23,426 Accrued compensation and benefits 14,603 16,964 Customer deposits 51,103 39,762 Current portion of operating lease 27,545 27,078 obligationsOther current liabilities and accrued 13,050 11,141 expensesTotal current liabilities 134,252 118,371 Long-term liabilities Post employment benefit obligations 12,454 12,089 Long-term portion of operating lease 103,468 111,972 obligationsOther long-term liabilities 6,412 2,087 Total long-term liabilities 122,334 126,148 Stockholders? equity Common stock 48,779 49,714 Retained earnings 111,958 109,710 Accumulated other comprehensive loss (1,290 ) (1,394 )Total stockholders' equity 159,447 158,030 Total liabilities and stockholders? equity $ 416,033 $ 402,549

Table 3 BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows - unaudited (In thousands) Nine Months Ended August 28, August 29, 2021 2020Operating activities: Net income (loss) $ 13,001 $ (16,964 ) Adjustments to reconcile net income (loss) to net cash provided by (used in)operating activities: Depreciation and amortization 10,458 10,249 Gain on lease modification - (152 ) Asset impairment charges - 12,184 Goodwill impairment charges - 1,971 Inventory valuation charges 1,975 3,814 Bad debt valuation charges (recoveries) (145 ) 727 Deferred income taxes 1,053 (708 ) Other, net 410 188 Changes in operating assets and liabilitiesAccounts receivable (4,184 ) 1,552 Inventories (20,916 ) 3,887 Other current and long-term assets (100 ) (8,898 ) Right of use assets under operating leases 18,857 24,338 Customer deposits 11,341 10,380 Accounts payable and other liabilities 2,750 1,379 Obligations under operating leases (20,823 ) (26,464 ) Net cash provided by 13,677 17,483 operating activities Investing activities: Purchases of property and equipment (7,141 ) (2,214 ) Proceeds from sale of property and 101 2,345 equipmentPurchase of investments - (241 ) Proceeds from maturity of short-term - 16 investmentsOther (1,173 ) (1,107 ) Net cash used in (8,213 ) (1,201 ) investing activities Financing activities: Cash dividends (6,321 ) (3,306 ) Proceeds from the exercise of stock 42 - optionsOther issuance of common stock 266 217 Repurchases of common stock (5,566 ) (1,542 ) Taxes paid related to net share settlement (219 ) (214 ) of equity awardsRepayments of finance lease obligations (854 ) (95 ) Net cash used in (12,652 ) (4,940 ) financing activitiesChange in cash and cash equivalents (7,188 ) 11,342 Cash and cash equivalents - beginning of 45,799 19,687 period Cash and cash equivalents - end of period $ 38,611 $ 31,029

Table 4BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIESSegment Information - unaudited(In thousands) Quarter Ended Nine Months Ended August 28, August 30, August 28, August 30, 2021 2020 2021 2020Sales Revenue Wholesalesales of $ 73,073 $ 55,443 $ 219,371 $ 153,588 furniture andaccessoriesLess: Salesto retail (26,779 ) (23,246 ) (84,303 ) (68,466 )segmentWholesalesales to 46,294 32,197 135,068 85,122 externalcustomersRetail salesof furniture 58,576 48,144 181,454 147,161 andaccessoriesConsolidated netsales of 104,870 80,341 316,522 232,283 furniture andaccessories Logisticalservices 21,200 17,848 63,525 54,422 revenueLess:Services to (7,164 ) (6,630 ) (23,409 ) (19,225 )wholesalesegmentLogisticalservices to 14,036 11,218 40,116 35,197 externalcustomersTotal sales $ 118,906 $ 91,559 $ 356,638 $ 267,480 revenue Operating Income (Loss)Wholesale $ 4,466 $ 3,324 $ 14,622 $ (1,344 )Retail 917 (1,585 ) 3,663 (12,004 )Logistical (486 ) 1,022 1,267 15 servicesInter-company (407 ) (14 ) (662 ) 2,266 eliminationAssetimpairment - - - (12,184 )chargesGoodwillimpairment - - - (1,971 )chargeLitigation - - - (1,050 )expenseConsolidated $ 4,490 $ 2,747 $ 18,890 $ (26,272 )

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

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