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Bassett Furniture Industries Inc. Reports Operating Results (10-Q)

October 07, 2010 | About:
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10qk

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Bassett Furniture Industries Inc. (BSET) filed Quarterly Report for the period ended 2010-08-28.

Bassett Furniture Industries Inc. has a market cap of $57.4 million; its shares were traded at around $4.99 with and P/S ratio of 0.2. BSET is in the portfolios of Mario Gabelli of GAMCO Investors, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

were $169,263, a decrease of $3,936 or 2.3% from the nine months ended August 29, 2009. Refer to the quarterly and year-to-date analyses of results for each segment below for a discussion of the factors affecting net sales for each period. Consolidated gross profit margin increases over the prior year of 0.4 points and 4.3 points as a percentage of net sales for the three and nine months ended August 28, 2010, respectively, were primarily attributable to improved margins on imported wood products and the retail segments increased share of the overall sales mix, partially offset by increased wholesale discounts and promotions. Consolidated SG&A expense increases over the prior year of 2.1 points and 2.3 points as a percentage of sales for the three and nine months ended August 28, 2010, respectively, are attributable to the increase in the number of retail stores. SG&A expense as a percentage of net sales remained stable in our wholesale segment and decreased for our comparable retail stores.

The results for the quarter and nine months ended August 29, 2009 included several restructuring and other non-cash items including $1,777 for lease exit charges and asset impairment charges of $376 to write-off the remaining leasehold improvements for our Arlington, Texas and Alpharetta, Georgia stores, which ran inventory liquidation sales and closed during the third quarter of 2009. We also recorded a non-cash asset impairment charge of $258 to write-off the remaining leasehold improvements and a $285 lease exit charge associated with the closure of our retail office in Greensboro, North Carolina in May 2009. In addition, we recorded a $434 non-cash impairment charge to write-down the carrying value of our long-lived assets associated with a nonperforming retail location. Lastly, we recorded $320 in severance charges associated with the downsizing announced in March 2009.

$19,258, and $23,250, respectively, for liquidations associated with various investments in the Alternative Asset Fund. As of November 28, 2009, the Alternative Asset Fund held only a $749 investment in Fortress, along with some remaining cash that was distributed in early 2010. Due to the level of the remaining assets in the Alternative Asset Fund, the Company and Private Advisors, L.L.C. dissolved the partnership effective December 31, 2009 and the Alternative Asset Funds remaining investment interest in Fortress was transferred to the Company.

Net sales for the wholesale segment were $43,805 for the third quarter of 2010 as compared to $41,771 for the third quarter of 2009, an increase of 4.9%. While we have seen some slight improvement in wholesale orders as compared to the third quarter of 2009, shipments were adversely affected by delays in receiving imported product from certain of our overseas suppliers. In an effort to mitigate the stock outages caused by these delays and improve service levels to our customers, we have increased inventory levels through the end of the third quarter with additional modest increases expected in the fourth quarter. Approximately 54% of wholesale shipments during the third quarter of 2010 were imported products compared to approximately 51% for the third quarter of 2009. Gross margins for the wholesale segment were 29.6% for the third quarter of 2010 as compared to 30.3% for the third quarter of 2009. This decrease is due to additional sales and promotional discounts given during the third quarter of 2010 to stimulate demand, and the introduction of a lower cost upholstery line that has a slightly lower margin. Wholesale SG&A expense, excluding bad debt and notes receivable valuation charges, increased $89, or 0.8%, for the third quarter of 2010 as compared to 2009, however as a percentage of sales SG&A expense decreased 1.1 percentage points from the third quarter of 2009 to 25.6%. We recorded $1,347 of bad debt and notes receivable valuation charges for the third quarter of 2010 as compared to $1,230 for the third quarter of 2009.

Net sales for the wholesale segment were $126,933 for the first nine months of 2010 as compared to $134,731 for the first nine months of 2009, a decrease of 5.8%. Wholesale shipments decreased in part due to the

softer retail environment in late fiscal 2009 that impacted our shipping rates early in the first quarter. In addition, shipments were adversely affected by delays in receiving imported product from certain of our overseas suppliers. In an effort to mitigate the stock outages caused by these delays and improve service levels to our customers, we have increased inventory levels though the end of the third quarter of 2010. Approximately 52.5% of wholesale shipments during the first nine months of 2010 and 2009 were imported products. Gross margins for the wholesale segment were 31.3% for the first nine months of 2010 as compared to 28.7% for the first nine months of 2009. This increase is due to improved margins on the imported wood and upholstery products as well as the closure of the fiberboard plant during the fourth quarter of 2009 which essentially operated at a breakeven gross profit during 2009; partially offset by additional sales and promotional discounts given during the third quarter of 2010 to stimulate demand, and the introduction of a lower cost upholstery line that has a slightly lower margin. Wholesale SG&A expense, excluding bad debt and notes receivable valuation charges, declined $2,488, or 6.9%, for the first nine months of 2010 as compared to 2009, due primarily to lower spending due to lower sales and continued cost cutting measures. We recorded $5,177 of bad debt and notes receivable valuation charges for the first nine months of 2010 as compared to $12,971 for the first nine months of 2009. This significant decrease in charges is primarily due to our efforts to work diligently with the licensees to control increases in accounts and notes receivable exposure. In addition, many of the distressed licensee-owned stores for which significant bad debt and notes receivable valuation charges were required in 2009 have since been acquired by us and are now run as company-owned stores.

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