Bassett Completes Retailing Agreement, Announces Upholstery Plant Closing, Non-Recurring Charges.

BASSETT, Va.--(BUSINESS WIRE)--Dec. 7, 1999--

Charges of $1.9 Million for Plant Closing

and Transition to New Organization

Bassett Furniture Industries, Inc., a manufacturer and marketer of branded home furnishings, today announced that it has finalized the previously announced agreement to merge its corporate store operations with those of the licensed Bassett Furniture Direct (BFD) stores operated by Phillip and Ronnie Ladin, forming a joint venture to be known as The Ladin Retail Group (LRG).

Bassett also announced that it will close its upholstery manufacturing plant in Dumas, Ark., by Feb. 4, 2000, as the company continues to consolidate and rationalize its manufacturing operations.

Under the terms of the definitive agreement, the retailing joint venture will be managed by the Ladins and will be owned 51% by Bassett and 49% by the Ladins and their partners. LRG will initially operate Bassett's eight corporate stores and the Ladins' five stores in Texas and Las Vegas, which are among the highest volume Bassett Furniture Direct stores. Plans call for LRG to develop five to 10 new BFD stores per year in major metropolitan areas. The agreement also gives Bassett the right to acquire the remainder of the venture after six years.

Robert H. Spilman Jr., Bassett's president and chief operating officer, stated, "The merger of the eight corporate owned stores with the five licensed stores operated by the Ladins brings significant advantages to both entities. The Ladins have done an outstanding job of opening and operating some of our very best licensed BFD stores. The merger creates immediate scale and leverages the strengths of both organizations. With Bassett's strong balance sheet and the Ladins' operating expertise, the new company has significant profitable growth potential that neither entity had on its own. As we move toward our goal of 200 or more BFD stores nationwide, we expect that the Ladin Retail Group will operate approximately one-fourth of the stores, with the remainder licensed to others."

Commenting on the new venture, Ronnie Ladin, chief executive officer of The Ladin Retail Group, said, "My brother Phillip and I have had great success with the Bassett BFD concept, as have other licensees. The Bassett brand is one of the strongest in the industry. The product line is complete and well rounded, and, when presented in the accessorized room-like settings featured in the BFD retail format, it has extremely strong acceptance by the consumer. Bassett's advertising and marketing support, the quality of the products, and responsive customer service are other key ingredients in the success of the BFD concept."

In connection with the formation of the new organization, Bassett announced that it will incur a special charge of approximately $1.9 million in the fourth quarter of fiscal 1999, which ended November 27. Of this total, $1.3 million relates directly to the consolidation of the retail organization. The remaining $600,000 represents the cost of closing the Dumas facility. The Dumas volume will be consolidated into Bassett's plants in North Carolina, creating significant manufacturing efficiencies and cost savings.

Earnings in the fourth quarter of fiscal 1999 will also be negatively impacted by a pre-tax loss of approximately $1 million in the corporate retail operation. For the full year, the corporate retail operation will incur a pre-tax loss of approximately $2.4 million. Pre-tax earnings for the fourth quarter, prior to the special charges mentioned above, will be approximately $1 million below previous expectations.

Paul Fulton, Bassett's chairman and chief executive officer, explained, "The retail loss will cause operating earnings for fiscal 1999 to be lower than originally anticipated, and the non-recurring charges will have a further impact on reported numbers. Both the charge and the loss are unusual items that will not recur in fiscal 2000. The changes made in fiscal 1999 provide a sound basis for significantly increased earnings in the next fiscal year.

"Except for retail, the rest of Bassett's operations in total are on or ahead of plan for fiscal 1999, with the wood division especially strong. We have already implemented major changes in our manufacturing operations, including the restructuring of the J. D. Bassett wood plant and the opening of a state-of-the-art table top plant. Gross margins in our Mt. Airy wood plant have more than doubled to better than 20% as a result of efficiency improvements. These actions are expected to have a combined positive impact of more than $5 million on fiscal 2000 pre-tax earnings, and they will result in significantly improved margins in the future. In addition, the closing of the Dumas facility is expected to result in annualized pre-tax savings of $3 million, half of which will be realized in fiscal 2000.

"The joint venture brings about the needed changes in out retail organization, with highly capable management, immediate scale, and a reduction of more than $1 million per year in Bassett's corporate overhead. We are committed to further expansion of the BFD concept, and we now have the right organization to move forward. These changes solidify our belief that next year's earnings will meet our original expectations."

Bassett Furniture Industries, Inc., based in Bassett, Va., is a manufacturer and marketer of branded home furnishings. The company operates 14 plants in five states, and operates or licenses 51 Bassett Furniture Direct stores nationwide. The company's common stock is traded on the NASDAQ market under the symbol BSET. More information about Bassett is available on the Internet at www.bassettfurniture.com.

Certain of the statements in the immediately preceding paragraphs, particularly those preceded by, followed by or including the words "believes," "expects," "anticipates," "intends," "estimates," or similar expressions, or those relating to or anticipating new store development, financial results for fiscal year 1999, profitable growth potential, increased future earnings, improved margins, annualized and other cost savings 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 can not 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 those results to differ materially from those expressed in the forward looking statements: correctness of the estimates of special charges, actual expenses of closing the Dumas facility, actual pre-tax losses for the corporate store retail operation, successful completion of the actions described in this press release, and other items. In addition to the factors set forth in this press release, the economic, competitive, governmental, technological and other factors identified in Bassett's filings with the Securities and Exchange Commission could affect the forward looking statements in this press release.