Bassett Furniture Industries (BSET) 8-K Bassett Announces First Quarter 2006 Earnings

Exhibit 99

Bassett Furniture Industries, Inc.	Barry C. Safrit, V.P., CFO
P.O. Box 626	(276) 629-6757 – Investors
Bassett, VA 24055	(276) 629-6332 – Fax
	Jay S. Moore, Dir. of Communications
For Immediate Release	(276) 629-6450 – Media
	(276) 629-6418 – Fax

Bassett Furniture News Release

Bassett Announces First Quarter 2006 Earnings

(Bassett, Va.) – March 23, 2006 – Bassett Furniture Industries Inc. (Nasdaq:BSET) announced today its earnings for its fiscal quarter ended February 25, 2006.

Sales for the first quarter of 2006 were $86.5 million, up 7% from first quarter 2005 levels. Wholesale shipments into the Bassett Furniture Direct (BFD) channel increased by $4 million or 8%. Wholesale shipments into the BFD channel represented 70% of total wholesale shipments in the first quarter of 2006 as compared to 66% in the first quarter of 2005. Partially offsetting this increase was approximately $2 million of expected wholesale sales attrition with traditional furniture stores. Additionally, the acquisition of 15 BFD stores in mid 2005 led to a $4 million increase in net sales in the first quarter of 2006 as compared to the first quarter of 2005.

The Bassett Furniture Direct retail store program continues to grow with 133 stores (106 licensed and 27 corporately owned) in operation at the end of the first quarter. Licensees opened four stores during the quarter (one was closed) and the Company expects licensees to open 12 to 14 new BFD stores in the remainder of fiscal 2006.

Gross margins increased 5.6 percentage points in the first quarter of 2006 as compared to the first quarter of 2005 primarily due to an increased sales mix of imported products and the inclusion of the operating results of the 15 BFD stores acquired in 2005. During the first quarter of 2006, approximately 44% of wholesale shipments were imported products as compared to 32% in the first quarter of 2005. SG&A expenses increased primarily due to the additional 15 BFD stores acquired in 2005. This increase was expected as our retail segment typically incurs a greater percentage of SG&A as compared to our wholesale segment. Operating profit improved slightly in the first quarter of 2006 as compared to the first quarter of 2005. Operating profit of our wholesale segment more than doubled from $1.6 million in the first quarter of 2005 to $3.5 million in the first quarter of 2006.

Bassett’s 27 corporate stores (reported as Bassett’s retail segment) experienced challenging conditions at retail and incurred an operating loss of $2.1 million compared to an operating loss of $0.3 million in the first quarter of 2005 when Bassett’s retail segment included only 14 stores. These additional losses relate almost entirely to the 15 stores acquired from three licensees in mid 2005. Net sales and margins were lower than planned primarily because the changes being made to drive more traffic, improve staffing, standardize pricing and streamline operations are taking longer than anticipated to implement. Bassett continues to take steps to merge the 27 corporate stores from 5 independent operating units into a centrally managed operation. These changes, which include a new management team and centralization of certain functions, have resulted in short term challenges but are expected to lead to improvement in the long-term.

The Company reported net income for the quarter of $2.3 million or $.19 per diluted share which compares to net income of $2.4 million or $.20 per share in the first quarter of 2005.

“We are pleased with our year-over-year wholesale division improvement,” said Robert H. Spilman Jr., president and chief executive officer. “Actions taken over the past three years to restructure our wholesale business have resulted in better returns and we expect continued improvement. Our primary focus in 2006 continues to be enhancing the customer experience at our BFD stores, continuing to introduce stylish new products in these stores and improving the profitability of the BFDs.”

The Company borrowed $5 million during the quarter primarily to fund increases in accounts receivable and inventories. The Company also received a dividend from its investment in an affiliate during the quarter and paid its regular quarterly dividend to shareholders during the quarter.

Bassett also announced that its Board of Directors has declared a regular quarterly dividend of $.20 per share payable on June 1, 2006, to shareholders of record on May 15, 2006.

Bassett Furniture Industries, Inc. is a leading manufacturer and marketer of high quality, mid-priced home furnishings. With over 130 Bassett Furniture Direct stores, Bassett has leveraged its strong brand name in furniture into a growing network of licensed stores that focus on providing consumers with a friendly and professional environment for buying furniture and accessories. While the Company continues to sell its products to other retailers, the most significant growth vehicle for Bassett continues to be the Company’s dedicated retail store program. Bassett’s retail strategy encompasses affordable custom-built furniture that is ready for delivery in the home within 30 days. The stores also feature the latest on-trend furniture styles, more than 1,000 upholstery fabrics, free in-home design visits, and coordinated decorating accessories. For more information, visit the Company’s website 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,” “should,” “estimates,” or similar expressions, or those relating to or anticipating financial results for periods beyond the end of the first quarter of 2006, 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 those results to differ materially from those expressed in the forward looking statements: economic, competitive, governmental and other factors identified in Bassett’s filings with the Securities and Exchange Commission, and the effects of national and global economic or other conditions and future events on the retail demand for home furnishings.

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BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income - Unaudited

(In thousands, except for per share data)

	13 Weeks Ended February 25, 2006					13 Weeks Ended February 26, 2005
	Amount			Percent of Net Sales		Amount			Percent of Net Sales
Net sales	$	86,489		100.0	%	$	80,752		100.0	%
Cost of sales		58,814		68.0	%		59,456		73.6	%
Gross profit		27,675		32.0	%		21,296		26.4	%
Selling, general and administrative		26,260		30.4	%		20,028		24.8	%
Income from operations		1,415		1.6	%		1,268		1.6	%
Other income, net		1,773		2.0	%		1,970		2.4	%
Income before income taxes		3,188		3.7	%		3,238		4.0	%
Income tax provision		(878	)	-1.0	%		(874	)	-1.1	%
Net income	$	2,310		2.7	%	$	2,364		2.9	%
Basic earnings per share:	$	0.20				$	0.20
Diluted earnings per share:	$	0.19				$	0.20

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

	(Unaudited)
	February 25, 2006		November 26, 2005
Assets
Current assets
Cash and cash equivalents	$	4,512	$	7,109
Accounts receivable, net		39,824		37,069
Inventories		54,335		48,887
Deferred income taxes		4,997		5,188
Assets held for sale		1,185		1,185
Other current assets		2,974		3,626
Total current assets		107,827		103,064
Property and equipment, net		64,089		64,644
Investments		78,755		76,890
Retail real estate, net		32,915		31,640
Notes receivable, net		17,988		15,768
Other, net		16,766		16,650
		146,424		140,948
Total assets	$	318,340	$	308,656
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	24,857	$	19,421
Customer deposits		6,905		7,525
Other accrued liabilities		19,432		21,402
Total current liabilities		51,194		48,348
Long-term liabilities
Employee benefits		9,139		9,208
Long-term debt		8,823		3,910
Real estate notes payable		15,024		15,144
Distributions in excess of affiliate earnings		13,410		11,833
		46,396		40,095
Commitments and Contingencies
Stockholders’ equity
Common stock, par value $5 a share, 50,000,000 shares authorized, issued and outstanding - 11,824,915 in 2006 and 11,777,505 in 2005		59,125		59,022
Retained earnings		156,416		156,471
Additional paid-in-capital		2,315		2,068
Accumulated other comprehensive income - unrealized holding gains, net of income tax		2,894		2,652
Total stockholders’ equity		220,750		220,213
Total liabilities and stockholders’ equity	$	318,340	$	308,656

BASSETT FURNITURE INDUSTRIES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows - Unaudited

(In thousands)

	13 Weeks Ended February 25, 2006			13 Weeks Ended February 26, 2005
Operating Activities
Net income	$	2,310		$	2,364
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		2,226			2,467
Equity in undistributed income of investments		(2,234	)		(2,772	)
Provision for losses on trade accounts receivable		840			590
Net gain from sales of investments		(290	)		(587	)
Deferred income taxes		(10	)		250
Changes in employee benefit liabilities		(69	)		(69	)
Changes in operating assets and liabilities:
Trade accounts receivable		(4,795	)		(3,465	)
Inventories		(5,448	)		(923	)
Other current assets		652			—
Notes receivable, net		(1,020	)		(277	)
Accounts payable and accrued liabilities		2,845			23
Net cash used in operating activities		(4,993	)		(2,399	)
Investing Activities
Purchases of property and equipment, net		(1,369	)		(1,104	)
Purchases of retail real estate		(1,658	)		(1,632	)
Proceeds from sales of property and equipment		193			1,367
Proceeds from sales of investments		1,606			3,513
Purchases of investments		(1,606	)		(3,088	)
Dividends from an affiliate		2,811			2,342
Other, net		(300	)		(21	)
Net cash provided by (used in) investing activities		(323	)		1,377
Financing Activities
Borrowings under revolving credit arrangement		5,000			5,000
Repayments of long-term debt		(120	)		—
Repayments of real estate notes payable		(120	)		(110	)
Issuance of common stock, net		344			260
Repurchases of common stock		(20	)		—
Cash dividends		(2,365	)		(2,350	)
Net cash provided by financing activities		2,719			2,800
Net change in cash and cash equivalents		(2,597	)		1,778
Cash and cash equivalents, beginning of period		7,109			4,022
Cash and cash equivalents, end of period	$	4,512		$	5,800