For the transition period from _____________________________ to _______________________

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes X No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No X

At September 18, 2015, 10,933,933 shares of common stock of the Registrant were outstanding.

	Quarter Ended						Nine Months Ended

	August 29, 2015			August 30, 2014			August 29, 2015			August 30, 2014
Sales revenue:
Furniture and accessories	$	97,107		$	85,186		$	286,122		$	246,018
Logistics		13,904			-			29,250			-
Total sales revenue		111,011			85,186			315,372			246,018

Cost of furniture and accessories sold		44,824			40,168			133,676			115,434

Selling, general and administrative expenses excluding new store pre-opening costs		58,303			41,510			163,203			120,991
New store pre-opening costs		192			109			236			1,217
Lease exit costs		-			-			419			-
Asset impairment charges		-			-			106			-
Management restructuring costs		-			-			449			-
Income from operations		7,692			3,399			17,283			8,376

Remeasurement gain on acquisition of affiliate		-			-			7,212			-
Income from Continued Dumping & Subsidy Offset Act		-			-			1,066			-
Other loss, net		(472	)		(65	)		(1,692	)		(52	)
Income before income taxes		7,220			3,334			23,869			8,324

Income tax expense		2,954			1,078			9,118			2,674
Net income	$	4,266		$	2,256		$	14,751		$	5,650

Retained earnings-beginning of period		115,149			105,297			106,339			104,526
Purchase and retirement of common stock		-			(859	)		-			(2,174	)
Cash dividends		(1,029	)		(836	)		(2,704	)		(2,144	)
Retained earnings-end of period	$	118,386		$	105,858		$	118,386		$	105,858

Basic earnings per share	$	0.39		$	0.22		$	1.38		$	0.54

Diluted earnings per share	$	0.39		$	0.21		$	1.36		$	0.53

Dividends per share	$	0.09		$	0.08		$	0.25		$	0.20

The accompanying notes to condensed consolidated financial statements are an integral part of the condensed consolidated financial statements.

	(Unaudited)
	August 29, 2015			November 29, 2014
Assets
Current assets
Cash and cash equivalents	$	20,600		$	26,673
Short-term investments		23,125			23,125
Accounts receivable, net		19,545			15,228
Inventories		65,437			57,272
Deferred income taxes		5,378			5,268
Other current assets		8,313			7,796
Total current assets		142,398			135,362

Property and equipment, net		96,579			74,812

Deferred income taxes		5,813			9,701
Goodwill and other intangible assets		17,762			1,730
Other		8,065			19,141
Total long-term assets		31,640			30,572
Total assets	$	270,617		$	240,746

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	21,609		$	22,251
Accrued compensation and benefits		12,014			8,931
Customer deposits		19,006			22,202
Dividends payable		-			2,102
Current portion of long-term debt		4,476			316
Other accrued liabilities		11,734			10,971
Total current liabilities		68,839			66,773

Long-term liabilities
Post employment benefit obligations		11,353			11,498
Notes payable		10,360			1,902
Other long-term liabilities		3,986			3,741
Total long-term liabilities		25,699			17,141


Stockholders’ equity
Common stock		54,681			52,467
Retained earnings		118,386			106,339
Additional paid-in capital		4,876			-
Accumulated other comprehensive loss		(1,864	)		(1,974	)
Total stockholders' equity		176,079			156,832
Total liabilities and stockholders’ equity	$	270,617		$	240,746

The accompanying notes to condensed consolidated financial statements are an integral part of the condensed consolidated financial statements.

	Nine Months Ended
	August 29, 2015			August 30, 2014
Operating activities:
Net income	$	14,751		$	5,650
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		7,302			5,428
Equity in undistributed income of investments and unconsolidated affiliated companies		(220	)		(534	)
Non-cash asset impairment charges		106			-
Non-cash portion of lease exit costs		419			-
Remeasurement gain on acquisition of affiliate		(7,212	)		-
Tenant improvement allowance received from lessors		933			2,119
Deferred income taxes		3,778			882
Collateral deposited with insurance carrier		-			(1,150	)
Other, net		1,445			(165	)
Changes in operating assets and liabilities:
Accounts receivable		(751	)		19
Inventories		(8,165	)		(1,151	)
Other current assets		(21	)		732
Customer deposits		(3,196	)		3,870
Accounts payable and accrued liabilities		2,158			2,570
Net cash provided by operating activities		11,327			18,270

Investing activities:
Purchases of property and equipment		(11,283	)		(15,210	)
Proceeds from sales of property and equipment		2,952			5,157
Cash paid for business acquisition, net of cash acquired		(7,323	)		-
Capital contribution to affiliate		(1,345	)		-
Proceeds from maturity of short-term investments		-			5,000
Proceeds from sale of interest in affiliate		-			2,348
Other		-			246
Net cash used in investing activities		(16,999	)		(2,459	)

Financing activities:
Cash dividends		(4,806	)		(4,316	)
Proceeds from the exercise of stock options		4,018			33
Other issuance of common stock		254			242
Repurchases of common stock		(1,374	)		(4,621	)
Taxes paid related to net share settlement of equity awards		(178	)		(489	)
Excess tax benefits from stock-based compensation		2,008			257
Repayments of notes payable		(1,630	)		(208	)
Proceeds from equipment loans		1,307			-
Net cash used in financing activities		(401	)		(9,102	)
Change in cash and cash equivalents		(6,073	)		6,709
Cash and cash equivalents - beginning of period		26,673			12,733
					.
Cash and cash equivalents - end of period	$	20,600		$	19,442

The accompanying notes to condensed consolidated financial statements are an integral part of the condensed consolidated financial statements.

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for complete financial statements. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.

References to “ASC” included hereinafter refer to the Accounting Standards Codification established by the Financial Accounting Standards Board as the source of authoritative GAAP.

The condensed consolidated financial statements include the accounts of Bassett Furniture Industries, Incorporated (“Bassett”, “we”, “our”, or the “Company”) and our wholly-owned subsidiaries of which we have a controlling interest. The equity method of accounting was used for our investment in an affiliated company in which we exercised significant influence but did not maintain a controlling interest prior to the Zenith acquisition mentioned following. In accordance with ASC Topic 810, we have evaluated our licensees and certain other entities to determine whether they are variable interest entities (“VIEs”) of which we are the primary beneficiary and thus would require consolidation in our financial statements. To date we have concluded that none of our licensees nor any other of our counterparties represent VIEs.

Revenue from the sale of furniture and accessories is reported in the accompanying condensed consolidated statements of income net of estimates for returns and allowances.

For comparative purposes, certain amounts from 2014 have been reclassified to conform to the 2015 presentation.

Zenith Acquisition

Prior to February 2, 2015 we held a 49% interest in Zenith Freight Lines, LLC (“Zenith”) for which we used the equity method of accounting. On February 2, 2015 we acquired the remaining 51% ownership interest (see Note 3, Business Combinations). Accordingly, the results of Zenith have been consolidated with our results since the date of the acquisition. Sales of logistical services from Zenith to our wholesale and retail segments have been eliminated, and Zenith’s operating costs and expenses since the date of acquisition are included in selling, general and administrative expenses in our condensed consolidated statements of net income. Our equity in the earnings of Zenith prior to the date of the acquisition is included in other loss, net, in the accompanying condensed consolidated statements of income.

3. Business Combination – Acquisition of Zenith

Prior to February 2, 2015 we held a 49% interest in Zenith for which we used the equity method of accounting. Zenith provides domestic transportation and warehousing services primarily to furniture manufacturers and distributors and also provides home delivery services to furniture retailers. We historically have contracted with Zenith to provide substantially all of our domestic freight, transportation and warehousing needs for the wholesale business. In addition, Zenith provides home delivery services for many of our Company-owned retail stores. On February 2, 2015, we acquired the remaining 51% of Zenith in exchange for cash, Bassett common stock and a note payable with a total fair value of $19,111. The value of the Bassett common stock was based on the closing market price of our shares on the acquisition date, discounted for lack of marketability due to restrictions on the seller’s ability to transfer the shares. The restrictions on one half of the shares expire on the first anniversary of the acquisition, with the remainder expiring on the second anniversary. The note is payable in three annual installments of $3,000 each beginning February 2, 2016, and has been discounted to its fair value as of the date of the acquisition based on our estimated borrowing rate.

The carrying value of our 49% interest in Zenith prior to the acquisition was $9,480 (see Note 7, unconsolidated affiliated company). In connection with the acquisition, this investment was remeasured to a fair value of $16,692 resulting in the recognition of a gain of $7,212 during the nine months ended August 29, 2015. The impact of this gain upon our basic and diluted earnings per share for the nine months ended August 29, 2015 is approximately $0.42 and $0.41, respectively, net of the related tax expense. The remeasured fair value of our prior interest in Zenith was estimated based on the fair value of the consideration transferred to acquire the remaining 51% of Zenith less an estimated control premium.

Under the acquisition method of accounting, the fair value of the consideration transferred along with the fair value of our previous 49% interest in Zenith was allocated to the tangible and intangible assets acquired and the liabilities assumed based on their estimated fair values as of the acquisition date with the remaining unallocated amount recorded as goodwill.

The total fair value of the acquired business was determined as follows:

Fair value of consideration transferred in exchange for 51% of Zenith:
Cash	$	9,000
Bassett common stock, 89,485 shares, par value $5.00 per share, fair value at closing $18.72 per share		1,675
Note payable		8,436
Total fair value of consideration transferred to seller		19,111
Less effective settlement of previous amounts payable to Zenith at acquisition		(3,622	)
Total fair value of consideration net of effective settlement		15,489
Fair value of Bassett's previous 49% interest in Zenith		16,692

Total fair value of acquired business	$	32,181

8 of 39

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

AUGUST 29, 2015

(Dollars in thousands except share and per share data)

The preliminary allocation of the fair value of the acquired business was based upon a preliminary valuation. Our estimates and assumptions are subject to change as we obtain additional information for our estimates during the measurement period (up to one year from the acquisition date). The primary areas of the preliminary allocation of the fair value of consideration transferred that are not yet finalized relate to the fair values of certain tangible and intangible assets acquired and the residual goodwill. The preliminary allocation of the fair value of the acquired business is as follows:

Identifiable assets acquired:
Acquired cash and cash equivalents	$	1,677
Accounts receivable, net		3,399
Prepaid expenses and other current assets		496
Property and equipment		18,110
Other long-term assets		646
Intangible assets		6,362
Total identifiable assets acquired		30,690
Liabilities assumed:
Accounts payable and accrued liabilities		(4,038	)
Notes payable		(4,329	)
Total liabilities assumed		(8,367	)
Net identifiable assets acquired		22,323
Goodwill		9,858
Total net assets acquired	$	32,181

Goodwill was determined based on the residual difference between the fair value of the consideration transferred and the value assigned to tangible and intangible assets and liabilities and is deductible for tax purposes. Among the factors that contributed to a purchase price resulting in the recognition of goodwill were Zenith’s reputation for best-in-class, fully integrated logistical services which are uniquely tailored to the needs of the furniture industry, as well as their ability to provide expedited delivery service which is increasingly in demand in the furniture industry.

A portion of the fair value of consideration transferred has been provisionally assigned to identifiable intangible assets as follows:

	Useful Life
Description:	In Years		Fair Value

Customer relationships		15	$	3,038
Trade names	Indefinite			2,490
Technology - customized applications		7		834

Total acquired intangible assets			$	6,362

The finite-lived intangible assets are being amortized on a straight-line basis over their useful lives. The indefinite-lived intangible asset and goodwill are not amortized but will be tested for impairment annually or between annual tests if an indicator of impairment exists.

The fair values of consideration transferred and net assets acquired were determined using a combination of Level 2 and Level 3 inputs as specified in the fair value hierarchy in ASC 820, Fair Value Measurements and Disclosures. See Note 12.

Acquisition costs related to the Zenith acquisition totaled $0 and $209 during the three and nine months ended August 29, 2015, respectively, and are included in selling, general and administrative expenses in the condensed consolidated statements of income. The acquisition costs are primarily related to legal, accounting and valuation services.

9 of 39

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

AUGUST 29, 2015

(Dollars in thousands except share and per share data)

Zenith’s revenue since February 2, 2015 included in our condensed consolidated statement of income for the three and nine months ended August 29, 2015 is $13,904 and $29,250, respectively, after the elimination of intercompany transactions. Net income of Zenith for the three and nine months ended August 29, 2015 is $629 and $1,220, respectively. The pro forma results of operations for the acquisition of Zenith have not been presented because they are not material to our consolidated results of operations.

4. Goodwill and Other Intangible Assets

At August 29, 2015 goodwill and other intangible assets consisted of the following:

	Gross Carrying Amount		Accumulated Amortization			Intangible Assets, Net
Intangibles subject to amortization:
Customer relationships	$	3,038	$	(118	)	$	2,920
Technology - customized applications		834		(70	)		764

Total intangible assets subject to amortization		3,872		(188	)		3,684

Intangibles not subject to amortization:
Trade names		2,490		-			2,490
Goodwill		11,588		-			11,588

Total goodwill and other intangible assets	$	17,950	$	(188	)	$	17,762

At November 29, 2014 our only intangible asset was goodwill with a carrying value of $1,731.

Changes in the carrying amounts of goodwill by reportable segment were as follows:

	Wholesale		Retail		Logistics		Total

Balance as of November 29, 2014	$	1,129	$	602	$	-	$	1,731
Goodwill arising from acquisition of Zenith		3,711		1,218		4,928		9,857

Balance as of August 29, 2015	$	4,840	$	1,820	$	4,928	$	11,588

The goodwill recognized in connection with our acquisition of Zenith remains subject to future adjustments before the close of the measurement period in the first quarter of fiscal 2016. Refer to Note 3, Business Combinations, for additional information regarding the Zenith acquisition. There were no accumulated impairment losses on goodwill as of August 29, 2015 or November 29, 2014.

Amortization expense associated with intangible assets during the three and nine months ended August 29, 2015 was $80 and $188, respectively. There was no amortization expense recognized during fiscal 2014. Estimated future amortization expense for intangible assets that exist at August 29, 2015 is as follows:

Remainder of fiscal 2015	$	79
Fiscal 2016		322
Fiscal 2017		322
Fiscal 2018		322
Fiscal 2019		322
Fiscal 2020		322
Thereafter		1,995

Total	$	3,684

5. Accounts Receivable

Accounts receivable consists of the following:

	August 29, 2015			November 29, 2014
Gross accounts receivable	$	20,840		$	16,477
Allowance for doubtful accounts		(1,295	)		(1,249	)
Accounts receivable, net	$	19,545		$	15,228

At August 29, 2015 and November 29, 2014 approximately 37% and 46%, respectively, of gross accounts receivable, and approximately 55% and 58%, respectively, of the allowance for doubtful accounts were attributable to amounts owed to us by our licensees. Our remaining receivables are primarily due from national account customers, traditional distribution channel customers, and logistical services customers.

Activity in the allowance for doubtful accounts for the nine months ended August 29, 2015 was as follows:

Balance at November 29, 2014	$	1,249
Acquired allowance on accounts receivable (Note 3)		209
Reductions to allowance, net		(163	)
Balance at August 29, 2015	$	1,295

We believe that the carrying value of our net accounts receivable approximates fair value. The inputs into these fair value estimates reflect our market assumptions and are not observable. Consequently, the inputs are considered to be Level 3 as specified in the fair value hierarchy in ASC Topic 820, Fair Value Measurements and Disclosures. See Note 12.

6. Inventories

Inventories are valued at the lower of cost or market. Cost is determined for domestic furniture inventories using the last-in, first-out (LIFO) method. The costs for imported inventories are determined using the first-in, first-out (FIFO) method.

Inventories were comprised of the following:

	August 29, 2015			November 29, 2014
Wholesale finished goods	$	34,275		$	31,399
Work in process		334			298
Raw materials and supplies		12,007			8,109
Retail merchandise		28,455			26,428
Total inventories on first-in, first-out method		75,071			66,234
LIFO adjustment		(7,859	)		(7,550	)
Reserve for excess and obsolete inventory		(1,775	)		(1,412	)
	$	65,437		$	57,272

We estimate an inventory reserve for excess quantities and obsolete items based on specific identification and historical write-offs, taking into account future demand, market conditions and the respective valuations at LIFO. The need for these reserves is primarily driven by the normal product life cycle. As products mature and sales volumes decline, we rationalize our product offerings to respond to consumer tastes and keep our product lines fresh. If actual demand or market conditions in the future are less favorable than those estimated, additional inventory write-downs may be required. In determining reserves, we calculate separate reserves on our wholesale and retail inventories. Our wholesale inventories tend to carry the majority of the reserves for excess quantities and obsolete inventory due to the nature of our distribution model. These wholesale reserves primarily represent design and/or style obsolescence. Typically, product is not shipped to our retail warehouses until a consumer has ordered and paid a deposit for the product. We do not typically hold retail inventory for stock purposes. Consequently, floor sample inventory and inventory for delivery to customers account for the majority of our inventory at retail. Retail reserves are based on accessory and clearance floor sample inventory in our stores and any inventory that is not associated with a specific customer order in our retail warehouses.

11 of 39

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

AUGUST 29, 2015

(Dollars in thousands except share and per share data)

Activity in the reserves for excess quantities and obsolete inventory by segment are as follows:

	Wholesale Segment			Retail Segment			Total

Balance at November 29, 2014	$	1,060		$	352		$	1,412
Additions charged to expense		1,601			319			1,920
Write-offs		(1,187	)		(370	)		(1,557	)
Balance at August 29, 2015	$	1,474		$	301		$	1,775

Our estimates and assumptions have been reasonably accurate in the past. We have not made any significant changes to our methodology for determining inventory reserves in 2015 and do not anticipate that our methodology is likely to change in the future.

7. Unconsolidated Affiliated Company

Prior to February 2, 2015 we owned 49% of Zenith and accounted for our investment under the equity method. Our investment in Zenith at November 29, 2014 was $7,915 and is included in other assets in our condensed consolidated balance sheet. The balance of our investment in Zenith was adjusted for our equity in the earnings of Zenith through February 2, 2015 of $220, and increased by $1,345 representing our 49% share of a $2,745 capital contribution made to Zenith, a portion of which was used for retirement of certain of Zenith’s debt prior to the acquisition. This activity resulted in a carrying value for our investment in Zenith of $9,480 on the date of acquisition. See Note 3 regarding the remeasurement of this carrying value to fair value in connection with the acquisition and the resulting gain.

At November 29, 2014, we owed Zenith $2,628 for services rendered to us. We believe the transactions with Zenith were recorded at current market rates. Prior to the acquisition on February 2, 2015, we recorded the following income from Zenith in other loss, net, in our condensed consolidated statements of income:

Quarter Ended

Nine Months Ended

August 29,

2015

August 30,

2014

August 29,

2015

August 30, 2014

Earnings recognized

190

220

534

8. Notes Payable and Bank Credit Facility

Our notes payable consist of the following:

	August 29, 2015
	Principal Balance			Unamortized Discount			Net Carrying Amount

Zenith acquisition note payable	$	9,000		$	(388	)	$	8,612
Transportation equipment notes payable		2,952			-			2,952
Real estate notes payable		3,272			-			3,272

Total debt		15,224			(388	)		14,836
Less current portion		(4,709	)		233			(4,476	)

Total long-term debt	$	10,515		$	(155	)	$	10,360

	November 29, 2014
	Principal Balance			Unamortized Discount		Net Carrying Amount

Real estate notes payable	$	2,218		$	-	$	2,218
Less current portion		(316	)		-		(316	)

Total long-term debt	$	1,902		$	-	$	1,902

The future maturities of our notes payable are as follows:

Remainder of fiscal 2015	$	420
Fiscal 2016		5,688
Fiscal 2017		4,330
Fiscal 2018		3,855
Fiscal 2019		527
Fiscal 2020		404
Thereafter		-
	$	15,224

Zenith Acquisition Note Payable

As part of the consideration given for our acquisition of Zenith on February 2, 2015, we issued an unsecured note payable to the former owner in the amount of $9,000. The note is payable in three annual installments $3,000 beginning February 2, 2016. Interest is payable annually at the one year LIBOR rate, which was established at 0.62% on February 2, 2015 and resets on each anniversary of the note. The note was recorded at its fair value in connection with the acquisition resulting in a debt discount that is amortized to the principal amount through the recognition of non-cash interest expense over the term of the note. Interest expense resulting from the amortization of the discount for the three and nine months ended August 29, 2015 was $76 and $177, respectively. The current portion of the note due within one year, net of the current portion of the unamortized discount, is $2,767 at August 29, 2015.

Transportation Equipment Notes Payable

Certain of the transportation equipment operated in our logistical services segment is financed by notes payable in the amount of $2,952. These notes are payable in fixed monthly payments of principal and interest at the fixed rate of 3.75% ,with remaining terms of twenty-two to forty-three months. The current portion of these notes due within one year at August 29, 2015 is $1,115. The notes are secured by tractors, trailers and local delivery trucks with a total net book value of $4,582 at August 29, 2015.

13 of 39

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

AUGUST 29, 2015

(Dollars in thousands except share and per share data)

Real Estate Notes Payable

Two of our retail real estate properties have been financed through commercial mortgages with interest rates of 6.73%. These mortgages are collateralized by the respective properties with net book values totaling approximately $6,026 and $6,127 at August 29, 2015 and November 29, 2014, respectively. The total balance outstanding under these mortgages was $1,983 and $2,218 at August 29, 2015 and November 29, 2014, respectively. The current portion of these mortgages due within one year was $332 and $316 as of August 29, 2015 and November 29, 2014, respectively.

Certain of the real estate located in Conover, NC and operated in our logistical services segment is subject to a note payable in the amount of $1,289. The note is payable in monthly installments of principal and interest at the fixed rate of 3.75% through October 2016, at which time the remaining balance on the note of approximately $1,004 will be due. The current portion of this note due within one year at August 29, 2015 is $262. The note is secured by land and buildings with a total net book value of $6,203 at August 29, 2015.

Fair Value

We believe that the carrying amount of our notes payable approximates fair value at both August 29, 2015 and November 29, 2014. In estimating the fair value, we utilize current market interest rates for similar instruments. The inputs into these fair value calculations reflect our market assumptions and are not observable. Consequently, the inputs are considered to be Level 3 as specified in the fair value hierarchy in ASC Topic 820, Fair Value Measurements and Disclosures. See Note 12.

Bank Credit Facility

Our credit facility with our bank provides for a line of credit of up to $15,000. This credit facility is secured by our accounts receivable and inventory. The facility contains covenants requiring us to maintain certain key financial ratios. We are in compliance with all covenants under the agreement and expect to remain in compliance for the foreseeable future. The line will mature in December 2015, at which time we expect to obtain a new line under substantially similar terms.

We have $1,825 outstanding under standby letters of credit, leaving availability under our credit line of $13,175.

9. Commitments and Contingencies

We are involved in various legal and environmental matters, which arise in the normal course of business. Although the final outcome of these matters cannot be determined, based on the facts presently known, we believe that the final resolution of these matters will not have a material adverse effect on our financial position or future results of operations.

We lease land and buildings that are used in the operation of our Company-owned retail stores as well as in the operation of certain of our licensee-owned stores, and we lease land and buildings at various locations throughout the continental United States for warehousing and distribution hubs used in our logistical services segment. We also lease tractors, trailers and local delivery trucks used in our logistical services segment. Our real estate lease terms range from one to 15 years and generally have renewal options of between five and 15 years. Some store leases contain contingent rental provisions based upon sales volume. Our transportation equipment leases have terms ranging from two to seven years with fixed monthly rental payments plus variable charges based upon mileage. The following schedule shows future minimum lease payments under non-cancellable operating leases with terms in excess of one year as of August 29, 2015:

	Retail Stores		Distribution Centers		Transportation Equipment		Total

Remainder of fiscal 2015	$	4,631	$	961	$	669	$	6,261
Fiscal 2016		17,528		3,523		2,429		23,480
Fiscal 2017		14,793		3,074		1,709		19,576
Fiscal 2018		12,282		1,339		806		14,427
Fiscal 2019		10,389		379		755		11,523
Fiscal 2020		9,103		-		671		9,774
Thereafter		24,635		-		30		24,665
	$	93,361	$	9,276	$	7,069	$	109,706

We also have guaranteed certain lease obligations of licensee operators. Lease guarantees range from one to ten years. We were contingently liable under licensee lease obligation guarantees in the amount of $2,594 and $3,164 at August 29, 2015 and November 29, 2014, respectively.

In the event of default by an independent dealer under the guaranteed lease, we believe that the risk of loss is mitigated through a combination of options that include, but are not limited to, arranging for a replacement dealer, liquidating the collateral (primarily inventory), and pursuing payment under the personal guarantees of the independent dealer. The proceeds of the above options are expected to cover the estimated amount of our future payments under the guarantee obligations, net of recorded reserves. The fair value of lease guarantees (an estimate of the cost to the Company to perform on these guarantees) at August 29, 2015 and November 29, 2014 was not material.

10. Post Employment Benefit Obligations

We have an unfunded Supplemental Retirement Income Plan (the “Supplemental Plan”) that covers one current and certain former executives. The liability for this plan was $10,323 and $10,376 as of August 29, 2015 and November 29, 2014, respectively, and is recorded as follows in the condensed consolidated balance sheets:

	August 29, 2015		November 29, 2014
Accrued compensation and benefits	$	724	$	724
Post employment benefit obligations		9,599		9,652

Total pension liability	$	10,323	$	10,376

Components of net periodic pension costs are as follows:

	Quarter Ended				Nine Months Ended
	August 29, 2015		August 30, 2014		August 29, 2015		August 30, 2014
Service cost	$	26	$	20	$	78	$	59
Interest cost		94		93		281		279
Amortization of transition obligation		11		10		32		32
Amortization of loss		49		31		146		92

Net periodic pension cost	$	180	$	154	$	537	$	462

We have an unfunded Deferred Compensation Plan that covers one current executive and certain former executives and provides for voluntary deferral of compensation. This plan has been frozen with no additional participants or deferrals permitted. Our liability under this plan was $2,081 and $2,174 as of August 29, 2015 and November 29, 2014, respectively, and is recorded as follows in the condensed consolidated balance sheets:

	August 29, 2015		November 29, 2014
Accrued compensation and benefits	$	328	$	328
Post employment benefit obligations		1,753		1,846

Total deferred compensation liability	$	2,081	$	2,174

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PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

AUGUST 29, 2015

(Dollars in thousands except share and per share data)

During the third quarter of fiscal 2014, we recorded a credit to income of $124 due to a change in our estimate of the future obligation of a former employee. We recognized expense (income) under this plan during the three and nine months ended August 29, 2015 and August 30, 2014 as follows:

	Quarter Ended					Nine Months Ended
	August 29, 2015		August 30, 2014			August 29, 2015		August 30, 2014
Deferred compensation expense (income)	$	54	$	(52	)	$	162	$	92

11. Earnings Per Share

The following reconciles basic and diluted earnings per share:

	Net Income		Weighted Average Shares		Net Income Per Share
For the quarter ended August 29, 2015:

Basic earnings per share	$	4,266		10,816,293	$	0.39
Add effect of dilutive securities:
Options and restricted shares		-		116,575		-
Diluted earnings per share	$	4,266		10,932,868	$	0.39

For the quarter ended August 30, 2014:

Basic earnings per share	$	2,256		10,475,945	$	0.22
Add effect of dilutive securities:
Options and restricted shares		-		135,209		(0.01	)
Diluted earnings per share	$	2,256		10,611,154	$	0.21


For the nine months ended August 29, 2015:

Basic earnings per share	$	14,751		10,658,416	$	1.38
Add effect of dilutive securities:
Options and restricted shares		-		153,787		(0.02	)
Diluted earnings per share	$	14,751		10,812,203	$	1.36

For the nine months ended August 30, 2014:

Basic earnings per share	$	5,650		10,596,433	$	0.54
Add effect of dilutive securities:
Options and restricted shares		-		138,627		(0.01	)
Diluted earnings per share	$	5,650		10,735,060	$	0.53

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PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

AUGUST 29, 2015

(Dollars in thousands except share and per share data)

For the three and nine months ended August 29, 2015 and August 30, 2014, the following potentially dilutive shares were excluded from the computations as their effect was anti-dilutive:

	Quarter Ended				Nine Months Ended
	August 29, 2015		August 30, 2014		August 29, 2015		August 30, 2014
Stock options		-		207,500		-		207,500
Unvested shares		2,000		-		8,354		66,339

Total anti-dilutive securities		2,000		207,500		8,354		273,839

12. Financial Instruments and Fair Value Measurements

Financial Instruments

Our financial instruments include cash and cash equivalents, short-term investments in certificates of deposit, accounts receivable, cost method investments, accounts payable and long-term debt. Because of their short maturities, the carrying amounts of cash and cash equivalents, short-term investments in certificates of deposit, accounts receivable, and accounts payable approximate fair value. Our cost method investments generally involve entities for which it is not practical to determine fair values.

Investments

Our short-term investments of $23,125 at both August 29, 2015 and November 29, 2014 consisted of certificates of deposit (CDs) with original terms generally ranging from six to twelve months, bearing interest at rates ranging from 0.28% to 1.00%. At August 29, 2015, the weighted average remaining time to maturity of the CDs was approximately ten months and the weighted average yield of the CDs was approximately 0.42%. Each CD is placed with a Federally insured financial institution and all deposits are within Federal deposit insurance limits. As the CDs mature, we expect to reinvest them in CDs of similar maturities of up to one year. Due to the nature of these investments and their relatively short maturities, the carrying amount of the short-term investments at August 29, 2015 and November 29, 2014 approximates their fair value.

Fair Value Measurement

The Company accounts for items measured at fair value in accordance with ASC Topic 820, Fair Value Measurements and Disclosures. ASC 820’s valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. ASC 820 classifies these inputs into the following hierarchy:

Level 1 Inputs– Quoted prices for identical instruments in active markets.

Level 2 Inputs– Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 Inputs– Instruments with primarily unobservable value drivers.

We believe that the carrying amounts of our current assets and current liabilities approximate fair value due to the short-term nature of these items. The recurring estimate of the fair value of our notes payable for disclosure purposes (see Note 8) involves Level 3 inputs. Our primary non-recurring fair value estimates typically involve business acquisitions (Note 3) which involve a combination of Level 2 and Level 3 inputs, and asset impairments (Note 13) which utilize Level 3 inputs.

13. Asset Disposition, Impairment Charges and Accrued Lease Exit Costs, and Income from CDSOA

Asset Disposition

On March 12, 2015, we closed on the sale of our retail real estate investment property located in Sugarland, Texas and received cash in the amount of $2,835 which is included in proceeds from sales of property and equipment in the accompanying statement of condensed consolidated cash flows. This asset was included in other assets at November 29, 2014 along with our other investments in retail real estate. During the nine months ended August 29, 2015, we recognized a non-cash charge of $182 to write down the carrying value of the Sugarland real estate to the selling price. This charge is included in other loss, net in our condensed consolidated income statement.

Asset Impairment Charges and Lease Exit Costs

During the first quarter of fiscal 2015 we announced the closing of our Company-owned retail store location in Memphis, Tennessee. In connection with this closing, we recognized non-cash charges for the nine months ended August 29, 2015 of $419 for the accrual of lease exit costs and $106 for the write off of abandoned leasehold improvements and other store assets.

The following table summarized the activity related to our accrued lease exit costs:

Balance at November 29, 2014	$	433

Provisions associated with Company-owned retail store closures		419
Payments and other		(185	)

Balance at August 29, 2015	$	667

Current portion included in other accrued liabilities	$	402
Long-term portion included in other long-term liabilities		265
	$	667

Management Restructuring Costs

During the nine months ended August 29, 2015, we recognized $449 of expense related to severance payable to a former executive, who left the Company in April, 2015. Of the total severance amount, $254 had been paid during the second and third quarters of 2015 with the remaining $195 included in other accrued liabilities in the condensed consolidated balance sheet at August 29, 2015.

Income from Continued Dumping & Subsidy Offset Act

During the nine months ended August 29, 2015, we recognized income of $1,066 arising from distributions received from U.S. Customs and Border Protection (“Customs”) under the Continued Dumping and Subsidy Offset Act of 2000 (“CDSOA”). These distributions primarily represent amounts previously withheld by Customs pending the resolution of claims filed by certain manufacturers who did not support the antidumping petition (“Non-Supporting Producers”) challenging certain provisions of the CDSOA and seeking to share in the distributions. The Non-Supporting Producers’ claims were dismissed by the courts and all appeals were exhausted in 2014. While it is possible that we may receive additional distributions from Customs, we cannot estimate the likelihood or amount of any future distributions.

14. Recent Accounting Pronouncements

In April 2014, the FASB issued Accounting Standards Update No. 2014-08 (ASU 2014-08), which updated the guidance in ASC Topic 205, Presentation of Financial Statements, and ASC Topic 360, Property, Plant and Equipment. The amendments in ASU 2014-08 change the criteria for reporting discontinued operations for all public and nonpublic entities. The amendments also require new disclosures about discontinued operations and disposals of components of an entity that do not qualify for discontinued operations reporting. This guidance will become effective for all disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after December 15, 2014, and interim periods within those years, and therefore will become effective for us as of the beginning of our 2016 fiscal year. The adoption of this guidance is not expected to have a material impact upon our financial condition or results of operations.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (ASU 2014-09), which creates ASC Topic 606, Revenue from Contracts with Customers, and supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. In addition, ASU 2014-09 supersedes the cost guidance in Subtopic 605-35, Revenue Recognition—Construction-Type and Production-Type Contracts, and creates new Subtopic 340-40, Other Assets and Deferred Costs—Contracts with Customers. In summary, the core principle of Topic 606 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. Companies are allowed to select between two transition methods: (1) a full retrospective transition method with the application of the new guidance to each prior reporting period presented, or (2) a retrospective transition method that recognizes the cumulative effect on prior periods at the date of adoption together with additional footnote disclosures. The amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, and early application is not permitted. Therefore the amendments in ASU 2014-09 will become effective for us as of the beginning of our 2019 fiscal year. We are currently evaluating the impact that the adoption of ASU 2014-09 will have on our consolidated financial statements and have not made any decision on the method of adoption.

In January 2015, the FASB issued Accounting Standards Update No. 2015-01, Income Statement — Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. ASU 2015-01 eliminates the concept of reporting extraordinary items, but retains current presentation and disclosure requirements for an event or transaction that is of an unusual nature or of a type that indicates infrequency of occurrence. Transactions that meet both criteria would now also follow such presentation and disclosure requirements. For all entities, the guidance is effective for annual periods, and interim periods within those annual periods, beginning after 15 December 2015. Early adoption is permitted; however, adoption must occur at the beginning of an annual period. Therefore the amendments in ASU 2015-01 will become effective for us as of the beginning of our 2017 fiscal year. The adoption of this guidance is not expected to have a material impact upon our financial condition or results of operations.

In July 2015, the FASB issued Accounting Standards Update No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. ASU 2015-11 requires that inventory within the scope of this Update be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amendments in this Update do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. For all entities, the guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2016. Early adoption is permitted. Therefore the amendments in ASU 2015-11 will become effective for us as of the beginning of our 2018 fiscal year. The adoption of this guidance is not expected to have a material impact upon our financial condition or results of operations.

15. Segment Information

We have strategically aligned our business into three reportable segments as defined in ASC 280, Segment Reporting, and as described below:

●

Wholesale. The wholesale home furnishings segment is involved principally in the design, manufacture, sourcing, sale and distribution of furniture products to a network of Bassett stores (Company-owned and licensee-owned stores retail stores) and independent furniture retailers. Our wholesale segment includes our wood and upholstery operations as well as all corporate selling, general and administrative expenses, including those corporate expenses related to both Company- and licensee-owned stores.

●

Retail – Company-owned stores. Our retail segment consists of Company-owned stores and includes the revenues, expenses, assets and liabilities and capital expenditures directly related to these stores.

●

Logistical services. With our acquisition of Zenith on February 2, 2015, we created the logistical services operating segment which reflects the operations of Zenith. In addition to providing shipping, delivery and warehousing services for the Company, Zenith also provides similar services to other customers, primarily in the furniture industry. Revenue from the performance of these services to other customers is included in logistics revenue in our condensed consolidated statement of income. Zenith’s operating costs are included in selling, general and administrative expenses and total $22,580 and $49,517 for the three and nine months ended August 29, 2015, respectively, since the date of acquisition. Amounts charged by Zenith to the Company for logistical services prior to the date of acquisition are included in selling, general and administrative expenses, and our equity in the earnings of Zenith prior to the date of acquisition is included in other loss, net, in the accompanying statements of income.

Inter-company sales elimination represents the elimination of wholesale sales to our Company-owned stores and the elimination of Zenith logistics revenue from our wholesale and retail segments. Inter-company income elimination includes the embedded wholesale profit in the Company-owned store inventory that has not been realized. These profits will be recorded when merchandise is delivered to the retail consumer. The inter-company income elimination also includes rent paid by our retail stores occupying Company-owned real estate, and the elimination of shipping and handling charges from Zenith for services provided to our wholesale and retail operations.

Prior to the beginning of fiscal 2015, our former investments and real estate segment included our short-term investments, our holdings of retail real estate previously leased as licensee stores, and our former equity investment in Zenith prior to acquisition. This segment has been eliminated and the assets formerly reported therein are now considered to be part of our wholesale segment. The earnings and costs associated with these assets, including our equity in the income of Zenith prior to the date of acquisition, will continue to be included in other loss, net, in our condensed consolidated statements of income.

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PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

AUGUST 29, 2015

(Dollars in thousands except share and per share data)

The following table presents our segment information:

	Quarter Ended						Nine Months Ended
	August 29, 2015			August 30, 2014			August 29, 2015			August 30, 2014
Sales Revenue
Wholesale	$	62,165		$	56,069		$	187,675		$	163,339
Retail - Company-owned stores		62,009			53,987			183,113			154,401
Logistical services		23,650			-			51,607			-
Inter-company eliminations:
Furniture and accessories		(27,067	)		(24,870	)		(84,666	)		(71,722	)
Logistical services		(9,746	)		-			(22,357	)
Consolidated	$	111,011		$	85,186		$	315,372		$	246,018

Income (loss) from Operations
Wholesale	$	3,795		$	3,216		$	11,518		$	9,821
Retail - Company-owned stores		2,037			(167	)		3,967			(2,605	)
Logistical services		1,070			-			2,089			-
Inter-company elimination		790			350			683			1,160
Management restructuring costs		-			-			(449	)		-
Lease exit costs		-			-			(419	)		-
Asset impairment charges		-			-			(106	)		-
Consolidated	$	7,692		$	3,399		$	17,283		$	8,376

Depreciation and Amortization
Wholesale	$	501		$	539		$	1,539		$	1,420
Retail - Company-owned stores		1,326			1,451			4,024			4,008
Logistical services		745			-			1,739			-
Consolidated	$	2,572		$	1,990		$	7,302		$	5,428

Capital Expenditures
Wholesale	$	1,793		$	788		$	4,138		$	4,013
Retail - Company-owned stores		1,448			2,690			5,326			11,674
Logistical services		100			-			1,819			-
Consolidated	$	3,341		$	3,478		$	11,283		$	15,687

	As of		As of
	August 29, 2015		November 29, 2014
Identifiable Assets
Wholesale	$	137,228	$	154,275
Retail - Company-owned stores		90,728		86,471
Logistical services		42,661		-
Consolidated	$	270,617	$	240,746

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Bassett is a leading retailer, manufacturer and marketer of branded home furnishings. Our products are sold primarily through a network of Company-owned and licensee-owned branded stores under the Bassett Home Furnishings (“BHF”) name, with additional distribution through other wholesale channels including multi-line furniture stores, many of which feature Bassett galleries or design centers, specialty stores and mass merchants. We were founded in 1902 and incorporated under the laws of Virginia in 1930. Our rich 113-year history has instilled the principles of quality, value, and integrity in everything that we do, while simultaneously providing us with the expertise to respond to ever-changing consumer tastes and to meet the demands of a global economy.

With 92 BHF stores at August 29, 2015, we have leveraged our 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. We created our store program in 1997 to provide a single source home furnishings retail store that provides a unique combination of stylish, quality furniture and accessories with a high level of customer service. The store features custom order furniture ready for delivery in less than 30 days, more than 1,000 upholstery fabrics, free in-home design visits, and coordinated decorating accessories. We believe that our capabilities in custom upholstery have become unmatched in recent years. Our manufacturing team takes great pride in the breadth of its options, the precision of its craftsmanship, and the speed of its delivery. The selling philosophy in the stores is based on building strong long-term relationships with each customer. Sales people are referred to as Design Consultants and are each trained to evaluate customer needs and provide comprehensive solutions for their home decor. We continue to strengthen the sales and design talent within our Company-owned retail stores. Our Design Consultants undergo extensive Design Certification training. This training has strengthened their skills related to our house call and design business, and is intended to increase business with our most valuable customers.

In order to reach markets that cannot be effectively served by our retail store network, we also distribute our products through other wholesale channels including multi-line furniture stores, many of which feature Bassett galleries or design centers, specialty stores and mass merchants. We use a network of over 25 independent sales representatives who have stated geographical territories. These sales representatives are compensated based on a standard commission rate. We believe this blended strategy provides us the greatest ability to effectively distribute our products throughout the United States and ultimately gain market share.

For many years we have owned 49% of Zenith Freight Lines, LLC (“Zenith”). During that time the strategic significance of our partnership with Zenith has risen to include the over-the-road transportation of furniture, the operation of regional wholesale distribution centers in eight states, and the management of various home delivery facilities that service Bassett Home Furnishings stores and other clients in local markets around the United States. On February 2, 2015, we acquired the remaining 51% of Zenith, which now operates as a wholly-owned subsidiary of Bassett. Our acquisition of Zenith brings to our Company the ability to deliver best-of-class shipping and logistical support services that are uniquely tailored to the needs of the furniture industry, as well as the ability to provide the expedited delivery service which is increasingly demanded by our industry. We believe that our ownership of Zenith will not only enhance our own wholesale and retail distribution capabilities, but will provide additional growth opportunities as Zenith continues to expand its service to other customers.

In September of 2011, we announced the formation of a strategic partnership with HGTV (Home and Garden Television), a division of Scripps Networks, LLC, which combines our 113 year heritage in the furniture industry with the penetration of 96 million households in the United States that HGTV enjoys today. As part of this alliance, the in-store design centers have been co-branded with HGTV to more forcefully market the concept of a “home makeover”, an important point of differentiation for our stores that also mirrors much of the programming content on the HGTV network. We believe the new co-branded design centers coupled with the targeted national advertising on HGTV have played a key role in our improved comparable store sales since their introduction following the third quarter of 2012.

At August 29, 2015, our BFH store network included 59 Company-owned stores and 33 licensee-owned stores. Due to the improved operating performance of our retail network along with continued improvement in underlying economic factors such as the housing market and consumer confidence, we have been expanding our retail presence in various parts of the country. As part of this expansion we opened six new stores during fiscal 2014 as well as relocated two others.

We plan to continue opening new stores, primarily in underpenetrated markets where we currently have stores. The Company and certain of our licensees are actively engaged in site selection and lease negotiations for several new stores. One new corporate store in Woodland Hills, California is expected to open in early October 2015, with another new corporate store in Sterling, Virginia scheduled to open during the first half of fiscal 2016. One licensee store opened in September 2015 with another expected to open during the first half of 2016. We also expect to relocate the Newport News, Virginia store during the first quarter of 2016. During the second quarter of 2015, we completed the closure of an underperforming store in Memphis, Tennessee, for which we incurred lease exit costs and asset impairment charges totaling $525.

As with any retail operation, prior to opening a new store we incur such expenses as rent, training costs and other payroll related costs. These costs generally range between $100 to $300 per store depending on the overall rent costs for the location and the period between the time when we take physical possession of the store space and the time of the store opening. Generally, rent payments during a buildout period between delivery of possession and opening of a new store are deferred and therefore straight line rent expense recognized during that time does not require cash. Inherent in our retail business model, we also incur losses in the two to three months of operation following a new store opening. Like other furniture retailers, we do not recognize a sale until the furniture is delivered to our customer. Because our retail business model does not involve maintaining a stock of retail inventory that would result in quick delivery and because of the custom nature of many of our furniture offerings, delivery to our customers usually occurs about 30 days after an order is placed. We generally require a deposit at the time of order and collect the remaining balance when the furniture is delivered, at which time the sale is recognized. Coupled with the previously discussed store pre-opening costs, total start-up losses can range from $300 to $500 per store. While our retail expansion is initially costly, we believe our site selection and new store presentation will generally result in locations that operate at or above a retail break-even level within a reasonable period of time following store opening. Factors affecting the length of time required to achieve this goal on a store-by-store basis may include the level of brand recognition, the degree of local competition and the depth of penetration in a particular market. Even as new stores ramp up to break-even, we do realize additional wholesale sales volume that leverages the fixed costs in our wholesale business.

Our wholesale operations include an upholstery plant in Newton, North Carolina that produces a wide range of upholstered furniture. We believe that we are an industry leader with our quick-ship custom upholstery offerings. We also operate a custom dining manufacturing facility in Martinsville, Virginia. Most of our wood furniture and certain of our upholstery offerings are sourced through several foreign plants, primarily in Vietnam, Indonesia and China. We define imported product as fully finished product that is sourced internationally. For the nine month period of fiscal 2015, approximately 38% of our wholesale sales were of imported product compared to 42% for the first nine months of fiscal 2014. Our plans for 2015 include the launch of several significant new product categories. During the first quarter of 2015 we introduced the “Bassett Baby and Kids” program in an effort to leverage our 70 year history in the juvenile and youth furniture products category. The products in this new program are initially available solely on our website and in certain BHF retail stores. Another important new product program for 2015 is “Bench★Made”, a selection of American dining furniture that appeared in retail showrooms during the second quarter of 2015. Partnering with nearby hardwood component manufacturers, we are preparing, distressing, finishing, and assembling an assortment of solid maple tables and chairs in our newly renovated Company-owned facility in Bassett, Virginia. Finally, we have undertaken a major makeover of our imported wood product assortment in 2015. All of these new products have been carefully designed in coordination with our merchants, designers, engineers and finishing technicians to achieve the upscale casual decor that we believe speaks to today’s consumer. These new products are appearing in our stores in phases coinciding with key holiday selling periods throughout 2015. This will result in the replacement of approximately one third of our imported wood product offering. Our operating results for the first nine months of 2015 reflect the start-up costs associated with this increased level of product development activity.

Results of Operations – Periods ended August 29, 2015 compared with periods ended August 30, 2014:

Net sales of furniture and accessories, logistics revenue, cost of furniture and accessories sold, selling, general and administrative (SG&A) expense, other charges and income from operations were as follows for the periods ended August 29, 2015 and August 30, 2014:

On a consolidated basis, we reported total sales revenue for the third quarter of 2015 of $111,011 as compared to $85,186 for the third quarter of 2014, an increase or $25,825, or 30%. Total revenues for the third quarter of 2015 include $13,904 of logistics revenue for Zenith from customers outside of the Company. Revenue from sales of furniture and accessories, net of estimates for returns and allowances, for the third quarter of 2015 were $97,107, an increase of $11,921, or 14%, over the third quarter of 2014. Gross margin on the sale of furniture and accessories for the third quarter of 2015 was $52,283, or 53.8% of the revenue from the sale of furniture and accessories, as compared with $45,018, or 52.8%, for the comparable prior year period. Operating income was $7,692 for the third quarter of 2015 as compared to $3,399 for the third quarter of 2014, an increase of $4,293 driven primarily by greater leveraging of fixed costs and the addition of Zenith which contributed an additional $1,070 of operating income.

On a consolidated basis, we reported total sales revenue for the first nine months of 2015 of $315,372 as compared to $246,018 for the first nine months of 2014, an increase of $69,354, or 28%. Total revenues for the first nine months of 2015 include $29,250 of logistics revenue from customers outside of the Company since the date of our acquisition of Zenith. Revenue from sales of furniture and accessories, net of estimates for returns and allowances, for the first nine months of 2015 were $286,122, an increase of $40,104, or 16%, over the first nine month of 2014. Gross margin on the sale of furniture and accessories for the first nine months of 2015 was $152,446, or 53.3% of the revenue from the sale of furniture and accessories, as compared with $130,584, or 53.1%, for the comparable prior year period. Operating income was $17,283 for the first nine months of 2015 as compared to $8,376 for the first nine months of 2014, an increase of $8,907 driven primarily by greater leveraging of fixed costs, lower new store related costs (both pre- and post- opening), and the addition of Zenith which contributed an additional $2,089 of operating income, partially offset by $525 of charges taken in the first quarter of 2015 related to the closing of our Company-owned retail store in Memphis, Tennessee, and a management restructuring charge of $449 taken in the second quarter for severance costs related to the departure of a senior marketing executive. Zenith’s operations since acquisition made a positive contribution to our operating results of $2,089 during the first nine months of 2015 and have been accretive to our overall operating margin percentage.

We have strategically aligned our business into three reportable segments as described below:

Wholesale. The wholesale home furnishings segment is involved principally in the design, manufacture, sourcing, sale and distribution of furniture products to a network of Bassett stores (licensee-owned stores and Company-owned stores) and independent furniture retailers. Our wholesale segment includes our wood and upholstery operations as well as all corporate selling, general and administrative expenses, including those corporate expenses related to both Company- and licensee-owned stores. We eliminate the sales between our wholesale and retail segments as well as the imbedded profit in the retail inventory for the consolidated presentation in our financial statements.

Retail – Company-owned stores. Our retail segment consists of Company-owned stores and includes the revenues, expenses, assets and liabilities (including real estate) and capital expenditures directly related to these stores.

Logistical services. With our acquisition of Zenith on February 2, 2015, we created the logistical services operating segment which reflects the operations of Zenith. In addition to providing shipping, delivery and warehousing services for the Company, Zenith also provides similar services to other customers, primarily in the furniture industry. Revenue from the performance of these services to other customers is included in logistics revenue in our condensed consolidated statement of income. Zenith’s operating costs are included in selling, general and administrative expenses. Amounts charged by Zenith to the Company for transportation and logistical services prior to February 2, 2015 are included in selling, general and administrative expenses, and our equity in the earnings of Zenith prior to the date of acquisition is included in other loss, net, in the accompanying statements of income.

The following tables illustrate the effects of various intercompany eliminations on income (loss) from operations in the consolidation of our segment results:

ITEM			PAGE
PART I - FINANCIAL INFORMATION

1.	Condensed Consolidated Financial Statements as of August 29, 2015 (unaudited) and November 29, 2014 and for the quarters ended August 29, 2015 (unaudited) and August 30, 2014 (unaudited)

		Condensed Consolidated Statements of Income and Retained Earnings	3

		Condensed Consolidated Statements of Comprehensive Income	4

		Condensed Consolidated Balance Sheets	5

		Condensed Consolidated Statements of Cash Flows	6

		Notes to Condensed Consolidated Financial Statements	7

2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		23

3.	Quantitative and Qualitative Disclosures About Market Risk		34

4.	Controls and Procedures		35

PART II - OTHER INFORMATION

1.	Legal Proceedings		37

2.	Unregistered Sales of Equity Securities and Use of Proceeds		37

3.	Defaults Upon Senior Securities		37

6.	Exhibits		37

	Quarter Ended August 29, 2015
	Wholesale		Retail		Logistics		Eliminations				Consolidated
Sales revenue:
Furniture & accessories	$	62,165	$	62,009	$	-	$	(27,067	)	(1)	$	97,107
Logistics		-		-		23,650		(9,746	)	(2)		13,904
Total sales revenue		62,165		62,009		23,650		(36,813	)