GENERAL:

The following analysis of the results of operations and financial condition of the Company should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this quarterly report on Form 10-Q.

CRITICAL ACCOUNTING POLICIES:

There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations", included in our 2008 annual report on Form 10-K.

Overview

The following table has been prepared as an aid in understanding the Company's
results of operations on a comparative basis for the three months ended
September 30, 2008 and 2007. Amounts presented are percentages of the Company's
net sales.


                                                      Three Months Ended
                                                        September 30,

                                                       2008         2007

           Net sales                                     100.0 %     100.0 %
           Cost of goods sold                            (81.3 )     (80.4 )

           Gross margin                                   18.7        19.6
           Selling, general and administrative           (18.3 )     (17.4 )
           Facility consolidation and other costs         (1.5 )         -

           Operating income                               (1.1 )       2.2
           Other expense, net                             (0.2 )      (0.3 )

           Income before income taxes                     (1.3 )       1.9
           Income tax expense                              0.5        (0.7 )

           Net income                                     (0.8 )%      1.2 %

Results of Operations for the Quarter Ended September 30, 2008 vs. 2007

Net sales for the quarter ended September 30, 2008 were $91.4 million compared to the prior year quarter of $100.9 million, a decrease of 9.4%. Residential net sales were $62.0 million, slightly less than prior year quarter net sales of $62.7 million. Recreational vehicle net sales were $5.9 million, compared to $15.7 million, a decrease of 62.1% from the prior year quarter. Commercial net sales were $23.5 million, compared to $22.5 million in the prior year quarter, an increase of 4.3%.

Gross margin for the quarter ended September 30, 2008 was 18.7% compared to 19.6% in the prior year quarter. The decrease in gross margin percentage is primarily due to under-absorption of fixed manufacturing costs on significantly lower sales volume and higher material costs.

Selling, general and administrative expenses for the quarter ended September 30, 2008 were 18.3% compared to 17.4% in the prior year quarter. This percentage increase is due to under-absorption of fixed costs on the lower sales volume and an increase in bad debt expense of approximately $0.2 million.

During the current quarter the Company announced the closure of its New Paris, IN recreational vehicle seating manufacturing facility and the end of residential furniture manufacturing at its Lancaster, PA facility. The Company recorded pre-tax charges during the current quarter of approximately $1.4 million, or $0.13 per share after tax related to facility consolidations. The Company anticipates that manufacturing consolidation will be completed by December 31, 2008 and estimates total pre-tax facility consolidation charges in the first half of fiscal year 2009 will be in the range of $2.0 million to $2.5 million.

Operating loss for the current quarter was $1.0 million compared to income of $2.2 million in the prior year quarter reflecting the aforementioned factors.

The effective income tax rate was 35.4% and 36.9% in the current and prior year fiscal quarters, respectively. The Company anticipates its effective income tax rate for the fiscal year to be approximately 35.7%. The primary difference between the federal statutory rate and the expected effective rate is the result of state taxes.

The above factors resulted in current quarter net loss of $0.7 million or $0.11 per share, compared to the prior year quarter net income of $1.2 million or $0.18 per share.

All earnings per share amounts are on a diluted basis.

Liquidity and Capital Resources

Operating Activities:
Working Capital (current assets less current liabilities) at September 30, 2008 was $94.5 million. Net cash provided by operating activities was $2.2 million for the three months ended September 30, 2008. Significant changes in working capital from June 30, 2008 to September 30, 2008 included decreased accounts receivable of $2.7 million, decreased inventory of $1.9 million and decreased accounts payable of $2.5 million. The decrease in receivables is related to timing of shipments to customers and the related payment terms. The decrease in inventory is due to lower purchases to support lower sales volume. The decrease in accounts payable is due to the timing of inventory purchases from suppliers, the related payment terms and the timing of payments. The Company expects that due to the nature of our operations that there will be continuing fluctuations in accounts receivable, inventory, accounts payable, and cash flows from operations due to the following: (i) we purchase inventory from overseas suppliers with long lead times and depending on the timing of the delivery of those orders inventory levels can be greatly impacted, and (ii) we have various customers that purchase large quantities of inventory periodically and the timing of those purchases can significantly impact inventory levels, accounts receivable, accounts payable and short-term borrowings. As discussed below, the Company believes it has adequate financing arrangements and access to capital to absorb these fluctuations in operating cash flow.

Investing Activities:
Capital expenditures were $0.2 million for the quarter ended September 30, 2008. Depreciation and amortization expense was $1.1 million and $ 1.2 million for the fiscal quarters ended September 30, 2008 and 2007, respectively. The Company expects that capital expenditures will be approximately $2.5 million for the remainder of the 2009 fiscal year.

Financing Activities:
Net cash used in financing activities was $4.3 million during the quarter ended September 30, 2008. Borrowings were lower by $3.5 million due to reduction in accounts receivable and inventory. Dividends of $0.9 million were paid during the quarter.

Management believes that the Company has adequate cash, cash equivalents, and credit arrangements to meet its operating and capital requirements for fiscal year 2009. In the opinion of management, the Company's liquidity and credit resources provide it with the ability to react to opportunities as they arise, the ability to pay quarterly dividends to its shareholders, and ensures that productive capital assets that enhance safety and improve operations are purchased as needed.

Outlook

The impact of the slowdown of the U. S. economy, where most of our products are sold, has magnified as the news media reports of job losses or layoffs related to cutbacks and closings over a broad spectrum of industries, including the furniture industry. With instability in the financial markets despite government relief efforts, rising prices throughout our supply chain and a changing political landscape, prospects for a recovery appear to be moving further into the future.

In response to these conditions, we continue to adjust our operations and workforce to bring production capacity in line with current and expected demand for our products. Our workforce has been reduced approximately 15% over the past year through layoffs and attrition. As announced in September, we have proceeded with the closing of two long-established manufacturing operations. Our Lancaster, PA facility has produced and distributed high quality residential furniture for over fifty years. As demand tightens and foreign sourced products continue to gain acceptance as providing

better value at the retail level, we no longer require this manufacturing capacity for residential products. Our New Paris, IN facility has been an integral part of our success in supplying quality recreational vehicle seating for over twenty-five years. With the recreational vehicle seating industry experiencing such a drastic decline in demand, as reflected by our 62% decrease in recreational vehicle seating net sales from the prior year period, we can no longer support our current capacity. While these are difficult decisions to make, we expect annual pre-tax cost savings of $3.5 million to $4.0 million going forward, and will continue to pursue cost savings in all aspects of our operations.

While we expect that current business conditions will persist for most, if not all, of fiscal year 2009, we remain optimistic that our strategy of a wide range of quality product offerings and price points to the residential, recreational vehicle and commercial markets combined with our conservative approach to business will be rewarded over the longer-term.