The consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). In our opinion, these statements include all adjustments necessary for a fair presentation of the results of all interim periods reported herein. All such adjustments are of a normal recurring nature. Certain amounts in 2004 have been reclassified to conform to the 2005 presentation. Certain information and footnote disclosures prepared in accordance with generally accepted accounting principles have been either condensed or omitted pursuant to SEC rules and regulations. However, we believe that the disclosures made are adequate for a fair presentation of results of operations and financial position. Operating results for the interim periods reported herein may not be indicative of the results expected for the year. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and accompanying notes included in our latest Annual Report on Form 10-K.

On April 26, 2005, the Board of Directors declared a two-for-one stock split effected in the form of a 100% stock dividend distributed on June 6, 2005. All share and per share amounts for all periods presented have been adjusted to reflect the stock split. At the April 26, 2005 stockholders meeting, stockholders approved an amendment to the Company’s certificate of incorporation increasing the number of authorized shares of common stock from 10 million to 25 million.

We apply the provisions of Accounting Principles Board Opinion No. 25 in accounting for our stock options and no compensation cost has been recognized in the financial statements. Had we determined compensation cost based on the fair value method as defined in Statement of Financial Accounting Standards (SFAS) No. 123, and as amended by SFAS No. 148, “Accounting for Stock-Based Compensation - Transition and Disclosure - an amendment of SFAS Statement No. 123”, the impact on our net earnings on a pro forma basis is indicated below:

The Plan is fully funded; therefore, no contributions are required to be deposited in 2005. However, we plan to makemade a discretionary contribution of approximately $1$1.5 million to $2 million in the third quarter of 2005.

Basic earnings per common share are based upon the weighted average shares outstanding. Outstanding stock options are treated as potential common stock for purposes of computing diluted earnings per share. Basic and diluted earnings per share are calculated using the following share data:

In November 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting StandardStandards No. 151, “Inventory Costs”. The new Statement amends Accounting Research Bulletin No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material. This Statement requires that those items be recognized as current-period charges and requires that allocation of fixed production overheads to the cost of conversion be based on the normal capacity of the production facilities. This statement is effective for fiscal years beginning after June 15, 2005. We do not expect adoption of this statement to have a material impact on our financial condition or results of operations.

The execution of our blended strategy of combining domestic manufacturing capabilities with an offshore sourcing program continues to produce positive results. We incorporate selected imported component parts and finished items in our product line to lower cost, provide design flexibility and offer a better value to our customers. Sourced product represented approximately 31%32% of sales during the first halfnine months of 2005 compared to 28%27% in 2004. We anticipate sourced product to remain about 30% of salesapproximate this level for the remainder of 2005.

During the first half ourOur manufacturing plants have operated at approximately 75% to 80% of their estimated capacity.capacity during the first nine months of 2005. We are maintaining our manufacturing capacity at current levels to provide protective capacity for improved demand. We will continue to evaluate our manufacturing capacity needs considering offshore sourcing opportunities, current and anticipated demand for our products, overall market conditions and other factors we consider relevant. Should capacity reductions become necessary, this could cause asset impairment or other restructuring charges in the future.

The following table sets forth the percentage relationship to net sales of certain items included in the Consolidated Statements of Income.

Net sales increased $11.4$6.8 million, or 15.8%8.6%, for the three month period ended July 2,October 1, 2005, from the comparable 2004 period. For the sixnine month period of 2005, net sales increased $22.8$ 29.7 million, or 15.9%13.3% from the 2004 sixnine month period. The increase was primarily due to higher unit volume and to a lesser extent higher average selling prices.prices and higher unit volume. Industry sales growth appears to have slowed during the first halfnine months of 2005 compared to the trends reported in 2004.

Gross profit margins for both the three and sixnine month periods of 2005 was 24.7%were 23.9% and 24.4%, respectively compared to 25.3%24.6% and 24.7% for the three and sixnine month periods of 2004, respectively.2004. Gross profit margins were negatively impacted by inflation in raw materials, wages, employee benefits, energy, freight costs and tariffs imposed on wooden bedroom furniture imported from China. OffsettingOperational inefficiencies and lower production levels in the third quarter of 2005 compared to the prior year period also contributed to the lower gross profit margins. Partially offsetting these higher costs were increased prices, higherselling prices. While we expect the operating efficiencies to improve, we also anticipate lower production levels and improved operating efficiencies.in the fourth quarter of 2005 versus the comparable prior year period. We continue to experience inflationary pressures in raw materials, compensation cost, energy and freight costs. However, we anticipate higher selling prices and improved operating efficiencies to offset these cost increases in the second half of 2005.

Selling, general and administrative expenses for the three and sixnine month periods of 2005 as a percentage of net sales increased slightlywere 13.0% and 13.2%, respectively compared to 13.4% from 13.2%13.5% and 13.3% for the comparable 2004 periods. Selling, general and administrative expenditures increased $1.7 million$470,000 and $3.3$3.8 million for the three and sixnine month period,periods of 2005, respectively, primarily as a result of higher selling expenses directly attributable to the increase in sales and additional warehousing expense. Also contributing to the lower selling, general and administrative expenses in the 2004 periods was a reversal of bad debt expense, as a result of a decrease in accounts receivable from certain customers experiencing financial difficulties.

As a result of the above, operating income as a percentage of net sales was 11.2%11.0% and 11.3%11.2% for the three and sixnine month period,periods of 2005, respectively compared to 12.1%11.1% and 11.5%,11.4% for the comparable 2004 periods.

Interest expense for the sixthree and nine month periodperiods of 2005 decreased primarily due to lower average debt levels. Interest income increased during the period2005 periods due to higher amounts of cash.

The effective tax rate for 2005 is expected to be 35.5%, compared to 36.1% for the total year 2004. The decrease in the effective tax rate is a result of the “American Jobs Creation Act of 2004” which allows for a deduction based on qualified domestic production activities. We expect a modest decline in our effective tax rate as this deduction is phased in over the next six years.

Our sources of liquidity include cash on hand, cash from operations and amounts available under a $25.0 million credit facility. These sources have been adequate for day-to-day expenditures, debt payments, purchases of our stock, capital expenditures and payment of cash dividends to stockholders. We expect these sources of liquidity to continue to be adequate for the future.

Working capital, excluding cash and current maturities of long-term debt, decreased $2.1$1.9 million during the first halfnine months of 2005 to $83.1$83.3 million from $85.2 million at year end. The decrease was primarily due to lower inventories and an increase in accounts payable; partially offset by an increase in accounts receivable resulting from higher sales.

Cash generated from operations was $16.9$23.2 million in the first sixnine months of 2005 compared to $6.6$4.7 million in the 2004 period. The increase was due to higher receipts from customers due to higher sales, partially offset by higher payments to suppliers and employees. Payments to suppliers and employees increased primarily to fund higher production, increased purchases of sourced product and higher selling and administrative expenses. We anticipate making a discretionary contribution of approximately $1.0 million to $2.0 million to our defined benefit plan in 2005.

Net cash used by investing activities was $2.8$3.8 million in the 2005 period compared to $288,000$521,000 in 2004 and consisted of normal capital expenditures. Capital expenditures in 2005 have returned to more historic levels. Over the past three years, capital expenditures were lower due to the relocation of a significant portion of machinery and equipment from a closed facility to other facilities in lieu of normal replacements. Capital expenditures for 2005 have returned to more historic levels and are anticipated to be approximately $5.5 million to $6.5 million for normal replacements and improvements, including approximately $1.0 million to expand warehouse space and improve manufacturing flow at one of our facilities.$6.0 million. As both our sales and the proportion of sourced goods increased, our need for additional warehouse space has increased. We are currently renting space to accommodate our needs, but continue to evaluate long-term solutions which could result in additional future capital expenditures.

Net cash used by financing activities was $8.2$7.7 million in the 2005 period compared to $4.9$4.5 million in the 2004 period. In the 2005 period, cash from operations and proceeds from the exercise of stock options provided funds for the purchase and retirement of our common stock, senior debt payments and cash dividends. During the first halfnine months of 2005, $10.0 million was used to purchase 473,000 shares of our common stock in the open market at an average price of $21.11. Approximately $10.2$20.2 million remainsis currently authorized by our Board of Directors to repurchase shares of our common stock. In the 2004 period, cash from operations provided funds for senior debt payments and cash dividends.

At July 2,October 1, 2005, long-term debt including current maturities was $12.9 million. Debt service requirements are $1.4 million remaining in 2005, $2.9 million in both 2006 $2.9 million inand 2007 and $1.4 million in both 2008 and 2009. As of July 2,October 1, 2005, approximately $25$25.0 million of additional borrowings were available under the revolving credit facility and cash on hand was $13.6$19.3 million.

Certain statements made in this report are not based on historical facts, but are forward-looking statements. These statements can be identified by the use of forward-looking terminology such as “believes,”“estimates”, “expects,”“may,”“will,” should,” or “anticipates,” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. These statements reflect our reasonable judgment with respect to future events and are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such risks and uncertainties include competition in the furniture industry including competition from lower-cost foreign manufacturers, our success in executing a blended strategy of combining offshore sourcing and domestic manufacturing, disruptions in offshore sourcing including those arising from supply or distribution disruptions or changes in political or economic conditions affecting the countries from which we obtain offshore sourcing, international trade policies of the United States and countries from which we obtain sourcing, the cyclical nature of the furniture industry, fluctuations in the price for lumber which is the most significant raw material used, fluctuations in foreign freight cost, credit exposure to customers, capital costs and general economic conditions. Any forward looking statement speaks only as of the date of this filing, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new developments or otherwise.

Our revolving credit facility bears interest at a variable rate; therefore, changes in prevailing interest rates impact our borrowing costs. A one-percentage point fluctuation in market interest rates would not have a material impact on earnings during the first sixnine months of 2005.

None of our foreign sales or purchases are denominated in foreign currency and we do not have any foreign currency hedging transactions.

Issuer Purchases of Equity Securities: