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Furniture Forecast From BDO Seidman - December 2006

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Monthly Forecast From BDO Seidman New Orders. According to our most recent survey of the residential furniture manufacturers and distributors, new orders in September 2006 were 10 percent below the level of orders received in September 2005, the most significant decline since April 2006 when they were down 13 percent. Part of the April decline was attributed to a late High Point Market, although orders did not pick up in May. The decline in September followed decreases in August of 7 percent and July of 4 percent. For the month of September, only 30 percent of the participants reported increased orders. This compares to the results in August where 30 percent reported increases. Year-to-date, new orders are now 2 percent lower than last year’s first three quarters. On a year-to-date basis, 34 percent of the participants have reported increased orders. This compared to approximately 36 percent in August. Shipments and Backlogs. Shipments in September 2006 were 3 percent lower than September 2005 but were up 10 percent over August. The increase over August is somewhat normal. The 3 percent decline in September was slightly lower than the 5 percent decline in August and a 4 percent decline in July. For the month of September, approximately 42 percent of the participants reported increased shipments. This compared to only 30 percent of the participants in August. We would expect the percentage of participants to decline in the months ahead based on current order levels. Year-to-date, shipments remained 1 percent below the first three quarters of last year. Some 39 percent of the participants reported increased shipments for the first nine months. These results were similar to the results in August. Again, we expect some slippage in these results next month based on order rates. Backlogs fell 7 percent compared to last September and fell 3 percent compared to August. The decline in backlogs resulted from shipments exceeding new orders in September, whereas last year, shipments were about equal to new orders. Receivables and Inventories. Receivables in September were 1 percent lower than September 2005. While not in line with the decline of shipments year over year, the decline is in line with year-to-date shipments. Accordingly, receivables levels appear to be in reasonable shape. Inventories were 2 percent lower than last September, but were up 1 percent over August. The 2 percent decline in inventories matches up with the year-to-date declines in shipments and orders, but will need to be watched in the coming months. Factory Payrolls and Employment. Factory payrolls were 10 percent lower than September 2005, reflective of the decline in orders as well as the effects of plant closings during the past year. The 10 percent decline compares to a 12 percent decline in August. Year-to-date, factory payrolls remained 8 percent below last year’s levels. The number of factory employees fell 1 percent below August levels and were 6 percent below September 2005 levels. The 6 percent decline was similar to the results of August and again reflects slower business and plant closings. BDO Seidman serves clients through more than 35 offices and 250 independent alliance firm locations nationwide. Their Furniture Industry Services practice publishes Furniture Insights®. For more information go to http://www.bdo.com.

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