Good day, ladies and gentlemen, and welcome to your earnings release conference call. (Operator's Instructions) I would now like to introduce your host for today's program, Mr. Farooq Kathwari. Please go ahead, sir.

Yes. Thank you, Jonathan. I'm Farooq Kathwari, Chairman and CEO of Ethan Allen Interiors. I'm joined by David Callen, our Vice President of Finance and Treasurer. Today we are reporting the results for the three months and the 12 months ended June 30th, 2009. I will provide a very brief summary, Dave will follow with our financial information, and I will then discuss our initiatives and open for questions or comments. The challenges of fiscal 2009 provided us an opportunity to restructure various elements of our business, that while reducing our expenses and costs by $150 million, has also enabled us to introduce many innovative initiatives to grow our business and profitability. As we mentioned in our press release, that our cash position has grown to $63 million from $52 million at the end of June 2009 — during the fiscal year we reduced our inventories by $29.7 million. We also said in our press release that while business conditions remain very difficult, (inaudible) the severe declines that we saw in the first six months of this calendar year compared to the previous year were substantially reduced in July. For the fourth quarter, our EPS strived to restructure and charges was $0.23 loss, and for the full year we ended with a loss of $8.9 million or $0.31 ex-restructuring. At this stage, Dave will provide you with the financial update.

Thank you, Farooq. Please note that in the earnings release issued last evening and in the course of our prepared remarks, reference has been made to certain non-GAAP information, which excludes the effects of restructuring and impairment charges recorded during the quarter and full-year ended June 30th, 2009, and comparable prior year. A reconciliation of this non-GAAP information to the most directly comparable GAAP measure was provided with the tables attached to the press release. As an added reminder, comments from this call should be considered in conjunction with the company's reports filed with the SEC. Discussions containing forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward looking statements reflect management’s current expectations concerning future events and results of the company, and are subject to various assumptions, risks, and uncertainties. Accordingly, actual future events or results could differ materially from those contemplated by the forward-looking statements. The company assumes no obligation to update or provide revision to any forward-looking statement at any time for any reason. Net sales for the quarter were $138.7 million compared to $235.9 million in the fourth quarter last year. The retail division's net sales were $102.3 million versus $176.5 million last year with comparable design-centered delivered sales 43.5% lower than in the prior year quarter. Written sales in retail decreased 38.3% and comparable written sales decreased 40.8% versus the prior year quarter. Wholesale net delivered sales were $85.2 million in the quarter, compared to $147.7 million in last year's fourth quarter. Consolidated growth margin for the quarter was 48.7% compared to 54.2% in the prior year quarter, but improved from the 47.1% in our third fiscal quarter this year. Gross margin was negatively impacted in the quarter by lower sales, downtime in our…

Yeah. Thanks, Dave. As I stated earlier, our main objectives in fiscal '09 were to reduce our operating cost structure, and also implement many programs to position us to grow the business. We have made many difficult decisions including reduction of associates in every facet of our operations to counter the sharp decline in sales. From January 2008, that is when we started taking these initiatives, we have reduced our headcount by 32%. And from June 2008, that is in this last fiscal year, we reduced the headcount by 26%. During the fiscal year we have consolidated several of our manufacturing facilities, two each in case goods and upholstery. We have consolidated several distribution and retail warehouses. We have reduced the cash compensation of our management associates and we have paid no cash bonuses. We have reduced our cash dividends from $0.25 per share to $0.05 per share currently. We have also reduced many other operating costs. The net result was an operating expense reduction on an annualized basis of $120 million, most benefit floating through in the first quarter of fiscal 2010. We also reduced other operating costs of about $30 million relating to the consolidation of manufacturing. Most of them will start benefiting from the second quarter of fiscal 2010. We also expect that about 50%-60% of all the reductions in expenses and costs are permanent, and will give us an opportunity of taking the business of our sales back to about $1 billion. We have also taken many steps to grow our business, including maintaining a strong network at retail, both with our independent retailers and the company operated retail division. We are pleased that while our independent retail network has operated under very difficult conditions, they have continued to manage their businesses well, and 95% of…

Certainly. (Operator's Instructions) Our first question comes from Brad Thomas. Your question, please?

Good morning, Farooq. Good morning, Dave. Farooq, wanted to follow up on some of the comments in the press release talking about the July results getting better. Could you just share a little bit more color of what it is that you're seeing and maybe quantify the improvement that you’ve seen?

Well, as you know we have sort of had an unprecedented decline. It's almost sort of an amazing — what has taken place in the last six months. And as you know, we decided that for us to counter the liquidations of big discounting, and the fact that we are already on an everyday best pricing, gave us some limited opportunities to counter the major discounting in advertising that was taking place so we left it. We went through this period and had some sharp declines. Now in July, a number of things that we have seen. One is that overall we're starting to see some improvement in confidence. Secondly, we have a stronger marketing program, even offering up some special values, all tied to these new initiatives. And the third factor is that we are comparing also somewhat to a lower volumes that were taking place last year. We've got to keep that in mind also. We were running at a rate of 30 — our declines, as you see are approximately 30%-40%. We had half that decline in July — still a decline, but half of what it was running in the earlier months.

Okay. So if you were to sort of adjust for the easier comparison and think about the seasonality of your business do you feel like you've seen a little bit of a pickup sequentially?

Yes, absolutely.

Okay, great. And then just a follow-up on — you alluded to promotions. I know that during the last quarter you've offered some discounts through your rewards program on your website, could you talk a little bit more about how successful this program was and would you think about repeating it in the future?

The program was successful because this is a time when most people were coming in and talking to our folks and asking what we are doing at Ethan Allen. And for us, just to say that we have everyday best price was not enough, so the rewards program gave an opportunity for our design associates to talk to their clients and to say yes, we are doing something. So it was successful. It was relatively a small amount. It was by becoming a reward member they would get a 5% lower price. It was successful. Now again, in terms of getting a major amount of traffic and getting into lots of sales — that did not take place. But we understood that would not happen. In addition to that we also started offering some special incentives on our new programs. For instance, in the June and July period, and in fact that also had something to do with the July period — we offered a custom upholstery — that is all our upholstery is custom in where we introduced 86 fabrics at great values. In fact we have grade A which is our lowest grade. We took fabrics that were in grade F, G, H and up, and offer them at A, and a lot of it also was due to the fact that we were able to work with our suppliers and that they were able to offer us great values. We passed them onto the customers as savings. Now we are continuing to do that. In fact, right now in August and September period we are offering 200 colors of fabrics which we have been able to introduce and again work closely with our partners, and all of them at grade A, which provide an excellent value. Anywhere from $1,200 to $1,500 for custom made Ethan Allen quality sofa. People see that and we are starting to see some results. Secondly, we are introducing this custom in our case goods and we are starting with four of our domestic case goods programs, and we're also offering the incentive about 10% to consumer. So we're giving some incentive, it's going to have some impact, but overall we believe that it is manageable.

Okay. I mean it seems like a smart decision in this environment where the consumer is very conscious of promotions and value. So as we think about the impact to your gross margins going forward, would you expect it to be perhaps a similar rate of impact in what we saw this past quarter?

Well, if you take a look at — just to give you a perspective, in our third fiscal quarter our gross margins were 47.1%. In the fourth quarter our gross margins were 48.7%, so we improved our gross margins from third to the fourth quarter. Our gross margins were more impacted by downtime than what we are doing at retail, and I think as we go forward, as we get our downtime back, the impact on our gross margins are going to be less. If you also, just keeping on with that, if you take a look at our third quarter and the fourth quarter, in our third quarter we had $140 million of sales and we had an operating income loss of almost $19 million. In the fourth quarter we had about $139 million, approximately the same as third quarter, but we reduced the loss to $7.5 million. This is after all this restructuring and impairment charges. And all of that came in by an increase of 1.6% in the gross margin and $10 million reduction in operating expenses.

Great. Thanks so much, Farooq.

Our next question comes from John Baugh.

Good morning, Farooq and Dave. Could you tell us with some detail how the IDA program works? And I guess my question is the compensation arrangement — obviously I understand how you're going to make money if they bring in a new customer to purchase furniture from you, but I’m just curious how it impacts the in-store designers and how you've worked through those issues.

Yes, John. This is public and it's going to go out to an amount of interior designers and so this information of compensation and all of that is not going to be confidential so I’m happy to share it. The way it's going to work is — first of all, let me go back to the company retail division and then I'll also talk about it with our independent retailers. Now obviously we have had a great amount of discussions internally with our independents, with our designers, we have advised them, informed them — so as you know, all of these initiatives I spent time discussing it internally first before we launch it externally. The way it's going to work is in our company-operated division, as you know we have the team concept which we instituted last year. Our teams operate on a salary. Each individual person has a salary and then if the team goes over a certain goal they start getting an incentive. The IDAs are going to be paid between 7%-10% of the business they bring in. For the first $100,000 it's going to be 7%, anything incremental of 7% annually will be at 10%. All this business sales that they will bring in will be added to the goal that our teams have, so it will help them achieve their goals, and they will also be able to achieve their incentive. We want this to be a win-win situation, and this will make it happen.

And it's the same for the independent —

It will be — now, some of the independents are on a commission structure. They are not converted to the team. But we are also working with them so they will have an extra way of rewarding their own associates from the business that is being brought in. Because if we don't make it into a win-win situation, it will create an issue.

Okay. And then I think I heard you say you only spent $1.4 million in 2009 fiscal acquiring licensed dealers, is that correct, number one? And then would you hazard a guess as to what that number might be in '10 — I guess an indirect way of saying how are your dealers doing? Are they struggling or are a lot of them offering to hand the keys to you?

Well, first thing is, it is correct. The 1.4 is correct, and the second is that almost everybody in this world is struggling, John. I don't know anybody who's not struggling, unless you are perhaps in health care and some other related businesses. Now our dealers have really held up very, very well. This is an amazing factor how well they've held up. Now it's a challenge. It's touch and go. I think this change in somewhat of a business in July has helped them. Their attitudes are better, and as I think if you get a few more months like that, the chances are we would not have many folks wanting to give their keys to us. So I think at this stage we don't have any number of people waiting there to give their keys to us.

The incremental 15 days, what does that mean in terms of incremental capital that you're deploying?

Approximately $2.5-$3 million.

Okay. And then my last question is, when we look at the case goods business before the custom, what were the options there? What were the choices, and what are they going to look like a year from now once you're fully implemented? What's the real change, in other words?

There's a lot of changes from its impact on the way we sell to product — it has an impact on our opportunity to give more custom options. For instance in the dining room that we have just introduced — if you go to our website you'll get some of our perspective. Obviously we are starting with more manageable options and as we go forward we will increase the options. Initially what we have done with the dining rooms is offer more finish options, but as importantly, is the fact that we are converting our manufacturing to making parts rather than making finished goods. So when an order comes in, similar to our upholstery, we will get the parts, assemble them — to do this we have to understand the process of finalizing it and working it out — there is a whole new information system, a configuration in our case goods manufacturing similar to our upholstery where our case goods now realizes from a systems point of view that they've got to collect parts and make the item. So it has a tremendous amount of implications. Now the other important thing as we go for a year from now, a year and a half from now, right now our case goods are made in our plants then they go to our distribution center, then from there they go a retail service center, they open them up, wrap them, and deliver them. In the new system, like in our upholstery, we will make it in the plant. There will be the final inspection. It will be packed appropriately, go through our distribution, and be delivered to the client.

And so is the primary to the consumer — you might have six or eight finish options as opposed to one or two — is that the big difference or are we talking — I don't know how you measure it in terms of skew count — and whether this has a lower inventory or higher inventory commitment on your part to service it? Any color there? Thank you.

Inventory would be initially about the same because we'll end up making parts. We will still have some finished goods inventory as we go forward. Overall I think the inventory may be somewhat slightly lower, but that is not what is driving it. What is driving it is the fact — our inventories are under control anyway, but what is driving it, is the fact that we would not end up with any excess unsold inventory. From that point I think it's important. Even with our best of forecast, everything we do we're always left with unsold inventory. This will not have any unsold inventory. From that point of view it is a very, very beneficial thing, as is in our upholstery programs.

Thank you.

Thank you. Our next question comes from Maggie Gillman (ph). Your question please? Maggie Gilliam - Gilliam & Co. : Good morning. I'd like to carry that question a wee bit further. How is it going to affect your operating efficiency in the manufacturing plant? And second of all, how do you see it affecting the balance between imported goods and domestically made, and will you carry on making domestic goods and line cuttings or how is all that going to work?

Well Maggie, these are very, very good questions. And this is such a tremendous paradigm shift. I mean this is changing 77 years of the way we have operated our business and we have to learn — certainly our manufacturing would love us to give them 200-300 items to make in a cutting, they put in a box, and it's out. We know that. So this will create operating issues from an efficiency point of view. But we are putting our heads together. We want to make it work as we do in upholstery, and I am pretty confident that by the time we are through, we are going to learn how to do it right. Now the other thing we have done is we have consolidated our manufacturing to two major plants plus a rough mill and a saw mill. And this gives an opportunity of consolidation so that we are able to become more efficient from that point of view. So we'll take those efficiencies and put it into making this thing work. But you are right. If you take a look at it from a perspective — it is harder to be efficient this way than making long runs. We would have more — what we are going to have is all the — as I said, there will be parts. When an order comes in the parts are going to come, and we already today have run very efficient finishing. So when these are assembled it'll go to our finishing, it'll be finished, and whatever the customer orders. Overall it's a very efficient system. While there will be some inefficiencies in manufacturing, the overall efficiencies throughout our whole channel of distribution is going to make it up and more than make it up. As for imports are concerned, right now in cased goods we are approximately 50-50 or maybe 55-45 domestic to imports, and I think in the end of the day this will end up between 65%-70% domestic and 35%-30% imports and we'll maintain that balance. Maggie Gilliam - Gillaim & Co. : Thank you.

Thank you. Our next question comes from Joe Feldman. Your question please?

Hi, good morning. How are you? Again, another follow-up on the custom operation; how will it change the time to deliver? I mean if I walk in today and order a new dining set and I want a different finish, is it the same six to eight weeks that I would normally receive the product?

No. It will change. Right now, 90% of our upholstery is shipped within 30 days. That's an amazing feat, in keeping in mind that three or four years back we did not ship a single piece within 30 days. Now we shipped average at that time approximately 60 days or more was when we shipped our upholstery or maybe between 60 and 90 days. Our case goods, if you order them, if it's in stock and let us assume you are in California, it would be shipped within that week and you would receive it, as a client, in about three to four weeks because it's got to get through our distribution channels. This most probably will take two more weeks, that's our objective. But you're going to get custom hand-made for you, approximately two more weeks than we do currently.

Thank you. Our next question comes from Budd Bugatch. Your question?

Hi. I'd like to talk a little bit about, again the cost actions you've taken and the impact on the upcoming quarters. You talked, I think earlier or last quarter if I remember right it was about $100 million of overhead actions that you've taken and I think you saw $10 million of benefit this quarter, is that correct?

On the operating expense line, yeah.

The operating expense line — and now you're talking $120 million, so I take it that there's an additional $20 million, or are we going to see if — are we going to see about $30 million a quarter and is all that in the expense line or how is that going to break out?

Yeah. $120 million will be on the expense line which is approximately $30 million a quarter. In this next quarter maybe it might be closer to $23-$25 million. In the second quarter fiscal year, $30 million.

$30 million, so that's the incremental. And then I guess when you get to the fourth quarter you're starting to lack that $10 million that you've already experienced. Now you've said 60% of that is fixed, so I take it there is some level at which volume starts to increase that you have to add back maybe some of that expense back, is that correct?

That’s right. But again, as I said, about 60% of this is going to be permanent, these cost reduction and savings.

Oh okay. So $38 million or $48 million would be variable. Now on the $30 million at the manufacturing level, obviously there's a lot going on with the change to custom case goods. How should we think about that and when will that start to show up?

It'll start showing some in our first quarter, but most of it from the second because these three manufacturing plants would be consolidated in this first fiscal quarter of 2010.

So that I take it is a permanent reduction from the consolidation of plants, not just because of what's going to go on with the move to cellular or lean or however you want to phrase the custom case goods operation.

Well, most of it is based on consolidation and some is also due to the initiatives, but I would say 80-20.

80-20, okay. Now as you look at those initiatives and there have been a few questions from Joe and before on that, you talked ultimately of going to 65%-75% domestically produced, is that because you're going to now introduce more domestic patterns or are you going to bring back some of the patterns offshore onshore?

It's a mixture of two, Budd. We believe that going into custom creates a competitive advantage. I mean, think of this, how does one maintain manufacturing in the United States? The reason we are successful in our upholstery is because it's custom. Even then we had to setup a plant in Mexico to provide us cut and sew materials which we are doing very successfully. In case goods, even though we have millions — almost $100 million over the last 77 years invested in our manufacturing, it is hard to maintain manufacturing in the United States unless you create an environment which gives you a competitive advantage. Custom does that. Now fortunately, because our system of a vertical integration helps us to make it happen, so for us, having manufacturing, having saw mills, having plants in Vermont and North Carolina is a competitive advantage, but only if we are able to turn them, in our opinion, in to custom. And that is, I think, how we are going to successfully be able to do it and I believe it'll give us an opportunity to build the business because we will provide a competitive advantage, and on top of it we have good values by consolidation and technology that we have been putting in, and we believe it's going to help us.

Okay. Well I think when you look at the SMPs, what you're going to do is the rough mill and the saw mill are going to really feed parts into the SMPs, is that correct, and the parts out of the SMPs will be pulled into the two plants?

Substantially there's an in between, which is the machining. So it goes from the saw mill to the rough mill to the machining and then it goes to the SMPs, yeah.

And all of that's not going to be on a cellular. All of that will be simply putting the stock parts that can be drawn into them.

That's right. That is not cellular because in this you don't need cellular. What is going to be end of the day, where the cellular is to some degree is just the basic assembly of it. Parts coming from the SMPs will be assembled and it'll go into finishing, it'll be packed, and then once it's packed and inspected, then it's opened at the customer’s home. It's 77 years we have not done it.

Now two other questions on that. One, the custom work primarily will be finish options, I will suspect their not mainly sizing options? You wouldn't size a dining table larger because a client wants it sized, or is that an option you're going to give?

Not to start with.

So it's really finish options as opposed to —

Finish, it's hardware, it is also changing some doors and things of that nature, but we are starting with finish and then we will start adding other options because this is such a major transformation, we just got to manage it.

Okay. And another question I had was on the promotional side of the business. You obviously have seen with needing to go to Celebrating American Innovation and the rewards program and the upholstery promotion, some real benefit of going away into everyday value pricing. You were very successful years ago of promoting, if I remember, about 12 or 13 times a year and having different sale events. Are you planning to go back towards that kind of promotional environment?

No. That is not the objective. In fact, almost all the promotions we have done have also a strategic objective. For instance, we are right now offering some values in our dining, but it is also tied to going into custom. So we are doing two things at the same time. In our upholstery we were able to offer special values, but it's also tied to getting new fabrics at very good values, which we passed onto the customer. So from that point of view we were able to bring something new and offer a great value, and then we will make those values permanent, at least half of them, in our programs. So all these promotions, as you call them, are tied to giving better values at a time when consumers are demanding it, but we're also tying it to transforming our business.

Okay. But you had used a rationale before of going to everyday value pricing for level loading the plants. But since you're going away from cuttings in the case goods, you can now level load basically to demand on a one-piece flow kind of operation. So I would think that using promotional vehicles is actually more viable in that kind of environment. Does that not make sense?

What you don't want to do is this; where the issues become where you promote only certain items is then you have got to back it up with inventories, even if they are parts or even if it is fabrics. At the end of the day, however smart you are, you are left with 30%-40% that you have got to then figure out what to do with it. That is a great thing of the everyday best price is the fact that we don't have much leftover. So we are balancing it and what are going to do about it is offer all these options, but what I don't want to do is end up by having to project four or six months from now — that's what we used to do, and end up with 20%-30% of products either with excess inventory or we had delivery problems. So we are managing it. I would just continue with what we are doing. These are difficult times. I think we have now this special, you might say values in place, tied to introduction of our conversion into custom, right up to the spring of next year.

All right, well we'll be very interested to follow your progress on that conversion. It's a challenge, but I think it's a very interesting concept so good luck on it. Thank you, sir.

Thank you. Our next question comes from Barry Vogel. Your question, please? Barry Vogel - Barry Vogel & Associates: Good morning, Farooq. I would like a little bit more color on the annualized savings — answers just a little bit more. I wrote down on a little table that for operating expenses you probably would have savings next year or in the new fiscal year, about of $115 million in actual savings hitting the P&L, and you had $10 million in the fourth quarter of fiscal '09. For fiscal '09, were there any other actual savings that hit the P&L besides the $10 million in the fourth quarter, that's the first part of that question.

Well on an operating expense line you had $10 million. There was some benefit, but on the other hand we had lots of other costs above the line that's in the cost of goods which is sort of complicated because the same time we are consolidating, same time we have down time and all that stuff, but I think what we know is $10 million was an actual saving of operating expenses in the fourth quarter versus the third quarter of fiscal '09. Barry Vogel - Barry Vogel & Associates: Right, but if we look at fiscal '09 to fiscal 2010, and again I — (Call unexpectedly terminated)