Good day, ladies and gentlemen. And welcome to the Ethan Allen Fiscal 2016 First Quarter Earnings Release Conference Call. Now, I will introduce your host for today’s conference, Mr. Corey Whitely, Executive Vice President, Administration and CFO. Please begin.

Thank you, Latif, and good afternoon, everyone. Welcome to Ethan Allen’s earnings conference call for our fiscal 2016 first quarter ended September 30, 2015. This call is being recorded and webcast live on ethanallen.com, where you will also find our press release, which contains supporting details, including reconciliations of non-GAAP information referred to in the release and on this call. As a reminder, our comments today will include forward-looking statements that are subject to risks and uncertainties, which could cause actual results to differ materially. Please refer to our SEC filings for a complete review of those risks. The Company assumes no obligation to update or revise any forward-looking matters discussed during this call. Also joining the call today is John Bedford, our Vice President, Corporate Controller. After our Chairman and CEO, Farooq Kathwari, provides his opening remarks, I will follow with details on the financial results. Farooq, will then provide further updates on our ongoing business initiatives before opening up the telephone lines for questions. With that, here is Farooq Kathwari.

Yes. Thank you, Corey. And thank you for participating in our conference call to discuss the results of first quarter ending September 30, 2015. We are pleased with our results, considering we are in the midst of a substantial transformation that is leveraging our unique, vertically integrated structure, while repositioning our offerings, interior design network, our technology platform, manufacturing and logistics. The main financial highlights of the quarter are: Gross margin of 55%, operating margin of 11% on $190.4 million sales which were flat from the previous year quarter. Earnings per share of $0.46, compared to adjusted EPS of $0.44 last year. EBITDA of $25.7 million or 13.5% of sales, dividend of $4 million in the quarter, increased 38% from the previous year first quarter. With a healthy balance sheet of cash and securities of $95 million, as of September 30, 2015 and no net debt. We are well positioned to execute our initiative to raise up to $250 million in the debt markets as previously announced. Written orders for the Company retail division decreased 9.3%, with comparable decreasing by 9.8%. As mentioned in our earlier prior release on October 19, 2015 the timing of our marketing initiatives had an impact on our written orders during the quarter. We are however seeing increased trends of written orders in October 2015, and we expect stronger written orders in the second quarter and moving forward. As we’ve discussed in the past, I will be discussing in greater detail of our transformational strategy, but before I do that Corey will give a brief overview of our financials.

Thank you, Farooq. We ended our fiscal 2016 first quarter with strong operating metrics and earnings. Net sales for the quarter of $190.4 million or 17 basis points off compared to prior year period sales of $190.7 million, which were impacted by timing this year of our marketing programs and annual price increase. Our manufacturing achieved increased efficiencies that contributed to a strong gross margin of 55% for the first quarter, same as in the prior year first quarter. The retail segment net sales for the first quarter were 76.5% of consolidated net sales compared to 76.1% during the fiscal 2015 first quarter. Consolidated operating income for the first quarter was $20.9 million with an operating margin of 11% compared to $20.5 million in the prior year first quarter, with an operating margin of 10.7% and adjusted operating income in the prior year period of $21.9 million with an adjusted operating margin of 11.5%. There were no material adjustments this year, and in the prior year the adjustments excluded $1.4 million expense associated with just addition of real estate. Additional operating expenses this year primarily related to increased advertising expense, up about 15% this quarter, as compared to the prior year quarter. With the extended time of our current promotions running through December 31, along with our strong September 76 Page magazine, and with the TV, print and electronic media, the first half advertising cost was somewhat frontloaded in the first quarter, due to a heavy September. However, we expect our advertising cost for the first six months of fiscal 2016 to level out with an overall increase of approximately 5% to 7%, over the prior year first half. Wholesale division net sales of $120.5 million for the first quarter decreased 3.3% from the prior year period when we benefited…

Thank you, Corey. As we have discussed in the past, we are aggressively pursuing a transformational strategy. Repositioning Ethan Allen as a leaner, vertically integrated interior design company. We believe that beginning in fiscal 2017, we will be well positioned to begin an accelerated growth phase towards sales of $1 billion at which level we expect to increase our operating margins from our current industry leading 11% to about 15%. A brief overview of our various initiatives and offerings. As discussed Phase 1focused on casual designs and was introduced to consumers in winter of 2014. Phase 2 referred to as Georgetown, focusing on formal classics was introduced to consumers in May, June of 2015. And Phase 3, referred to as romantic classics inspired by European attributes mostly French and Italian, is just now getting into our design centers. Phase 4, covering attributes of classics with modern attitudes, are scheduled to be marketed from late spring 2016. Regarding our design center network, in North America, our focus remains to attract talented interior designers, to add to our qualified team of 1,500 designers. Last week, we had our Annual Interior Design Recognition Conference at our Danbury headquarters and recognized over 200 of our top interior designers. One of our major competitive advantages is a talent of our 1,500 in-house interior designers, supplemented with about 5,000 interior design affiliates. Resulting in about 70% of product custom made to order when orders are received. This makes North American manufacturing very advantageous and also helps in inventory and cash management and lower returns. We also continue to open new design centers and are renovating existing design centers. During the last six months, we have opened new and relocated design centers in Philadelphia, Pittsburgh, Wichita, Kansas, Toledo, Ohio. And under construction our design centers in San…

Yes, sir. [Operator Instructions] Our first question comes from the line of Budd Bugatch of Raymond James. Your line is open.

Hello, Budd.

Good afternoon, Farooq and Corey. This is actually Bobby filling in for Budd. I appreciate you guys taking my questions.

Yes, Bobby.

Just real quick, I was wondering if you can give some more detail around the size of Phase 4s introduction compared to the first three phases.

Yes, Bobby. It’s a good question. The Phase 4 actually is going to be somewhat larger than our Phase 2 and 3. This is, as I mentioned these products are classics, with a modern attitude and we believe will expand our reach to larger population base including the millennials.

Okay, so is it larger than Phase 2 and 3 combined or larger than Phase 2 and 3 on the standalone basis?

On the standalone basis.

Okay. And then, maybe could you also, maybe provide a little color as with the first three phases have you been able to reach that younger customer in any of your data or you starting to see that that trend changing your favor?

We are starting to see, but keep in mind the Phase 1 was somewhat more on the casual side and the Phase 2 and Phase 3 are more on the classics and the romantics and we made some impact, the major impact is going to be made in Phase 4 which is going to directly impact, you might say, the younger, the millennial customers which I think you referred to.

Okay, I appreciate the color. And then, one last one from me, I just – I noticed there in the release, there wasn’t any shares bought back this quarter, can you maybe just give a little – give a little additional thoughts on the share buyback as we move forward?

Yes, we did not, we are in the process as we’ve discussed of looking at our total capital structure, of raising $250 million, as we do that we will take a look at the utilization of those funds, whether in dividends, whether in share repurchases, and that we will do as soon as the funds have been raised and our Board is able to make a decision.

I appreciate you answered my questions and best of luck going forward.

Thank you, Bobby.

Thank you. Our next question comes from the line of Brad Thomas of KeyBanc Capital Markets. Your question please.

Hello, Brad.

Yes, hi good afternoon, Farooq and Corey. Let’s say, my first question, if I could – would be around promotions, and I was wondering Farooq, if you could just give us a little bit more detail on why you decided to change the promotional cadence, it seemed that the more frequent, monthly discounts as opposed to the longer term ones, that the more frequent ones are better at driving sales, why did you decide to change that?

Yes, I think Brad, that is an important question, and the reason was that, with Phase 2 and Phase 3 being introduced, Phase 2 came into our design centers around May and June, Phase 3 just coming in. We needed to make sure that we would have the ability of making these products, getting them into the design centers had not necessarily advertise them and not be able to deliver on time. There is too much of happening at – in a limited period of time and this ability for us to have a longer shelf life of our direct mail magazines gives us an opportunity of having the product come in and even if it is a little bit, coming a little bit later, it does not miss the opportunity of advertising. That’s why, for instance if you take a look at our magazine in October, which also will be in November, some of the new products which is Phase 3 has come in early November, I mean early October, some will come late October, some in November. This gives us an opportunity of making sure that when we advertise it, we get the benefit of it because in a very compressed time, we are introducing a lot of products. Then also on the manufacturing side, even though as I mentioned we have, our manufacturing has done extremely well. But we – we do have, on one hand, I would like to have more sales, on the other hand because of our unique structure of making the products in our own workshops here in North America, we’ve got to manage that process too. Now conversely if we had done what many others have done and they’ve done it successfully that they develop a product line, have it made offshore, get at large quantities, put it on sale and they can sell it. In our case, we make the product and then 70% of that is made after it is sold to the customer. In our model, is different than a model whereby you go out and buy the product and sell it and be able to service it. So service was an important factor in taking our promotional calendar to a longer period than we've done in the past. Now going in January or February, March, we are looking at it to see whether we would be in a better position for especially the products that have been introduced in Phase 2 and 3, so that we can go back to our monthly marketing that period but then, after that, we're going to be introducing the Phase 4. But Phase 4 is not going to impact the first, I mean the third quarter of this fiscal year, Brad.

Got you. That's helpful, thank you. And then just with respect to understanding the cadence of the business, and how much backlog you have, so that we can maybe think about what revenues are going to look like going forward. I guess as we look at the fourth-quarter written comp of 10%, and this first-quarter comp of almost negative 10%, is this really a case of timing, where a lot of sales fell in the fourth quarter rather than the first quarter? And so as we stand here today, there's really not a backlog to work through? Is that the way to think about it, if you blended those two quarters together?

Well, it is a little bit more complicated, because of the nature of customization, because the nature of all this product. Like for instance, you are right, our orders did fall into the fourth quarter. But again, our Retail backlog as of September 30 is about 3.6%. So our Retail backlog has increased and not decreased, despite the fact of these written orders. So it has also a lot to do with the fact of customization, and our process of making all these products. That's – and the other thing is that the October increase in business will have a positive impact on deliveries in this quarter, if that's your next question.

Got you. Okay. And if I could just ask one last question about the Board, as you approach your Annual Meeting here. I know there's a couple of Directors who I believe are stepping down or retiring from the Board. Maybe could you just talk a little bit about why you think the Board members that you are putting up are the right ones for the Company?

We have – Brad, only actually last night filed our proxy. And we also filed, early this morning, a strategic letter giving all these reasons why the Board members that are coming in are very qualified, and will add a lot of value. So I would suggest that, because all of that information is in our proxy and the strategic letter that has been filed, if you want to, I can have Corey forward it to you, the strategic letter, which is a public document.

All right, I will go read it. Thank you, Farooq.

All right, Brad. Thanks.

Thank you. Our next question comes from John Baugh of Stifel. Your line is open.

Hello, John.

Thank you, good afternoon. Status of the bond deal, Farooq?

If you folks were to just stabilize these markets and don't tell us that there is some sort of – what do you call the word?

Disruption.

Disruptions or whatever, John, as we mentioned in our press release last week, we had discussions with a number of leading institutions. And we received from – we understand from our bankers, very positive comments. But in the next week or so, we will be making a determination whether it is the right time to go, and mostly, we're looking at the rates as you know I don’t like to pay a lot.

Okay. Any price talk that you could share with us at this point?

That's what I'm saying is, is the pricing is a factor. I just want to make sure that the price is right, because we are not in hurry to get it. There is nothing – we don't – we are not in an urgent matter to get this. I want to make sure we get it at the right price.

Okay. And then to help us understand so you went from a monthly to I guess this quarter will be a quarterly promotion. Would we expect to see orders pile up in December to beat the end of that promotion? You mentioned October was up or strong. First of all, what is October tracking? And then how would you expect the cadence of the promotion the work in terms of orders written.

Well. I think it will be unwise to start giving numbers other than to say it is strong, because we still have to still a long way to go to the end of the quarter, but to answer your question. We would expect that most of the business will come in October and November, but generally as you know December is not a strong for overall furniture. It is a somewhat stronger accent. So we should expect to get most of this business in October and November.

Okay. And then could you comment on your International businesses particularly China whether you are seeing anything there?

Yes. We have been watching it carefully. We’ve had good meetings in fact about two weeks back, 10 members of our Associates from China were here. They are very positive. And interestingly what we hear is, this is it seems to be holding and our business is increasing actually in China. And they are actually investing a great deal in renovating a number of their design centers and leading markets. And the reason I believe is this that as that happens in all good times, lot of folks come into business fast and those are the one who go out fast. The one who have a competitive advantage, the one who provide have the ability to survive. They are ones that are doing well. And our partner in China is very stable and is doing well. And from our business is up and we understand from them, their business is holding up too.

Hey Farooq, we haven’t heard anything yet, we on the government contract?

Yes. I don’t know where the government is so slow, John. I’m sort of – we have been ready, we spend a lot of effort and time and Dan Grow who has that – we expect, they tell us that they were waiting for the fiscal year to end and they will do it in October and they tell us any day, but we’ve got to just have to make the decision.

Okay. And my last question is just is candidly as you can, feedback from either your designers or your licensees store managers, what have you, on the product changes you’ve made good and bad?

We had last week 200 of our top interior designers here. These are the folks who write about over $200 million of business. For the last 30 years, we have been recognizing them. Not only do we discuss with them our current products, we also discuss with them our new offerings. They are extremely motivated. They believe we are absolutely on the right track. And obviously, as much of product as we've introduced, some product does extremely well, some is in the middle and some has poor results. That happens all the time. But overall, the reaction is very favorable, keeping in mind most of the product came into our design centers in June of this year. So it is a relatively short period of time, June, May. June, is when second phase, which was a very important introduction. And the third phase is just getting into design centers now. So I would say that the reaction is positive, and that we expect to have positive increases in our sales, John, after…

And I lied, I have one more. And that was, could you be a little more descriptive of the promotion? What percentage of the products you have kind of on sale? What the sale discount rate is? And then how the December quarter may or may not be influenced by any clearance of older floor samples, product in the warehouse, et cetera?

Well, when you look around and see the kind of promotion that are taking place, every day, folks are selling products, or at least advertising 40% to 50% I mean it is crazy out there. Because of our nature of our business, and the credibility of our 1,500 interior designers, we have to maintain credibility. For instance, in the last two weeks, we just offered a special offer which we called Start Something Beautiful, and get one Ethan Allen great item at a 30% saving, one item. It had a very extremely positive reaction by our clients, and even new people, because at Ethan Allen, they recognize our value. And when we give one item on 30% off, it really has had a major impact. Now, we don't want to fall into the trap of having those kinds of discounting. But overall, John, most of our products are sold at a savings of between 10% to 20%, but the general, the median, is about 15%, is what we give as a discount.

Would that be on the entire product line?

It would be. Yes.

Okay. And then lastly, are you doing anything with financing, in terms of the promotions?

Of financing yes, John, we always offer a number of financing options. And mostly – interest rate, most of the time, they have to pay a monthly payment, and it is working well…

Was it more aggressive, or similar to what you've offered before, in terms of the term, or the rate, or what have you?

No, it’s about similar.

About similar. Thank you very much. Good luck.

All right, John.

Thank you. Our next question comes from the line of Jeremy Hamblin of Dougherty and Company. Your line is open.

Hello, Jeremy.

Good evening guys, thanks for taking the questions. I wanted to just build on that last point about the 30% off. And first just ask, on the margin side and gross margins, and you have been getting fairly consistently up in this 55% range running those types of promotions, which is unusual for the Company historically. Is that likely to have a negative impact on your gross margins? Specifically as we look forward into the December quarter, and then beyond that?

Jeremy, you know, obviously we have been watching it very carefully. We have been able to maintain 55% gross margin despite many, many challenges at our manufacturing level, at our retail level. Our retail has had to absorb all the clearance products. And because of that, the retail gross margin – I mean the operating margin is about 1% or so, which is very, very low. Think of this, that our operating margin at retail should be, or was anywhere between 3% to 5%. At a 3% operating margin, even at a current rate of sales, our overall Company operating margin has the opportunity of going from 11% to close to 13%. That is just at our current level. So our opportunity at retail is to increase our margins. And I believe that, with all these promotions, everything we have going, we have the opportunity of continuing close to the gross margin that we have.

Okay, let me build on that, then, with a follow-up. And you mentioned that the 30% off promotion has been very positive reaction at this point in time. And that you see a lot of competitors who are not vertically integrated running 30%, 40%, 50% off, really eye-catching, eye-popping marketing tools, to get customers into the store. In this era, in which the customer is looking for a deal across retail, does the fact that you guys are vertically integrated, and if the margins or the discounting has to be higher, simply to get the sale done, does that put you at all at a disadvantage? Is that part of the reason why your sales have not been a little bit higher compared to some of your peers? Or can you help me think about that a little bit better?

Jeremy, that is one of the reasons. Obviously, we can have more sales, and not have 55% gross margin. We could have more sales, and have more returns. We could have more sales and higher inventories. So it is a balancing act. We run a business, keeping in mind that we've got to not only have sales, but we've got to have appropriate margins. We control our inventories. We have good cash flow. So those are things that – I don't want to increase our sales, and not have the disciplines of running our business with those sound metrics that I mentioned. Yes. We could do more sales, if we decided to go out and buy a lot of product from overseas build an inventory and sell it, yes, we'll have more – and put it on sale, 30% to 40% off. But it would change our model.

Let's take that a step further, then. And in the release and in your talking points, you address the goal of getting to $1 billion in sales, with 15% operating margins. And it sounds like you are not expecting a ton of growth this year, that you are thinking you are putting the pieces in place to grow from here. Help me think about the bridge of how we get from $750 million run rate of sales to $1 billion. How much of that is coming from an increase in the number of stores or company-owned stores? How much of that is coming from Internet sales increasing? It is a big number. But over the last three years, the compounded annual growth has only been about 1%, and it sounds like you are expecting relatively low growth this year. How do we bridge that gap?

You are talking about a 20% to 25% increase. That’s what we are talking about, and that is feasible. Before we spend the resource of advertising and money, we need to make sure that we are – offerings are in the place, our design centers are renovated, we are able to service it. Because in our model, if we become too aggressive and don't service it, it backfires. 20% is not something that we cannot do, Jeremy. That's what we are talking of between where we are now and a 20% increase. Within – our existing design centers can do it, let alone the new ones that we plan to add.

So if you are looking at getting into that number, it is – you feel like, without substantial additions, that it's really a combination of growth in Internet sales, as well as having your standard box, the average unit volumes, increasing fairly substantially? Is that the way I should be thinking about this? This isn't about unit growth at all?

Yes, you see, we did order $1 billion a few years back, with design centers that were not as strongly positioned as we have them today. Interior designers that was not as strong as we have them today. In the last five, six, seven years of when we did $1 billion, we have changed almost half of our interior designers. More qualified, more entrepreneurial. We have continued to put our design centers in the right places. We have added technology. And keep in mind, as I said, we have been improving our technology. 90% of the folks who are coming to our design centers have gone already to our website. The good news is, they are more qualified. Seven years back, they used to do window shopping and take a lot of time with our interior designers. Today, when they come in, they are qualified. So I think opportunity of doing 20% within our existing structure is very feasible, and we could even do more, as we expand nationally and internationally.

Okay, great. Just one additional question. This is maybe for Corey, as well. So you had – if I go back to the last quarter, you had 11% increase in written orders. You had a retail backlog that increased almost 19%, and that's come down to 3.6%. And your Wholesale backlog at the end of Q4 was up $19 million, but that did not really translate to sales. What has changed in the dynamic, where the fairly stable correlation that the Company has historically had between written orders, it is not very predictive anymore, in terms of how the next quarter's delivered sales number is? What – should I interpret this as, you just did not sell a lot of accents, or things that would be much shorter timeframe on delivery? That you sold more goods that are 8 to 12 week delivery times? Or that end of July and August were so weak that none of those deliveries helped the end of the September quarter. Because it is kind of a head scratcher for me, as to where the sales level came out.

All right, Corey, go ahead. Try to answer it. Go ahead.

You asked a lot of question these. Jeremy, I tell you the – in my remarks earlier, I did not mention the undelivered backlog for retail, because that number is a harder number to really calculate and project off of. Truly, our net sales are the most predictable, from a consistency standpoint, from period to period. Because written orders are so dependent upon the timing in the quarter, of when they occur. And on the Wholesale side, the cadence of their shipments, which can fluctuate from two to four to six weeks, in those windows, and the timing of the orders all have an impact. So it is not as easy to track on the undelivered…

And also, I would – what you said, Jeremy, is that it is. Many years back, we were the ones who started this written sales. And the written sales, and you look at period – end of the period. If you don’t end the sale at the end of the month, it changes. We could have a much greater sales two weeks later, which does not reflect the quarter. So they are becoming more unpredictable than it was before.

Great. Thanks, guys, appreciate you taking my questions.

All right, Jeremy.

Thank you. Our next question comes from the line of Kristine Koerber of Barrington Research. Your line is open.

Hello, Kristine.

Hello, good afternoon. A couple questions. I just wanted to confirm. So you stated in the press release that you expect to resume growth in fiscal 2017. So are we talking another nine months of disruption to the business? And what should we think about, as far as the clearance merchandise, as you get into Phase 4?

Yes, we did say that our main opportunity of substantial increase should start from fiscal 2017. That does not mean that we would not grow our business in the next six months.

Okay. And then as far as clearance, is that going to be a major disruption over the next couple of quarters? I mean where do you stand with the clearance products, especially as you get into Phase 4?

Well, it will continue the way we have it now. Keep in mind, in our structure, we don’t have outlet stores. Everything that we do is done through our design centers, and our retail – and sometimes through our service centers, as our warehouse is the retail. And we will – our objective will be to continue on the plan basis in the next year, to sell that product, it will have some impact on our retail. But I think overall, as you can see, we have been able to maintain a good gross margin for the enterprise. And I think that is an opportunity we have. continue the way we have it now. Keep in mind our – in our structure we don’t have outlet stores. Everything that we do is done for our design centers and our – and sometime through our service centers that our warehouses the retail and we will – our objective will be to continue to plant basis in the next year to sell though that products, it will have some impact on our retail. But I think overall as you can see, we can able to maintain a good gross margin for the enterprise and I think that is an opportunity we have.

Okay. So I just wanted to clarify that it is not going to be any heavier than what we’ve seen in the past several quarters, on the clearance side?

No, you would not. It would be about the same.

Okay, fair enough. And then, if we think about Phase 4, you indicated that Phase 4 is larger than Phase 2 and Phase 3, on a standalone basis, can you kind of quantify, I mean, how big – I was under the impression, when you initially announced Phase 4, that it was going to be the smallest of, the four phases and now it’s turning out to be the second largest. Can you kind of quantify how big that’s going to be?

It is going to be, I mean, I just – it’s a hard question, because when we talk how big, it has a different implication in number of units, different implications in terms of the cost of the products. But I will just say, just so we can put this in perspective, I would say that in terms of overall investments, and the number of investments, most probably will be in the range of about 15% or so higher than either the Phase 2 or Phase 3.

Okay, that's helpful. And then just lastly, on your longer-term target, to get to the $1 billion, the additional 20%, 25% increase in sales, how important is the younger consumer, to reach that goal? And then what is the timeframe to hit that 15% operating margin?

We are already operating at 11% operating margin, which really is sort of at the top in our industry. And this is with all these challenges that we are talking about. I think the opportunity of increasing it is always there. We are not going from 3% to 15%, we are talking from 11% to 15%. So the opportunities, Kristine, is, it is not something like a major undertaking for us. This is, I believe, an opportunity of, as I said, just going into normal operating margin in the retail of 3% to 5%, take it from 11% to 13%. Then we've thought of increasing our sales. Our vertically integrated business has a great operating leverage. So when we talk of increasing our business by 10% or 15%, 20%, we have a major operating leverage in our operating income.

So as far as timing, retail to get to 13%, are we – once this transformation is complete, is it just a couple years out? Or are we talking five years, seven years?

I would think that you are going – should see continuous improvements even as we move forward into the third and fourth quarter, you should see that, we are not saying we’re not going to make improvements, even at the 11% that we have. We have the opportunity of increasing from where we are. What we are saying is that from FY17, which starts June of next year, we have even a greater opportunity of increasing it.

Okay. And then to get to that top line target, the question was, how important is the younger consumer, the millennial customer, to get to that $1 billion? Is that a key to reach the number?

I don’t think it’s a key. But it is important.

Okay. Thank you.

All right.

Thank you. Our next question comes from the line of Cristina Fernandez of Telsey Advisory Group. Your line is open.

Hello, Cristina.

Hi, good evening. I wanted to ask about the lift you're seeing in October on written orders. How much is that driven by that 30% off promotion on one item. And should we see more of these types of promotions from Ethan Allen, going forward?

Well, now 30% is creating a buzz. It is getting us new customers. We talk of millennials, we can see a lot of millennials coming in, because they look upon it and see that they can get started with Ethan Allen. So at the end of the day, they are of course buying a lot of other products. But 30% – this one gets them opportunity, especially to the millennials and the younger people, to come in and get started with Ethan Allen. You’re going to see, continuously, some innovative ways for us to get people, yet do not yet do not give away a lot of margins.

Okay. And my second question is, when you think about the price increase that you did, how much did that shift sales to the fourth quarter versus this quarter?

Well, it’s hard to say in June, when the impact in the June alone, we had approximately a 20% increase in sales in the month of June. That resulted in about 10%, 11% I think close 11%, Corey, increase in our written for the fourth quarter of last year.

And how much – and as you think – this last quarter, how much was July down as a result?

Sorry.

I would assume the impact, then, of the price increase was mostly in July. How much was July down?

Well we don't give numbers for each month. But overall, as you see, we had – overall, we had a decline of 9.3% on total written.

And then one last question for Corey. Your CapEx this quarter was below the recent run rate. How should we expect that to trend, over the next couple of quarters, to get to your target of $20 million to $25 million for the full year?

Start trending higher in the second half, and this quarter will be probably close to par with where it was in the first quarter.

Thank you.

Thank you, thank you again. [Operator Instructions] Our next question comes from the line of Justin Bergner of Gabelli and Company. Your line is open.

Hello, Justin.

Hello, Farooq. I should probably say good night at this point of the call. But thanks for fitting me in. I guess my first question was just in regards to any differing trends across case goods versus upholstery versus accessories?

We have continued to see increase in upholstery, and now also accents and accessories. So somewhat stable, in terms of the ratios between the three, with slight increases in –somewhat more in accessories.

Okay. Switching gears, how does Ethan Allen think about combating some of your competitors that are trying to move up to your price segment from below?

Well, you know, Justin, this has been something we have been combating all our lives; it is nothing new. This is not something that’s happening – now in fact, what’s happened is that, especially in the last 15 years, with globalization and commoditization, furniture came in, especially case goods, even upholstery, due to the fact it was being made offshore at fairly lower prices. Everybody was affected by lower margins and deflation. It stopped, to some degree, I think, in the last couple of years, we have not seen that. If anything, we’ve seen price increases coming in. I think that the focus of most people in our industry really is selling furniture as a commodity. And because of that, promotions and sales are very, very important. They have a tough time selling the product. When we put one item at 30% off, it creates a buzz, because of our credibility. And the fact that – of our quality, and the service we provide. So I don’t think anything new, Justin, that we see, that is any different now than we’ve seen all along, in terms of competition at all levels. We just have to differentiate ourselves in products, in our – and overall value, and then the service we provide. So I think we are very competitive from that perspective. And as I’ve been saying that, because of the nature of our business, the vertically integrated business, we have to balance between what we sell and what we service. And that’s our model. That’s great model for cash generation, inventory management, lower returns. But does, in this major under change, it does restrict us from becoming extremely aggressive in marketing, because of the fact that we’ve got to service it. 70% of the product is made when somebody orders it. There’s a big difference.

Okay, appreciate that answer. I was thinking more in terms of one competitor that also has a North American-centric manufacturing footprint, and sort of a similar geographic profile. If you want to comment further on that dynamic?

No, I do not know what you are referring to, Justin.

Okay. Then I will move on to my next question, which is, you’ve obviously been running this Company, through thick and thin, for decades. At what point in time, assuming that there are no external factors that interfere with your ability to sort of make your own decision on a potential future retirement at some point as CEO. At what point sort of in the Company’s lifecycle do you think it would be appropriate to sort of consider sort of future leadership for the Company? I know you just entered into a multi-year contract extension. But just sort of conceptually, what do you – what milestones do you want to hit before you think about transferring leadership of the Company?

Justin, I don’t know how old you are, but I’m 46 biologically. So I don’t know how old you are. I think age is not a factor, it is the factor of being relevant. And have the ability to be – now if I’m not relevant, that is critical, and that is where our Board comes in, even myself. I am the largest shareholder in this Company. I do want to be in a position where I’m not relevant, I don’t have the ability, I don’t have the strength. If that is the case, then I should not be – should be running it. But keep in mind, we have a very strong team of leaders, because it is a vertically integrated Company. Running a sawmill is a very different business than running a retail, running cased goods, running upholstery, running 150 design centers with management all over the country. We have a very strong and a diversified group of leaders running this business. And so to answer your question, as I said, it is a question always of being relevant. You can be 35 and not relevant, and you could be 46, like me, and be very relevant. All right?

Okay, thank you for that perspective, and thanks for taking my questions.

All right, Justin. Okay, Latif, I think that as Justin said, I will say good night. Anybody else there?

Actually, we do have one more in queue, sir. I believe it is a follow-up.

Yes, we will take it, yes.

Okay we have a follow-up question from Budd Bugatch of Raymond James. Your line is open.

Yes, Bob.

This is Bobby filling in again. Thank you for letting me get back in the queue, Farooq.

Okay Bobby.

Given what we’ve learned today about the size of Phase 4, it sounds like the product assortment is going to increase, once you’re done with this transformation of all four phases. Can your existing design centers hold all four phases of the new product? Or are your newer design centers in the future going to have to be in some type of a larger format?

Well, that’s a very, very important question, because of the fact that we, our business model, is somewhat of a reverse of what we see happening. We have just opened up design centers in markets which we gave up. Like in the last few months, we opened in Toledo, Ohio, Chattanooga, Tennessee, in Wichita, Kansas. These are all markets where we used to have 15,000 square foot freestanding stores. That was our model in the 70s. Everything was 15,000 square feet. All of these are about 6,000 to 8,000 square feet, half the size. Now they cannot, obviously, show all our products. That’s why customization becomes important. That’s why qualified interior designers become important. And that’s why technology comes in. As you know, we have touch screen technology. We have tablets with our designers. So our designers today, in a 6000, 7000 square foot, can do more business than a 20,000 square foot store, if you are selling it as a commodity. If you are selling it as a commodity, you need a large space. If you are selling it with service and design, which is what we do, we can do a lot of business with talented designers. And so what you are going to see us, is having smaller design centers, with very talented designers and a lot of technology.

Okay, I appreciate that color. And best of luck going forward, and thanks again for letting me back in the queue.

No, it’s all right. And thank you very much everybody. And please, if you have any questions, comments, please let us know. Thanks very much.

Thank you, sir, and thank you ladies and gentlemen for your participation. That does conclude your program. You may now disconnect your lines at this time. Have a wonderful evening.