Good day, ladies and gentlemen, and welcome to the Ethan Allen 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. Corey Whitely - CFO, Treasurer & Executive VP-Administration: Thank you, Jonathan. Good afternoon, and welcome to Ethan Allen's earnings conference call for our fourth quarter and fiscal year ended June 30, 2016. 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. These 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. After our Chairman and CEO, Farooq Kathwari, provides his opening remarks, I will follow with some 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. M. Farooq Kathwari - Chairman, President & Chief Executive Officer: Thank you, Corey. We are pleased that we are reporting a strong fourth quarter and fiscal year ended June 30, 2016. For the fourth quarter sales increased 6.3%; gross margin of 56.3%, a 144 basis point increase; adjusted operating income of $25.2 million or 12.3% of sales compared to 10.3% in the previous year, an increase of 27%; adjusted EPS of $0.57, an increase of 32.6%. For the 12 months, our sales increased 5.2% to $794.2 million, with adjusted EPS increasing 36.2% to $1.92. We also maintained…

Yes, I am here. M. Farooq Kathwari - Chairman, President & Chief Executive Officer: Can we – everybody can hear it?

Yes, there was some – you were fading out for a moment there, but you sound good now. M. Farooq Kathwari - Chairman, President & Chief Executive Officer: I see. I don't know what the problem is. It's not coming here. Could we check with – anybody else in here has a problem hearing it? Because my office tells me they were not hearing it.

You're back. M. Farooq Kathwari - Chairman, President & Chief Executive Officer: Okay. I'm back. Well, the question is, Jonathan, did we lose any part?

It's more like you just lost part of a word here and there. M. Farooq Kathwari - Chairman, President & Chief Executive Officer: Yeah. I don't know why, because I've been speaking clearly, so and loudly, so I do not know – Okay. Okay. Anyways, when we open for questions I want to see if there's an issue. All right, so going back to what I was discussing, I was talking about 70% of our furniture products are manufactured in our North American workshops, 80% of our furniture products are custom and delivered within four weeks to six weeks, while 20% of our furniture products and over 60% of our non-furniture products are available for immediate delivery. We continue to also add technology to the craftspeople in our workshops. We're also pleased that environmental stewardship, sustainability, health/safety and increasingly social responsibility are an important focus. And finally, combining technology and personal service is one of the major differentiators of great customer experience and we are adding technology to create dynamic omnichannel environment. With that, I will prepare to open for any questions or comments.

Our first question comes from the line of Budd Bugatch from Raymond James. Your question, please? M. Farooq Kathwari - Chairman, President & Chief Executive Officer: Yeah. Hello, Budd. Bobby Griffin - Raymond James & Associates, Inc.: Good afternoon, Farooq and Corey. This is Bobby actually filling in for Budd. Congrats on another excellent operational quarter. M. Farooq Kathwari - Chairman, President & Chief Executive Officer: Yeah. Thanks, Bobby. Bobby Griffin - Raymond James & Associates, Inc.: A couple questions from me. Farooq, can you just update us on the phase four new product offering progress? How much is out on the retail floors? How much is left to be implemented? M. Farooq Kathwari - Chairman, President & Chief Executive Officer: On the phase four is – the last part of that is going to be introduced next week in – which is the Brooklyn product line, and that is already getting into our floors right now. Bobby Griffin - Raymond James & Associates, Inc.: Okay. Then after the Brooklyn product line, phase four is then complete? M. Farooq Kathwari - Chairman, President & Chief Executive Officer: Yes. It is complete and then after that our next major program is the Ethan Allen Disney, which will get on to our floors in mid-November. Bobby Griffin - Raymond James & Associates, Inc.: Okay. Perfect. Thank you. And then is there any update on the government contract that we've talked about before in the past? M. Farooq Kathwari - Chairman, President & Chief Executive Officer: They tell us every week, every day, so we're waiting. Bobby Griffin - Raymond James & Associates, Inc.: Still waiting. All right. M. Farooq Kathwari - Chairman, President & Chief Executive Officer: Yeah. Bobby Griffin - Raymond James & Associates, Inc.: I appreciate it. And then lastly…

Thank you. Our next question comes from the line of John Baugh from Stifel. Your question, please. M. Farooq Kathwari - Chairman, President & Chief Executive Officer: Yeah. Hi, John. John Baugh - Stifel, Nicolaus & Co., Inc.: Hello. How are you doing, Farooq? M. Farooq Kathwari - Chairman, President & Chief Executive Officer: Thanks, John. John Baugh - Stifel, Nicolaus & Co., Inc.: Good, yeah. Just so you know, the first part of the call was pretty broken up. So, a few things. Any way you could parse out what you thought orders might have done, written, excluding the timing of the price increase? And then, could you tell us what you're going to do in August with pricing? Will it be similar to last year? How does it differ? M. Farooq Kathwari - Chairman, President & Chief Executive Officer: Yes, John, I think just keeping perspective, Corey did mention it, that in the last year, in the fourth quarter, our orders were up, on a comp basis, they were up about 10.4%. This quarter because of the price increase – a major factor. But then in the first quarter of last year, our orders were down 9.8% -- I'm sorry, they were down... Corey Whitely - CFO, Treasurer & Executive VP-Administration: 9.8%. M. Farooq Kathwari - Chairman, President & Chief Executive Officer: 9.8%, yes, so you can see the difference in the timing. Our price increase is approximately similar to last year, ranging anywhere between 3% to 4% at retail, between 3% and 5% at retail, John. John Baugh - Stifel, Nicolaus & Co., Inc.: Okay, thank you. And I'm wondering if you could comment, your incremental margin, if I did the math right, in the fourth quarter, was above 40%? If I did it for the entire…

Thank you. Our next question comes from the line of Jessica Mace from Nomura. M. Farooq Kathwari - Chairman, President & Chief Executive Officer: Yes, hello, Jessica.

Hi. Good afternoon, and congrats on a nice quarter. M. Farooq Kathwari - Chairman, President & Chief Executive Officer: Thanks.

My first question is if you wouldn't mind repeating the backlog number. That was one I missed during the prepared remarks. But as a follow-up, I did hear you say that there were some dynamics that caused some volatility in the backlog figure, and wondering if there's any other place you would point to, to help us look at the trends of the business exiting the quarter? M. Farooq Kathwari - Chairman, President & Chief Executive Officer: Corey has given that information. Corey, go ahead. Corey Whitely - CFO, Treasurer & Executive VP-Administration: Yes. The backlog was down 13.1% on June 30, 2016. So my comment then was that really the backlog is a little bit not necessarily an indicator of future sales because there are so many variables that go into it such as the timing of the price increase last year versus this year, and then we're just much more efficient in our shipping today with our custom quick ship, the level of our in-stock programs and then our improving efficiencies in our manufacturing with our shortened lead times. Today that's an advantage that we're leveraging, is the ability to deliver faster, and that's a good competitive advantage for us. So the backlogs will fluctuate as you've seen, so there is not a strong trending for those.

Understood. Thank you. And then I was wondering if you could comment on how some of the product introductions that are nearly 18 months, almost two years old now, how those are contributing to the top line strength that we've seen? And kind of what you expect as we go through Phase 4 and some of those earlier periods that are a little bit further away? M. Farooq Kathwari - Chairman, President & Chief Executive Officer: Yes, Jessica. If you take a look since about the last year is that when we started introducing the round for these five major offerings. It was about the summer of last year when we introduced what we called now Capitol Hill that was Georgetown previously. Sonoma which we called Euro last year. We changed the name to Sonoma, which was introduced in the fall of last year, and then and actually really was mostly selling – starting to sell in the winter and spring of this year. And then from June, we have been introducing these three new attitudes. They all are contributing because they now represent most of the space in our floors and our design centers. We've also continued to be – I mean, we've had good results, but consider the fact that we're also going through a disruption of selling products off, clearing the floors. We'll still continue to some degree as we move forward, but all these new products are making a difference, and they are actually contributing to the substantial increase in our sales.

Got it. And then just following on to your comments about, in previous quarters, clearing the floor to make some room. Is the lower clearance activity in the retail margin this quarter. Was that up against somewhat of an easy compare? Or is there anything done about the overall promotional environment in the quarter? M. Farooq Kathwari - Chairman, President & Chief Executive Officer: No. Relative to last year it's about similar. And again, it'll continue that further for this year, too, because again, we're still continuing to sell that clearance. And then with Ethan Allen and Disney coming in this November, we got to make some more room. So we'll continue it this fiscal year also.

All right. Thank you so much for taking the questions. M. Farooq Kathwari - Chairman, President & Chief Executive Officer: All right. Thank you.

Thank you. Our next question comes from the line of Jeremy Hamblin from Dougherty & Co. Your question, please. M. Farooq Kathwari - Chairman, President & Chief Executive Officer: Hello, Jeremy. Jeremy Hamblin - Dougherty & Co. LLC: Hey, good afternoon, congrats on a great quarter, and really, a terrific year, especially in a fairly tough environment. I wanted to just follow up on the question around clearance. Think about how we should be looking at near-term, given all the product turnover. So, first half of fiscal 2017, what type of impact should we see on the clearance activity? Whether you're expecting it to be elevated through the first half of the year? Is that going to have a negative impact on your gross margins? And your gross margins really have trended towards a higher level, and I know that's reflective somewhat of the sales gains. But in terms of how we should be thinking about gross margins moving forward, historically, you've talked about a kind of 55% level. And you've really kind of cleared through that now, closer to a 56% level. Can you just provide us with some color on that? M. Farooq Kathwari - Chairman, President & Chief Executive Officer: Jeremy, it will vary from quarter to quarter. But I think if you stop between – last year we had – in the first quarter, we had 55%, now it's 56.3%. I think it's going to vary between the two, in that range. So, it's hard to – at this stage, I think, if we're maintaining between 55% and 56%, I think that'll be a good margin. Jeremy Hamblin - Dougherty & Co. LLC: I agree, but just in terms of thinking about the nearer-term, where you might have a little more visibility given the product turnover…

Thank you. Our next question comes from the line of Cristine Fernández from Telsey Advisory Group. Your question, please. M. Farooq Kathwari - Chairman, President & Chief Executive Officer: Yeah. Hello, Christine. Cristina Fernández - Telsey Advisory Group LLC: Hi. Good afternoon. Just following up on the prior question. The 4.5%, is that for the full year? Or just for the first quarter? M. Farooq Kathwari - Chairman, President & Chief Executive Officer: For the first quarter. Cristina Fernández - Telsey Advisory Group LLC: Okay. And then for the full year, should we be thinking about a similar range? M. Farooq Kathwari - Chairman, President & Chief Executive Officer: Yeah. I would say so at this stage. This could change, depending upon on how we see but at this stage 4.5% is a good number. Cristina Fernández - Telsey Advisory Group LLC: Okay. And then I believe the marketing program with the real estate agents that you had commented at the Analyst Day earlier this year is just getting started. Can you talk about what progress you're making on that and when could we start seeing some benefit? M. Farooq Kathwari - Chairman, President & Chief Executive Officer: Yes. It's with the Realogy company which has a fair amount of real estate brokers. It's just too early. It is getting good comments, but it just started just a few weeks back, but I believe that it is a very – I would say a program that brings in people and the realtors. So I would say that by next quarter we'll be able to give you somewhat of a better indication about how it is really doing. Cristina Fernández - Telsey Advisory Group LLC: Thank you. And last quarter, you had commented that you were seeing traffic up I believe…

Thank you. Our next question comes from the line of Justin Bergner from Gabelli & Company. Your question, please. M. Farooq Kathwari - Chairman, President & Chief Executive Officer: Yeah. Hi there. Justin Laurence Bergner - Gabelli & Company: Hi, Farooq. Hi, Corey. Most of my questions have been taken, but I will ask the following. Is there anything you can comment on in terms of initial success of the Georgetown product line that I guess was rolled out about a month ago? M. Farooq Kathwari - Chairman, President & Chief Executive Officer: You don't mean Georgetown. Are you talking about Santa Monica? Justin Laurence Bergner - Gabelli & Company: Santa Monica, I'm sorry. M. Farooq Kathwari - Chairman, President & Chief Executive Officer: Yeah, yeah. We just started Santa Monica, which is in July this month and before that in June we had Buckhead. Justin Laurence Bergner - Gabelli & Company: Oh, Buckhead, that was what I was thinking of. M. Farooq Kathwari - Chairman, President & Chief Executive Officer: Buckhead is well received. They've both being well received. They're great style, they're relaxed and this is what lots of folks are looking for. They're looking for stylish products, which are great quality and then which is what we have, but also relaxed. And I think that lifestyle is important and these product lines of course they mix well with each other. So when we talk about Buckhead that works well with also Santa Monica. And it's been well received and Santa Monica has been well received, too. And it's interesting. It depends on what part of the country. Santa Monica has a major coastal feeling, so it is doing well and obviously those folks who are interested in a coastal attitude, while Buckhead is somewhat more you might…

Thank you. And this does conclude the question-and-answer session of today's program. I'd like to hand the program back to management for any further remarks. M. Farooq Kathwari - Chairman, President & Chief Executive Officer: All right. Thanks very much. And if you have any further questions or comments, please let us know. Thanks very much.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.