Welcome to the La-Z-Boy fiscal 2010 second quarter conference call. (Operator Instructions) It is now my pleasure to introduce Ms. Kathy Liebmann, Director of Investor Relations of La-Z-Boy Incorporated. Ms. Liebmann you may now begin.

Thank you. Good morning everyone and thank you for joining us to discuss our fiscal 2010 second quarter results. Present this morning are Kurt Darrow, La-Z-Boy’s President and Chief Executive Officer and Mike Riccio, our CFO. Kurt will begin today’s call and then Mike will speak about the financials before turning the call back to Kurt for his concluding remarks. We will then open the call to questions. As is our custom the time allotted for this call is one hour. A telephone replay of the call will be available for one week beginning this afternoon. These regular quarterly investor conference calls are one of La-Z-Boy’s primary vehicles to communicate with investors about the company’s current operations and future prospects. We will make forward-looking statements during this call, so I will repeat our usual Safe Harbor remarks. While these statements reflect the best judgment of management at the present time, they are subject to numerous future risks and uncertainties as detailed in our regular SEC filings and they may differ materially from actual results due to a wide range of factors. We undertake no obligation to update any forward-looking statements made during this call. With that, let me turn over the call to Kurt Darrow, La-Z-Boy’s President and Chief Executive Officer. Kurt?

Thank you, Kathy. Good morning, everyone. Yesterday afternoon we reported our second quarter results for fiscal 2010. In the midst of continued challenges pervasive throughout our industry where the consumer remains reluctant to make discretionary furniture purchases, we were pleased to report our third consecutive quarter of profitability. Our results speak volumes about the work we have done to improve our operating structure. Over the past several years our team has been executing against many strategic initiatives and these projects are now bearing fruit. Coupled with the benefit of these initiatives, our performance also reflects the significant cost cutting measures taken throughout our company beginning last November following the collapse of the credit and financial markets. Undoubtedly we are still facing a challenging sales environment. However, within the confines of that environment we are focused on doing what we can to drive the top line and ensure we operate as efficiently as possible. Innovation, lean business practices and a strong commitment to marketing the brand are the cornerstone of our efforts. We believe our company has four strategic pillars that help to differentiate and strengthen our competitive position. First, the La-Z-Boy brand is the strongest brand in the furniture industry with consumer awareness at nearly 100%. Just last week the 2009 Home Furnishing New Brand Survey was released and again La-Z-Boy is in the top ten of all brands in the home increasing to number seven from number nine. We are once again the only furniture company included in the top ten, which reflects the excellent name our company has built over its long history as well as our continuing strong focus on marketing and building the brand. In difficult environments, such as the one we are now in, people trust brands and tend to come back to them when…

Thank you Kurt. This quarter the $0.01 per share restructuring charge was primarily associated with the consolidation of the company’s casegoods facilities and the previously announced store closures within the company’s retail segment. Last year’s second quarter included a non-cash, $0.74 per share charge for a valuation allowance against our deferred tax assets and a $0.04 per share restructuring charge primarily related to the closure of the La-Z-Boy Tremonton, Utah facility and our United Kingdom operations. We believe we have made great strides in our operating results over the last several quarters but we are still facing various economic headwinds as well as challenges in our dealer base. Although our bad debt expense has somewhat stabilized this year, we are still being prudent and are not over-extending credit to our dealers. However, at the same time we are ensuring that we satisfy our consumer’s orders. We continue to focus on reducing our effective tax rate for the year by accelerating expenses for tax purposes where applicable. This resulted in our quarterly tax rate reaching almost 40%, down from the mid-40% rate I noted in last quarter’s conference call. As Kurt mentioned earlier, we remain focused on improving our liquidity to allow us the greatest level of financial flexibility. During the quarter we generated over $22 million in cash from operating activities including a net $13 million income tax refund. We reduced our debt only slightly this quarter and our debt to equity ratio is at a sufficient level and there are no significant debt maturities in the near future. We also increased our cash and equivalents to $59 million leaving us with a negative debt position and as previously stated our availability on our revolving line of credit increased by $15.5 million to $87 million. As we reported, we entered into our credit agreement almost two years ago, our excess availability fluctuates based on our outstanding borrowings, [inaudible] receivables and inventory and among other things such as outstanding letters of credit. We are still estimating our capital expenditures for fiscal 2010 will be in a range of $12-14 million primarily related to ITF rates, our cut and sew center in Mexico, transportation equipment and our ongoing maintenance of our facilities. Depreciation and amortization is estimated to remain in the $23-25 million range. I will now turn the call back to Kurt for some closing remarks.

We are encouraged La-Z-Boy has experienced a sequential reduction in year-over-year sales, although we do not believe our industry is out of the woods yet. In analyzing our business, our cost structure and growth potential our team has outlined and executed against a plan of initiatives within its control. We attacked our cost structure last fall to ensure we would operate profitably within the confines of the lower volume environment and importantly have continued to implement a series of strategic projects to ensure we improve our manufacturing and retail efficiencies. At the present time, we remain focused on driving the top line of our business through innovation, marketing, merchandising, R&D and providing the consumer with a positive experience in our branded outlets to ensure that our company will achieve profitable growth when the economy strengthens. The fact that we have some 800 branded outlets provides us with an advantage to capitalize on the return to the consumer and increase our market share, particularly as the distribution landscape has contracted and changed. In the meantime, we have been asked to give some direction on our margin expectations or incremental contribution levels as we go forward assuming volume begins to recover. This is a difficult process to outline given the number of moving parts. As a starter, sequentially from the first quarter to the second we had about $38 million more in volume and approximately $8 million more in operating profit which equates to about a 20% contribution on the additional sales. The problem with this calculation is that it assumes everything stays the same quarter-to-quarter and that rarely happens. So going forward, over the next 12-18 months, we believe we will capture savings and improvements from our Mexico strategy and the casegoods consolidation plans underway. Conversely, there are some other things…

Thank you Kurt. We will begin the question and answer period now. Operator, please review the instructions for getting into the queue to ask questions.

(Operator Instructions) The first question comes from the line of Analyst for Budd Bugatch - Raymond James.

You mentioned store traffic being down at retail but ticket increasing. Could you maybe clarify or give us some more color around ticket? Are we seeing year-over-year increases? Is it increasing sequentially? What color can you give us there?

Good question. I think what has really been driving this is our new retail team has really focused on the selling process. We have made a number of changes in our field management. There is more accountability in the sales process than there was before. I also think because there is less traffic our sales teams have more time to spend with each customer and try to get a bigger share of their wallet. So we are trying to complete the full sale and not just sell the upholstery but get the tables, lamps and accessories that goes with that sale is something we have been training on and coaching on and trying to do a better job of and we are seeing evidence of that happening.

Is there any way you can quantify for us what traffic is looking like? Down low single? High single? Have the declines moderated?

I don’t have that in front of me and it is different by market so to give you a general statement wouldn’t be that accurate. Some markets are having more problems than others with traffic, such as Florida, while other markets are doing better. I don’t have that traffic count here handy to give you. We can follow back up with you if you thought that was necessary.

You also mentioned as we think about contribution margins going forward the possibility we could see some of the temporary cost reductions come back like the reinstatements of the employee benefits and some other things. Is there any way for you to give us a sense of I guess how you are thinking about that given the fact that profitability is so much improved and the company’s financial position is also so much improved? Or just give us a sense of maybe the timing and potential magnitude of any temporary cost increases.

We have not concluded on our definite plans there but our thought process has been as the company continues to improve a lot of the credit goes to our team. A lot of the credit goes to the employees of the company who have made some sacrifices during this period to help us improve our performance and we want to share some of our success going forward with them. The magnitude of what we do, when we do it, how we do it, we are still working on our plans and have not finalized them. I don’t want to give some idea of it to you before I talk to my own employees. I am not going to quantify it but suffice it to say if we continue to make progress the next couple of quarters like we have the last couple we would begin to reinstate some of the benefits that have been suspended a year ago.

I think in the Q you quantify raw materials as about a 300 basis point year-over-year benefit to gross margin. If you think about it sequentially is it relatively stable relative to the benefit you had this quarter? Is it starting to tick down? How do we think about that for the next quarter or two?

I would answer it this way. I would not say we are getting any more decreases sequentially. Year-over-year obviously last year at this time things started coming down so the third quarter probably won’t be as influential as the second quarter was. But we don’t see this getting any better. Our thought is some of these prices will probably start going back up again, especially in poly so that is probably the best information I can give you in looking at the future.

Could you give us an update on how many of the stores company-wide and system-wide and company-owned are in the new generation format right now?

223 out of the 311.

The next question comes from the line of Matt McCall - BB&T Capital Markets. Matt McCall - BB&T Capital Markets: So I want to follow-up on a couple of those previous questions. You talked about potentially in the next couple of quarters those costs coming back. Remind us of the total range of the costs that are temporary.

Remind you? You think we are going to give you more information as the same question we gave Chad? Matt McCall - BB&T Capital Markets: I thought you had given that before. Am I mis-remembering?

There is a number of issues. I was just kidding with you. There is a number of issues about if we turned them all back on to the fullest extent, if we stagger them. There is also the issue about management bonuses but those have to be earned before they are paid. They are not a fixed cost that you add back in increases, wage increases. So the number, I think we have said before, is between some of the employee benefits is between $7-9 million but it wouldn’t be our intent to flip the switch and turn everything on to its fullest extent at one time. Matt McCall - BB&T Capital Markets: So you teased us a little bit. I thought I was going to get more on the contribution margin side but that is okay. I understand. You have talked about in the past a certain level of top line improvement in the retail environment to get that part of the business to breakeven. Can you remind us of where that kind of stands?

The increase in volume today the way we are operating under the current circumstances it would take us 20-25% more volume than we are currently doing to get above the breakeven line in our retail business. At one time our retail business performance at that level but given what has happened in the economy and to our industry it has dropped, but that is the number that is needed to get us to a profitable level. Matt McCall - BB&T Capital Markets: So you said that is based on where things stand today. Can we assume you are working to continue to bring that breakeven level down or are we kind of tapped out as to what we can do before we get some volume?

Well our philosophy is we are never totally tapped out. We are finding things every day. I believe particularly in our retail business we have garnered most of the low-hanging fruit and achieved a number of the big dollar savings as evidenced by our performance the last year on reducing our losses by over $20 million on less volume. So there is not the same kind of magnitude going forward. But there is always some cost containment. There is some less spending that can be done. There is some potential on the gross margin level. It is always a balance between the volume and the gross margin but we cannot because of the high occupancy cost we have with our stores we cannot cut enough expense out to be profitable. We have to get some volume. Matt McCall - BB&T Capital Markets: I actually wanted to ask about that occupancy expense. I assume there has got to be some opportunity right now to maybe improve that number a little bit. Have you had much success or is there some opportunity?

There is opportunity. We have been meeting with a lot of our landlords. It depends on the timing of leases. It depends on the condition they are in. It depends on how the center is doing. In some cases we are getting straight rent reductions as certain of our locations come up for renewal, the lessee has a lot more strength today than the lessor. So all of that has been going on a constant basis and yes, I would think the rents paid for commercial real estate over the next few years are going to be substantially less than what they were a couple of years ago.

I just want to caution you the difference on what we are able to save cash-wise. The accounting standards which I guess I am not really allowed to call FASB’s anymore since they have a codification, but FAS 13 requires we amortize the lease expense over the life of the lease. So let’s say we get six months free rent on a 10-year lease, I have to take that six months of free rent and take that over the 10-year lease, not over the six months that I have. So you don’t see the immediate impact of every dollar we save in our current year financials because of the accounting standards requirements. Matt McCall - BB&T Capital Markets: At the end of your comments you talked about some of the seasonal items that impacted Q3 ad spending, maybe a fewer number of manufacturing days. I also noticed the corporate overhead number moves up. It looks like it moves up every year in Q2. Can you remind me what is behind that seasonal pattern? Should we expect it to ease as we move through the end of the year? Is there anything else besides those three items we should think about from just a pure seasonal perspective?

Historically until last year we have always done more business in the second half of our fiscal year than the first. It has ranged from a stretch of 45% in the first half to 55% in the second. 48 and 52. Last year was the first time in a long, long time we ever did less business in the second half. Obviously the comparisons are pretty weak going forward here. We would expect a traditional, normal seasonal pattern happening in the next two quarters. There is an ebb and flow of our advertising expenses based on how many holidays are in each quarter and I spoke about the down days. There is nothing unusual. I will ask Mike to comment on the corporate charges in the second quarter. I’m not sure…

There is only one issue there that we noted in our 10-Q when you have a chance to look at that. There is a $700,000 difference in the gains on property we had last year versus a loss this year. So $700,000 of the differential is mainly due to property gains and losses. Matt McCall - BB&T Capital Markets: That seasonal pattern through the back half of the year, what should that look like?

Our corporate expenses are kind of evened out throughout the year. We don’t have that much seasonality in any given quarter unless we have some issues relating to professional fees. There is no seasonality to the corporate expenditures.

Just a further reminder, in normal times and let’s hope we are headed back to normal times, our fourth quarter has been always our largest quarter and our second quarter has always been our second largest in terms of volume. Part of that is the demand sequence that happens. Part of it too, in the first quarter we take a week’s vacation for the summer holiday and then in the third quarter we take a week’s vacation for the Christmas holiday. So it also has a reflection of the number of production days we actually work each quarter.

The next question comes from the line of Barry Vogel - Barry Vogel & Associates. Barry Vogel - Barry Vogel & Associates: On the retail side, I know you are talking about volume and you did have a slight volume gain sequentially. Very slight. Very slight. Almost imperceptible. You are still losing $5 million a quarter. I know you talked about those savings have been realized and you need a certain amount of volume to breakeven and you mentioned before a 25% increase in volume could get you to breakeven. Other than volume, can you lower your quarterly losses in your opinion? Your quarterly losses in retail, sequentially in the third and fourth quarter of this year?

I think there are two things to keep in mind here. Number one, I think we can. What I mentioned was we can’t do it to the same magnitude that we have done the trailing 12 months. We have every intention even on flat volumes to continue to lower the loss. I didn’t want to leave any perception we can cut our way to total profitability. The second thing we have been talking about for the last couple of years is you have to look at our business on an integrated retail model and we are making the 10.9% this quarter on the wholesale side of selling to our own retail business and we look at the aggregate of the two in determining the cash generation or cash drain in the long-term impact that would have by carving out the separate retail segments. I think you have to look at it in its entirety. You have to look at the alternatives. If we didn’t have retail stores how would we get business out of those various communities? How would the position of all the other costs associated with that happen? So we are going to continue to limit down these losses, increase our volume and we are positive the integrated retail model is the correct one for our brand. Barry Vogel - Barry Vogel & Associates: Staying on the retail segment for a second, I know you have loans to dealers and I believe it is in other long-term assets, is that correct?

The long-term portion of that, yes. Barry Vogel - Barry Vogel & Associates: Can you tell us at the end of the quarter what the loans outstanding to dealers were?

We don’t break that out in our filings. It is part of other long-term assets. It is part of our receivable number for the current portion. We don’t differentiate the difference. Barry Vogel - Barry Vogel & Associates: Have you had any losses with dealers going out of business?

Our bad debt reserve this quarter was a little over $2.2 million this quarter. So we have adjusted our bad debt reserve based on the current risk associated with our dealers whether they go out of business or not. Most of the time by the time they go out of business we have fully reserved our exposure with that company so we usually don’t see an additional expense related to that. Then we had a tax deduction and we actually write the bad debt off. Barry Vogel - Barry Vogel & Associates: Can you tell us what the effective tax rate for fiscal 2010 is going to be?

Right now based on where we are at right now we are at about a 40% rate. That will be my best guess for right now depending on how the rest of the quarter plays out. We are always striving to lower our rate based on what we can find in deductions. This new law they passed on November 6th will have some impact on our rate. Since it just came out a week before we filed, we really haven’t had a chance to assess the extent of whether or not we can go back a couple of more years and take some of our credits or losses that we haven’t utilized yet. It is not that much but it will have some impact on our rate. I don’t know that answer yet. It is not going to be 10-15% or anything but it will have some effect on our rate based on the new law passed by Congress. Barry Vogel - Barry Vogel & Associates: Could you tell us what the current interest rate is on your debt?

I think in our 10-K we give average interest rate which is around…I don’t know that number. We will have to get back with you on that one. It is in our 10-K. Footnote 13 or something like that. We will get back with you on that. Barry Vogel - Barry Vogel & Associates: Kurt I have a question to ask you about the cost of operating this Mexican cut and sew facility. Obviously you have duplicate manufacturing expenses as you outlined in the last couple of conference calls. Am I correct that overall because you are doing this right now you have had net costs associated with that in the first and second quarter?

That is correct. Barry Vogel - Barry Vogel & Associates: I don’t know why you don’t give us some idea of what they are. That would be very helpful. You said you expect some contribution. I infer from that it is a positive effect in the fourth quarter. If you can give us some idea of what the overall net cost would be in fiscal 2010 which we can understand you would have an improvement next year considering what you said about your $20 million cost savings, which you have kept to that mantra for quite awhile.

We will think about whether or not we want to do that going forward. It is a good question. Barry Vogel - Barry Vogel & Associates: Considering you are doing so well with transparency is your friend. I really believe that.

We think we are very transparent.

Just to conclude, it is footnote eight, not 13. My memory is not that good. We give a range of what our interest rates are but I would say it is average on our $50 million in debt it is probably 4-5% in that range on average.

There are no further questions at this time. I would like to turn the floor back over to Ms. Liebmann for closing comments.

Thank you everyone for participating this morning. If you have follow-up questions I will be available. Please give me a call. Have a great day.

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.