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Ethan Allen Reports First Quarter Sales & Earnings

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Ethan Allen Interiors Inc. reported sales and earnings for the three months ended September 30, 2006. Net delivered sales for the quarter ended September 30, 2006 amounted to $242.8 million as compared to $251.3 million in the prior year quarter. Net delivered sales for the Company’s Retail division increased 4.8% to $166.0 million, while Wholesale sales decreased 12.8% to $155.6 million during that same period. Comparable Ethan Allen design center delivered sales decreased 1.7% as compared to the prior year quarter. The Company previously announced, on September 6, 2006, a plan to consolidate one of its case goods manufacturing facilities and convert one of its upholstery manufacturing facilities into a regional distribution center. As a result, the Company recorded a pre-tax restructuring and impairment charge of $13.9 million ($8.7 million, after-tax), or $0.27 per share, in the quarter ended September 30, 2006. In the prior year comparable period, the Company recorded a pre-tax restructuring and impairment charge totaling $4.2 million ($2.6 million, after-tax), or $0.08 per share, related to the conversion of another of its manufacturing facilities into a regional distribution center. Including the aforementioned after-tax restructuring and impairment charges, earnings per share amounted to $0.26 on net income of $8.5 million for the quarter ended September 30, 2006 as compared to earnings per share and net income of $0.49 and $17.1 million, respectively, in the prior year comparable period. Excluding the impact of these restructuring and impairment charges, earnings per share amounted to $0.53 on net income of $17.2 million for the three months ended September 30, 2006, as compared to earnings per share and net income of $0.57 and $19.7 million, respectively, in the prior year comparable period. During the quarter, the Company utilized $16.7 million of available cash from operations to repurchase 478,300 shares of its common stock in the open market. In July, the Company’s Board of Directors increased the then remaining share repurchase authorization to 2,500,000 shares. As of September 30, 2006, the Company had a remaining authorization to repurchase an additional 2,473,000 shares. Farooq Kathwari, Chairman and CEO, commented: "We are pleased to report operating earnings, ex-restructuring, of 11.6% of sales despite a weak retail environment for home furnishings and challenging prior year comparisons which, together, resulted in a 3.4% decline in sales. During the quarter, we generated nearly $37 million in operating cash. During that same period, we utilized $17 million for stock repurchases and an additional $22 million for capital expenditures and acquisitions.” Mr. Kathwari further stated: “We continue to make progress in our efforts to position Ethan Allen as an interior design service company by strengthening the professionalism of our associates, developing stylish products which enable us to provide one-stop design service, opening new design centers in key markets, and shortening the delivery time of our products to our clients. We believe these efforts, along with our marketing initiatives, provide us a great competitive advantage and opportunity to grow our business.” Commenting on business trends, Mr. Kathwari continued: "As previously stated, we saw positive trends in September. However, as has been reported by many, the retail environment remains difficult. In addition, sales in the prior year quarter benefited from our initiative to reduce delivery times. While this initiative has been very positive for our clients, it has reduced our forward visibility and made comparisons to the prior year more challenging. As a result, we plan to provide a further update in the coming weeks in order to report whether we believe the trends experienced in September are sustainable throughout the second quarter.” Ethan Allen Interiors Inc. is a leading manufacturer and retailer of quality home furnishings. The Company sells a full range of furniture products and decorative accessories through an exclusive network of 307 design centers in the United States and abroad, of which 141 are Company-owned. Ethan Allen has 9 manufacturing facilities, which include 2 sawmills, located throughout the United States.

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