Ethan Allen Announces First Quarter Sales and Earnings

DANBURY, Conn.--(Business Wire)--
Ethan Allen Interiors Inc. ("Ethan Allen" or the "Company")
(NYSE:ETH) today reported operating results for the three months ended
September 30, 2008.

Net delivered sales for the quarter ended September 30, 2008 were
$205.8 million, representing a decline of 17.2% compared with $248.7
million in the prior year quarter. Net delivered sales for the
Company's Retail division were $155.9 million representing a decline
of 14.7% from the prior year period. Wholesale sales were $121.3
million representing a decline of 22.4% from the prior year period.
Comparable Ethan Allen design center delivered sales were down 19.0%
compared to the prior year quarter.

As of September 30, 2008 there were a total of 292 retail location
design centers of which 160 were Company owned compared with a total
of 311 of which 159 were Company owned as of September 30, 2007.

For the quarter ended September 30, 2008, diluted earnings per
share amounted to $0.26 on net income of $7.4 million, including a
restructuring benefit of $1.0 million net of tax due to the gain on
the sale of one of the properties closed last fiscal year. Excluding
this net restructuring benefit, diluted earnings per share was $0.22
on $6.4 million in net income. This compares to diluted earnings per
share and net income of $0.57 and $17.5 million, respectively, in the
prior year comparable period.

During the quarter, the Company implemented the "Team Concept" in
the Retail division whereby design associates are paid a base salary
with an opportunity for the team to earn a bonus. There was an
incremental one-time overlap of selling expenses as prepaid
commissions of $4.6 million (or $0.10 per diluted share) were
expensed. Also during the quarter, historical tax exposures were
resolved resulting in a one-time tax benefit to the income statement
of $0.8 million (or $0.03 per diluted share).

Farooq Kathwari, Chairman and CEO, commented, "We have been able
to maintain decent profitability during these challenging times. While
our sales have decreased, our gross margins increased due to many
factors including maintaining our every day best price policy. In
addition, our many initiatives during the last several years are also
a major factor in reducing costs and improving our performance. These
initiatives have included developing knowledgeable and motivated
associates, the repositioning of our brand to project a modern
attitude with a classic perspective, maintaining a consistent strong
national advertising program, and continued structural changes in our
retail, manufacturing and logistics network."

Mr. Kathwari added, "Our focus has also been to maintain
liquidity. We are pleased that during the quarter we increased our
cash position by $5.5 million with an ending balance of about $80
million. As we indicated previously, we have completed most of the
repositioning of the retail network and expect a major reduction in
capital expenditures in this fiscal year which should further help
strengthen our cash position."

Mr. Kathwari continued, "While the overall economic environment
remains uncertain, we believe that we are well positioned during this
period and also ready to grow our business as conditions improve."

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 a network of 292
design centers in the United States and abroad, of which 160 are
Company owned. Ethan Allen owns eight manufacturing facilities in the
United States, which include 2 sawmills, and one cut and sew factory
in Mexico.

The Company will conduct a Conference Call at 11:00 AM (Eastern)
on Thursday, October 23th. The live webcast and replay are accessible
via the Company's website at www.ethanallen.com/investors.

This press release should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended June 30, 2008
and other reports filed with the Securities and Exchange Commission.
This press release and related discussions contain forward-looking
statements 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.

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Ethan Allen Interiors Inc. and Subsidiaries
Selected Financial Information (Unaudited)
(In millions)

Selected Consolidated Financial Data:
-----------------------------------------
Three Months Ended September
30,
----------------------------
2008 2007
------------- --------------
Net Sales $ 205.8 $ 248.7
Gross Margin 54.4% 53.7%
Operating Margin 5.9% 11.2%
Operating Margin (ex restructuring &
impairment charge (credit)) 5.1% 11.2%
Net Income $ 7.4 $ 17.5
Net Income (ex restructuring & impairment
charge (credit)) $ 6.4 $ 17.5

Operating Cash Flow $ 18.1 $ 41.5
Capital Expenditures $ 11.1 $ 12.5
Acquisitions $ 0.4 $ 0.7
Treasury Stock Repurchases (settlement
date basis) $ - $ 41.7

EBITDA $ 19.2 $ 35.1
EBITDA as % of Net Sales 9.3% 14.1%
EBITDA (ex restructuring & impairment
Charge (credit) ) $ 17.6 $ 35.1
EBITDA as % of Net Sales (ex
restructuring & impairment charge
(credit)) 8.6% 14.1%

Selected Financial Data by Business
Segment:
-----------------------------------------

Three Months Ended September
30,
----------------------------
Retail 2008 2007
----------------------------------------- ------------- --------------
Net Sales $ 155.9 $ 182.8
Operating Margin (2.0%) 0.5%
Operating Margin (ex restructuring &
impairment charge (credit) ) (3.3%) 0.5%

Three Months Ended September
30,
----------------------------
Wholesale 2008 2007
----------------------------------------- ------------- --------------
Net Sales $ 121.3 $ 156.3
Operating Margin 9.8% 17.1%
Operating Margin (ex restructuring &
impairment charge ) 10.1% 17.1%
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Ethan Allen Interiors Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except per share amounts)

Three Months
Ended September
30,
-----------------
2008 2007
-------- --------
Net sales $205,841 $248,727
Cost of sales 93,900 115,270
-------- --------
Gross profit 111,941 133,457
-------- --------
Operating expenses:
Selling 55,302 57,578
General & administrative 46,058 48,082
Restructuring & impairment charges (credit) (1,630) -
-------- --------
Total operating expenses 99,730 105,660
-------- --------
Operating income 12,211 27,797
Interest & other miscellaneous income 1,100 2,922
Interest & other related financing costs 2,901 2,935
-------- --------
Income before income tax expense 10,410 27,784
Income tax expense 2,988 10,280
-------- --------
Net income $ 7,422 $ 17,504
======== ========

Basic earnings per common share:
----------------------------------------------------
Net income per basic share $ 0.26 $ 0.58
Basic weighted average common shares 28,703 30,084

Diluted earnings per common share:
----------------------------------------------------
Net income per diluted share $ 0.26 $ 0.57
Diluted weighted average common shares 28,847 30,464
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Ethan Allen Interiors Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)

September June 30,
30, 2008 2008
----------- --------
Assets (unaudited)
Current Assets:
Cash and cash equivalents $ 79,917 $ 74,376
Accounts receivable, net 11,549 12,672
Inventories 187,495 186,265
Prepaid expenses and other current assets 22,016 32,860
Deferred income taxes 4,188 4,005
----------- --------
Total current assets 305,165 310,178

Property, plant, and equipment, net 355,036 350,432
Intangible assets, net 94,633 96,823
Other assets 4,423 4,540
----------- --------
Total Assets $759,257 $761,973
=========== ========

Liabilities and Shareholders' Equity
Current Liabilities:
Current maturities of long-term debt $ 41 $ 41
Customer deposits 42,640 47,297
Accounts payable 25,894 26,444
Accrued expenses and other current liabilities 68,056 61,720
----------- --------
Total current liabilities 136,631 135,502

Long-term debt 203,018 202,988
Other long-term liabilities 20,661 20,383
Deferred income taxes 22,948 27,327
----------- --------
Total liabilities 383,258 386,200

Shareholders' equity 375,999 375,773
----------- --------
Total Liabilities and Shareholders' Equity $759,257 $761,973
=========== ========
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Ethan Allen Interiors Inc.
Investor/ Media:
Peg Lupton, 203-743-8234

Copyright Business Wire 2008