Kurt Darrow - President & Chief Executive Officer Mike Riccio - Chief Financial Officer Kathy Liebmann - Director of Investor Relations

Budd Bugatch - Raymond James Matt McCall - BB&T Capital Markets John Baugh - Stifel Nicolaus Barry Vogel - Barry Vogel & Associates David Cohen - Midwood Capital

Good morning, ladies and gentlemen and welcome to the La-Z-Boy fiscal 2010 first quarter conference call. At this participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (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, Jackie. Good morning and thank you for joining us to discuss our fiscal 2010 first quarter results. Present on the call are Kurt Darrow, La-Z-Boy’s President and Chief Executive Officer and Mike Riccio our Chief Financial Officer. Kurt will begin this morning’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 first quarter results. Without question, the furniture industry continues to go through a challenging period and La-Z-Boy is not immune to the difficulties that exist throughout our sector. However, our performance for the past two quarters demonstrates the depth and breath of work we have done, to strength in our business model and insure that we can run our business profitability even in a low volume environment. For the first quarter, which is historically our lowest demand period due to seasonality issues, we posted net income attributable to La-Z-Boy incorporated of $2 million or $0.04 per share on a sales decline of 18.3%. This compares with a loss in last year’s first quarter of $8.5 million or $0.17 per share. By the low volume environment persists our positive results for the quarter are reflective of the following. First, over the past few years, we have made many strategic decisions, which are enabling us to be more competitive with a leaner operating platform. This includes plant rationalizations, continued cost reductions, the conversion to sale your production, warehouse consolidations, the Mexico cut-and-sew facility and other projects including our commitment to marketing even in difficult times. We also made structural changes to our business by divesting smaller companies and focusing on the La-Z-Boy brand as well as our other larger entities. Today we are refocused on the core growth in earnings engine of our company, the La-Z-Boy brand. Second, we took aggressive in the size of actions last fall when the crisis in the financial and credit markets brought consumer spending for furniture to a halt. We made many difficult decisions which eliminated costs across our entire company. We reduced our workforce significantly, curtailed spending, closed stores and facilities, and curtailed many employee benefit programs. We moved quickly to remove $60 million in annual structural costs from the business, to insure our costs are in alignment with today’s volume. Third, we are committed marketing the La-Z-Boy brand in both good and bad times and that strategy has allowed us to build our powerful brand over 80 years. During this period meeting our industry scale back on their marketing efforts, but we remain resolute in our commitment and predicted our immediate spend. This gave us an opportunity to increase our overall share of voice in the marketplace and ultimately increase our market share as evidence by our same-store sales numbers. Fourth in this environment, we believe our brand strength is more important than ever. As history tells us, but in difficult times people trust brands and comeback to them when there’s perceived value and quality. That is certainly true of the La-Z-Boy brand. We are also benefiting from being primarily an upholstery company operating in the mid tier of the market. We believe that is the suite spot in today’s environment as higher end consumers appear to be trading down somewhat, and the lower end consumer is more challenged during this time. Historically, upholstery products in general are more affordable than higher in casegoods and tend to be more resilient during difficult times, with the consumer have to spend money for a sofa or chair by putting off larger purchases of complete bedroom and dining room sets. Finally, we have established an excellent management team over the past few years, people who are talented, committed, innovative, and experienced. Our management team did a great job to remove a merit of costs last fall, and it should be noted that our employees made many sacrifices since that time to insure our company would prevail. Before I go into discussion of our segments, I will take a moment to make a brief comment on our balance sheet. As most of you know our company has always had a conservative stance with respect to the balance sheet and today, that philosophy continues. Mike will speak to the numbers specifically, but I will note that we remain focused on debt reduction and liquidity improvement particularly in this environment. Now let’s turn to our results for our wholesale operating segments. First upholstery, for the quarter our operating margin increased to 8.3% from 4.2% in last year’s first quarter, while sales in the segment declined 17% or $40 million. We are becoming a lean and efficient organization, as evidence by the almost doubling of our operating margin. In addition to our plant rationalization efforts, which brought down capacity to be in alignment with current volumes, it is in large part attributable to the cellular production at our La-Z-Boy branded facilities. Cellular has allowed us to gain efficiencies through the significant reduction in indirect labor and the process itself has afforded us the ability to vastly improve our productivity per employee and has contributed to our success over the last two quarters. Looking ahead, we will garner greater efficiencies throughout the La-Z-Boy branded business when our Mexican cut-and-sew operation is fully transition. Move to Mexican has gone smoothly and seamlessly, and today we have over 600 employees working in the facility, which the making cut-and-sew kits for our custom order business. With custom orders a significant part of our business and importantly a strategic position in the market for us, the proximity of Mexico allows us to deliver on our brand promise to the consumer. Custom furniture delivered to their gnome 30 days or less. As I’ve said in the past, we are not yet driving the cost savings from Mexico, as we continue to run dual cut-and-sew operations in Mexico and in our domestic plants. This will ensure there is no service interruptions while the Mexico facility ramps up its staffing and training. We expect to be fully transitioned to Mexico by next summer with some cost savings coming through in early calendar 2010. The full benefit of Mexico, which is expected to be $20 million on an annual basis, will flow through in fiscal 2011. On a casegoods side of the business, although our sales declined 25%, we essentially broke even on an operating basis. As I stated at the outset of this call, the challenges in the furniture industry from a volume perspective are aspirated in the higher ends casegood business. Given the significant volume reduction this quarter, our team did a good job of running the business as efficiently as possible. Our operating margin was impacted this quarter by continued discounting to reduce the inventory of discontinued collections. To give you some perspective, we’ve reduced our casegoods inventory by approximately 8% during that period of the composition of that inventory mainly finished-goods. During the quarter, we ceased production in our North Wilkesboro, North Carolina facility and moved it to our Hudson North Carolina facility, which has improved the capacity utilization. Next spring we will vacate a least warehouse in Statesville and move that operation to the company-owned North Wilkesboro facility. The combination of these moves will save the company between $5 million and $6 million annually, based on our current run rates. Now, I will spend a few moments talking about our retail operation. For the third consecutive quarter, we significantly reduced our retail losses on much lower volume levels. This quarter our volume declined 15.2%, we decreased our losses by $4.3 million. Our new management team has instituted a number of changes across the operation. From the four-wall structure to the way in which we approach the consumer. Additionally during these difficult times, as we have cut cost across the business, leaving no stone unturned we have been more effective with our media spin for the La-Z-Boy brand while many competitors were pulling back. By doing so, it gave us an opportunity in this environment to increase our overall exposure and drive traffic into the stores. We have also placed an emphasis on the improvement and effectiveness of the sales team and are increasing our close ratio along with our average ticket. Our in-home design program, which is a tremendous growth vehicle for us has also gained traction and typically yields a much higher transaction that one we designed services are not utilized. All of these have helped us to improve our gross margins on the sequential basis. We believe we can make further improvements in this segments performance, but we’ll need an increase in volume before the segment can become profitable as our fixed cost structure is high primarily due to expensive occupancy costs in the markets in which the company owned retail segment operates. Finally, I want to take a brief moment to remind everyone that we continue to believe integrated retailing is good a winning strategy for us as branded distribution will play an important role in the growth of our company. As the distribution landscape contracts, the stores afford us the ability to pay the necessary penetration in each market. When we analyze our business, we look at the blended wholesale or retail margins as well as cash flow models and anticipate being cash neutral on the integrated retail model with an increase of volume of 10% to 15%. I’m going to turn the call over to Mike now to discuss our financials for the quarter.

Thank you, Kurt. I will spend a couple of moments to give you clarity on a few financial items for the quarter, including the SFAS 160 accounting change, our tax rate, and our balance sheet. First, the new accounting standard SFAS 160, which was implemented this quarter; it changes how we account for non-controlling interest like our Thailand and Asia interests, as well as our VIEs. Previously, income from non-controlling interest, which we refer to as minority interest in the past, was reported as a reduction to operating income. With SFAS 160, income attributable to non-controlling interest is now a separate line item on the P&L. Importantly in the past, any losses incurred by VIEs, in excess of their equity were absorbed by the company. Under the new accounting method, these were included attributable to net income attributable to non-controlling interest and as a result, are excluded from income attributable to the company. Prior year reclassifications were made to be consistent with this year’s presentation, although as the accounting standard requires net income attributable to La-Z-Boy Incorporated was not restated to exclude the VIE losses. Second, our 16.7% effective tax rate for the quarter, resulted primarily from an increase in estimated full income tax benefits of approximately $0.9 million, associated with completion of our fiscal 2009 federal income tax return. Our effective tax rate was impacted by the relatively low level of free tax income reported for the quarter ended July 25, 2009 and the valuation allowance on our deferred tax assets. Without the benefit of the increase in our federal tax refund, this quarter, our effective tax rate would have been in the mid 40% range. With the completion of our 2009 federal tax return and carry back of our losses, we have utilized a significant portion of our federal NOLs. We continue to be focused on liquidity, and during the quarter generated $13.8 million in cash from operating activities, we reduced debt by $11.7 million bringing our net debt position to $10.8 million. We have $38.3 million of cash and increased availability on our revolving line of credit to $70.5 million. As we have discussed in past calls are excess availability fluctuates based on our outstanding borrowings, eligible receivables and inventory among other factors such as outstanding letters of credit. In this environment, our objective is to continue to evaluate the appropriate level of our debt and increase our cash position to afford us the greatest level of financial flexibility in running our company. As we mentioned earlier our casegoods segment reduces inventory by 8% during the current quarter of the company’s overall inventory increased during the last three months by about $2 million. The increase was mainly due to raw materials, specifically cover, relating to the ramp up of our production of our Mexico facility as well as anticipated seasonal increases in business, for the fall compared to summer months. We remain vigilant in maintaining our inventory at appropriate levels based on seasonal adjustments. Our capital expenditures for 2010 will be in range of $12 million to $14 million primarily related to maintenance of our facilities, transportation equipment, IT upgrades, and our cut-and-sew center in Mexico. We estimate that depreciation and amortization will remain in the $23 million to $25 million range. I’ll now turn the call back to Kurt for some closing remarks.

Thank you, Mike. The environment for furniture in discretionary nature remains challenging. Although our sales decline this quarter was lower than in the previous two quarters, we believe it is too early to predict a recovery in the sector. I will note however that we believe our industry has worked through most of the inventory overhang, both on the wholesale and retail side of the business and that today as product is sold at retail, the manufacturing order needs to be placed. As I have previously stated we right sized our operation last fall to insure profitability at this rate of volume. For modeling purposes, given the magnitude of the changes we have made to our business, both structural and otherwise and given the last two quarters of profitability, we believe it’s prudent to analyze our company going forward using our current cost structure. The platform we have established for our enterprise has made us much more efficient and should volume increase we believe the incremental piece would operate at higher level of profitability although it is too early to quantify that level. If for some reason volumes were to deteriorate from we’re to date we will again react quickly and make the necessary adjustments to the business, to reflect the real order flow. Additionally in the next fiscal year we will realize the benefit of our Mexican cut-and-sew operation in addition to the savings we will achieve from the consolidation in our casegoods business. While we look forward to driving the benefits of these actions, we continue on our lean journey with our team identifying various projects from which to going additional cost savings, which will help to offset normal increases in operational costs due to inflation and other factors. Concurrent with our focus on cost the amount throughout our organization is define way the drive sales. This takes many forms from innovation in R&D to marketing and advertising, to the experience the consumer has in the store and at every touch point to our ability to deliver custom order furniture, in 30 days or less. We believe the consumer will come back to the marketplace, and are confident the infrastructure we have established will enable us to capitalize of that return. Additionally as the distribution landscape contracts with so many smaller furniture stores closing, we believe there is great potential for the La-Z-Boy Furniture Galleries store system as well as our other branded outlets to gain market share. We are committed to leveraging the power of the La-Z-Boy brand, making it more relevant and insuring that we maintain its leadership position in the marketplace. In addition to being proud of the work our team has done, I also cannot say enough about the support and strength of our dealer base. With an 80 year history our company is privileged to work with a great network of customers throughout North America. Their commitment to La-Z-Boy is second to none and gives us a distinct competitive advantage. In closing we all look forward to a more positive operating environment one in which the strength of our business model and balance sheet will carry us well into the future. As the consumer comes back to the marketplace, we believe it should be financially rewarding for both our company and our shareholders. We appreciate your being on our call today, and for your interest in our company. I will now turn the call back over to Kathy to begin the question-and-answer period.

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

(Operator Instructions) Your first question comes from of Budd Bugatch - Raymond James. Budd Bugatch - Raymond James: A couple of questions, in the Upholstery segment did raw materials play a piece of the improvement year-over-year or quarter-over-quarter? How will that factor going forward?

I think there is three factors in the gross margin improvement. The raw material to price ratio, the lack of restructuring this year compared to last year, and the efficiencies of our cellular production. All three of those pieces played a role and we’re not going to quantify them anymore than we have in our filings, but it played a significant roll. Budd Bugatch - Raymond James: How persist are the raw materials’ price? Will that persist all of this fiscal or when does that turn a run-off?

Hopefully, if demand picks up throughout a lot of sectors including the housing, I would think lumber and some other things might tend to go back up, but it’s anybody’s guess, if that’s going to happen. The last couple of years, raw materials has been volatile and have gone up quickly and back down quickly and so, it’s something that our bias probably is it is not going to stay at this level for the next year and a half, two years, but that’s just speculation at this point. Budd Bugatch - Raymond James: The segment operating income margin at 8.3%, do you think that the first quarter is historically the weakest quarter of the year, if I remember right. Will the margins in there, do you believe the margins for Upholstery and next three quarters will be higher than the 8.3%? I guess that’s the operable question?

I would answer that question, Bud with this. If we historically we would do more volume in the succeeding quarters primarily even than the first quarter, we’re shutdown one week. So, yes I believe if we can do more volume, we can see improvement to our margins in the future in the Upholstery segment. Budd Bugatch - Raymond James: You do shutdown a week too in third quarter, right?

Yes, we do at the Christmas time. Budd Bugatch - Raymond James: Okay.

If there is sufficient demand, we can figure out a way to work. Budd Bugatch - Raymond James: In casegoods, how much of the casegoods is now and in the future will be sourced versus produced domestically? You get off one casegoods factory left, is that right?

We have one factory left in Hudson and its making bedroom furniture for Kincaid, American Drew and some, and where that is going to settle in, Bud, I would say 75% to 80% will be imported and 20% to 25% will be produced domestically. Budd Bugatch - Raymond James: Can you quantify it offers, and how much the discounting impacted the quarter? What was the amount of foregone gross profit on the discounted sales, and is that finished?

I won’t probably give you exactly what you want, but it was substantially less than last quarter and it will be substantially less next quarter as we’re pretty much worked our way through that. Budd Bugatch - Raymond James: How much was it last quarter?

A lot more. Budd Bugatch - Raymond James: A couple of other questions, can you give us kind of a feel for what the breakeven level is at retail in terms of volume or do you think you’ve gotten the cost down too?

We’ve quantified our cash neutral position on the integrated model being the 10% to 15% better than we’re doing today. On a standalone model, you’re probably looking double that, somewhere in the 20%, 25% range of increased volume over our current plan or current run rate in order to become profitable, which wouldn’t even be back to the high water mark, the stores performed at a few years ago. Budd Bugatch - Raymond James: For Mike, I have got some, just I’m confused, I little confused, but between SFAS No. 160 and the tax rate, what is an appropriate book tax rate for us to model going forward?

Well, I tried to give you a little bit of insight on that by telling you we had one discrete item during the quarter of additional refunds and if you add that back it would be in the mid 40s. So based on where we stand now and because our valuation allowances are 100% pretty much of our deferred tax assets, depending on how things come off the timing differences, but it just gets a little complicated, but right now the best I can give you inside on that is the mid 40s. Budd Bugatch - Raymond James: How does that work if you’ve got, if the valuation allowance has taken all of the deferred tax asset? How are you in a book tax position?

Essentially, will happen is, I’ve got some add backs to my book income that will make by taxable income higher than my book income. Budd Bugatch - Raymond James: That has to get booked in the financial books as opposed to just on the tax books?

Right, because you take the tax rate from your tax return applied to your book income. The issue is obviously as I stated, we used the majority of our NOLs or at least our federal NOLs that carried it back couple of years to get our refund that we’re anticipating, getting later on this year. So we don’t have a significant number of NOLs to carry forward. Budd Bugatch - Raymond James: The valuation allowance, when will that comeback on the books, if you’re in a profit position doesn’t that start to comeback on?

There’s all kinds of, but you’ve got to get out of the cumulative loss position over the last years is what that rule of thumb is. Budd Bugatch - Raymond James: On 160, how is that going to look going forward, is the VIE operating results not going to be above the line, it’s only going to be below the line, and is that a tax affected number?

No, it’s in operating income and then it comes back out on the line tax affected. Budd Bugatch - Raymond James: You are not going to separate that out for us to know?

We separated the VIEs out in the footnote in the 10-Q and I don’t have it on the top of my head, but I think we broke even this year on VIEs and we lost about $1 million last year in the first quarter. Budd Bugatch - Raymond James: I looked at the Q. I don’t remember seeing that...

It’s like footnote 15 or 10. We’re trying to find that real quick, but there is one of the footnote disclosures in the back like 13. So footnote 13.

That’s about, going forward our hope is that this will have a minimal impact on us, but it had in the previous years, we had a significant impact on the VIEs. We’re losing money, we had to absorb them.

Your next question comes from Matt McCall - BB&T Capital Markets. Matt McCall - BB&T Capital Markets: First, Kurt you talked about the average ticket and you mentioned in the releases, did you quantify what the improvement was on average ticket?

Matt, we did not quantified, but it is improving, it’s the more in-home design business we’re able to do which has substantial higher ticket as a percentage of our business. The more that we can do every quarter will influence that percentage. Also selling multiple pieces, finishing off the room and people come in to buy sofas, and just a better effort at the point of contact with the consumer, and a lot more focus by our field team with our sales people and maximizing the share of wallet out of each customer, all of those things are starting to take effect, but we’re not going to quantify where we were and what’s going on because it just one of those other competitive things we don’t want. Matt McCall - BB&T Capital Markets: What about, this is the first such increased you have seen on a quarterly basis and why not the first ever but the first NOI?

It fluctuates depending on our promotional activities for the quarter depending on the emphasis on whether it’s on leather worth on chairs; our marketing emphasis can skew that a little bit, so it something we watch all the time, but we mentioned it because it was more than a normal improvement this quarter. Matt McCall - BB&T Capital Markets: I don’t want to beat it to death, from this kind of make sure I understand. How many design, are you fully staffed with designers in all the locations now, and or do you have more to go where if you can potentially see some incremental increase from this?

We have design capability and 90% to 95% of our stores, there is a couple of small stores that don’t lend themselves to that but we have that capability, and a combination of how good we become at offering that service and the consumers appetite to accept it will determine the success of that going forward. Matt McCall - BB&T Capital Markets: You said you have ways to maybe this wasn’t the exact quote to further improve the performance are retail, but you need to see some volume to get profitable. What can you tell us about those other ways that you can improve the performance the retail segment, what more things can you do?

The majority of the improvement we have seen in the last three quarters has been on the cost side, and there is not huge there’s some other minor things, there is not the huge improvement we can make on the cost side going forward, but there’s always things with your margin, there’s always things with your close rate, there’s always things with you volume that you work on and challenge the team every month on and that’s where focus has shifted from giving the business structurally sound to now operating at an efficient level. Matt McCall - BB&T Capital Markets: So just continue what you are doing is not some, was you consider it what hanging fruits something you are have in the fight harder for these savings now?

I hopefully by now we have got all of the low hanging fruit and I don’t see a wholly gray out there. It is just executing everyday better than we ever have. Matt McCall - BB&T Capital Markets: I think Budd asked about the discounting and quantify and I know you probably won’t quantify this, but you talk about the duplicate costs that you had in Mexico with the cut-and-sew. Are the duplicate cost pretty stagnant even though you are scaling down here, moving up there, I guess you are having the same number of employees and same factory, so are we still seeing the same duplicate costs quarter-over-quarter.

You can think it in that way, it doesn’t always happen one for one at that time. We have been very reluctant to be overly aggressive on disrupting our service and so we’re probably carrying some of the, are domestic cut-and-sew capabilities longer than you would say you need to, but we just, we don’t want there to be any hiccups and so it is not a one-to-one relationship, but obviously has we had more people trained in Mexico, that corresponding headcounts declines in the domestic operations. Matt McCall - BB&T Capital Markets: So when you talk about getting savings in the first half of calendar 2010, that’s the initial, savings will be elimination of the duplicate costs.

Most of it. Matt McCall - BB&T Capital Markets: Then I note that you have been clear about that target of $20 million in stating that is on in the past you have said it is on current volume levels, volume level are ticked lower I want to make sure I understand, is that, were you assuming normal seasonality and maybe that’s way it’s playing out and that’s why you can still talk about $20 million are there incremental savings that you are going to be able to generate on this lower top line level?

I would answer that, Matt with a couple of observations, one what we gave you the $20 million number originally, that was at the volume at the time. It would be in our planning that, by 2011 at some point in time volume starts to turn back to that level and so, we haven’t calculated over a two or three year period continue when go run at this run rate that we ran in the first quarter. I would also say that one of the other judgments we have is we do still do a significant part of our cover business with, our fabric and leather in Asia with good partners there. There’s a volume level and a sophistication level of certain patterns in fabrics that we may choose to do here in Mexico as opposed to Asia, depending on how our business flows, our efficient we get. So, there’s a give and take process here in and where we source which particular part of our business.

We have to remember, most of our commercial goods, most of our high volume SKUs are being done in Asia and Mexico’s intent was to do mostly or primarily our custom order business. There’s been a category of styles that falls in between there. They’re not pure custom, but they’re not at the volume level of our best sellers. So where do you do the cut and sew work for that piece of business, we have not determined that. Matt McCall - BB&T Capital Markets: The cost savings we talked about Mexico, we talked about the casegoods consolidation. You also mentioned some curtailed spending, some benefits that were cur tailed, can you talk about any cost savings that may return should things stabilize and improve?

Well, the first two that come to mind is what would happen to raw materials over a 12 or 18 month period, that’s anybody’s guess and I made some comments on that earlier. The other issue is at an appropriate time, when we have more clarity to choppy environment, there are a number of employee programs that we curtailed and suspended that we would consider reinstating. That is on our agenda, it’s on the horizon, but we’re not going to make any quick judgments on that. I have to get further down the stream here, but that is another cost that needs to be added back to operations for us to have a Competitive Pay Program for our employees.

Your next question comes from John Baugh - Stifel Nicolaus. John Baugh - Stifel Nicolaus: Maybe can ask same question little bit differently. You’ve throne out three numbers as it relates to savings released on, one of them being the $60 million annual cost reductions to $5 million to $6 million and I guess is pending through the casegoods and then $20 million. I’m not going to plug in what is that $85 million into my pretax earnings next year and I’m sure you don’t want me to, but I guess the question simply is, how much of the $60 million is in the numbers we’re looking at either on the latest quarter or trailing six months or 12 months. Obvious those $5 million to $6 million is pending? We have talk a little over about the $20 million, but we’re getting some offset from Mexico with the added cost as to running dual operations, or we got a full $20 million to start flowing again assuming the volumes are back at that level at one or two quarters out, anymore color there?

Let’s start back in November, when we made a number of changes and we gave the $60 million a number. That number consisted of facility closings, at the time over 800 people leaving the organization, a lot of other curtailed spending, cut back of programs that has only been now, we announced it, you don’t get all of the savings the day you announce it. It trickled out there in the third quarter we started to see some benefit in the fourth and now in the first, that piece was structural and that the primary reason we’ve been able to post a profit the last two quarters, and that should flow through the next two quarters and we would start anniversarying that next year in the fourth quarter the full benefit of that. The piece on Mexico, the best direction we can give you is we think it will be more positive to us in calendar year 2010 and probably our fourth quarter we’ll start seeing some increased benefit and then the majority of that benefit. So if we get some of it in the fourth quarter we may only get and I’m not quantify this, we’re just trying to give you the map, we may only get $17 million or $16 million in full 2011. We can’t get $5 million in the fourth quarter and then another $20 million in 2011. So, it’s going to be happening going through there, and then the whole other then the $6 million is pretty much a standalone process through the greater efficiency that our Hudson facility, one less facility, greater capacity utilization and going from a fairly expensive distribution center to one where we own. So that pretty much is a standalone piece in the casegoods business.

We’ll get some of that this year as we made the transition and then John all of those things then determine the volume and we always try to clarify when we make the decisions based on our current volumes. As volumes get higher there’s some costs add to service that volume and volumes gets lower than the number, savings on a per unit basis aren’t quite as great because we’re not running the same number of units through our facilities.

I think your other issue is not putting the $85 million into your model is other things go up and there’s other costs and there’s other thing that will change in the business, but our attempt was to get our cost structures inline to where we thought our volume is going and still be profitable and our team accomplished that. John Baugh - Stifel Nicolaus: So the $60 million, you might look at the trailing 12 month of revenues through November ‘08 or something is that could old cost structure and with that $60 million is probably fully implemented, what for the quarter we’re in now?

That would be a good assumption. John Baugh - Stifel Nicolaus: You’d mentioned, I think on the last call about the retail cash flow drain of about $8 million annually at the quarter-on-quarter current volume levels and then you mentioned about a different numbers today about P&L breakeven. Is that still a good number to think about in terms of volumes here integrated will be a negative cash flow of $5 million to $10 million for retail?

Let back up here, and we talked last quarter about our integrated model and not the cash flows on retail as a standalone, but our integrated cash drain on the business between the two given current run rates and current profitability of the wholesale business and losses of the retail business to be a cash burn in the $10 million range using that. Budd asked the question about the volume to get the retail business to be profitable standalone and that volume number is much higher than the 10% or 15% increase we have to have to be cash neutral, there’s probably a doubling of that or 20%, 25% level it takes for retail to be profitable on a standalone business. John Baugh - Stifel Nicolaus: I guess, what I’m wondering is your revenues in retail were certainly better than I thought they would be. Does that cause you to think about that $10 million cash flow integrated number being less or is that still a good number to think about?

Again where we’re that with our retail business is all depending on volume, and if we continue to make improvements and one day our industry starts talking about same-store sales increases, that number will comedown quickly, but right now we’re using the numbers that we have in our plan and haven’t really made any adjustments to that based on our first quarter. John Baugh - Stifel Nicolaus: Lastly on casegoods side, here you gone to largely variable cost model, so excluding the plant consolidation expenses and all that, and you just continued some lines. Are you going to be able to, I mean I don’t know profitable EBIT company on casegoods, even if volumes just continue to drop from here and you’ll be down to one plant. : : : : :

That’s a correct assumption. If you would have backed out the excess of discounting and some of the overhang of startup costs of new product line at the Hudson facility, our casegoods group as a total would have been profitable, but I would caution that the casegoods business is the most difficult space to be in right now in the furniture business, and it is very competitive, and everybody is faced with the same challenges that the consumer has pulled back, more than in any other category. So the competitive nature of what’s happening in that category is also going to have an effect on our ability to improve our earnings performance in that segment, but obviously our planning is no different in the casegoods segment than it was in upholstery. What we have to do to be profitable at the assumed level of volume, which was assumed to be down quite a bit. John Baugh - Stifel Nicolaus: My last question, it was just on the same-store sales number. I wanted to make sure that we were, in the past that you talk about calendar quarters, I think this refers to a July quarter, is that correct and then in its company-owned and independent and its written business, is that correct?

You’ve done your homework John. I’ll repeat our same-store sales numbers that we report in our press release, because we’re reporting one week later than previous years, we know have the current quarters numbers. So it is the May, June, July period, it is the entire system, all 300 plus stores and it is written business. John Baugh - Stifel Nicolaus: When do you look at that year-over-year by month, was there any material trend was July better or less worst year-over-year than May?

Our business got sequential better as we went through the quarter.

John just to clarify one thing, just to make sure we’re clear on the $60 million, it is not all structural changes that we did some of that was the suspense curtailment of these benefit plans that Kurt spoke to earlier.

Your next question comes from Barry Vogel - Barry Vogel & Associates. Barry Vogel - Barry Vogel & Associates: Do you have a debt reduction goal for fiscal 2010?

The way I can answer that for you Barry is we are just being imprudent on how we utilize cash flow and we will determine the right balance between debt reductions if it is available some of our debt is fixed at a certain level IRBs and we have a, some dealing with interest rate swap and then based on that we will both deal with the rest with cash and determine how what our levels need to be. Barry Vogel - Barry Vogel & Associates: Well its, we know with standing we just said what would you be allowed to reduce in terms of the debt level if you had the cash generation or the desire to do that because you have $38 million of cash in your balance sheet, so obviously you can reduce debt further. What can you reduce debt at?

If you look at the Annual Report and it breaks out the debt levels there’s not much more that we can reduce debt without you know asking for early retirement of our debt which we don’t intend to do, but IRBs are $15 million to $20 million or something we had some come do and we have a certain portion of the revolver that tied into an interest rate swap. So, what we’re probably, within a couple of million dollars that number as it is. Barry Vogel - Barry Vogel & Associates: You probably hardly going to reduce debt this year?

Well we have already reduced it this quarter but of the $50 million that we have left in debt, there’s probably, I don’t know, I’ll just take a guess at $5 million, $10 million at the most I can reduce. Barry Vogel - Barry Vogel & Associates: As far as that tax refund you mentioned, what is the amount of the tax refund in fiscal 2010?

I have noted and there should be about $14 million with all in. Barry Vogel - Barry Vogel & Associates: You can get $14 million in cash, but from tax refunds this year, would you have received yet?

That’s correct. Barry Vogel - Barry Vogel & Associates: Now, as far as inventory, the fact that you raised of inventory to a couple of million dollars, does that imply that you’re not going to have inventory reduction this is year from the end of last fiscal year?

The answer to that, Berry would be it would depend on business. Our business frankly was slightly better than we had anticipated and we had to make sure we have inventory to service. I am not saying it’s going to happen this year, but historically between now and Christmas is better than between April and July. You have to anticipate in front of that and you have to buy fabric and other raw materials out 10 to 12 weeks. So you have to make some judgments on where you think the business is going. Barry Vogel - Barry Vogel & Associates: So basically, the bottomline is you’re probably not going to reduce inventory, in term of a probability, in fiscal 2010 versus your inventory level at the end of fiscal 2009…?

You are not going to see huge decreases in our inventory unless you see huge decreases in our volume. Barry Vogel - Barry Vogel & Associates: Probably, based on what you’re doing your volume is going to go up. So don’t be so pessimistic. Now I have a question for you Kurt, about this color on this Mexican thing and cellular thing. So I just want to try to pinpoint it. The fact that you were doing in duplicate lines and you had the start up of the Mexican cut and sew operation in fiscal ‘09. Tell me if I’m wrong, that did it affected negatively in terms of P&L in fiscal ‘09?

That’s correct. Barry Vogel - Barry Vogel & Associates: Could you give us some idea of how it affected you negatively in fiscal ‘09?

We won’t be revealing that. Barry Vogel - Barry Vogel & Associates: You won’t?

No. Barry Vogel - Barry Vogel & Associates: Why?

It’s a moving target. I would tell you one thing now, I have to correct it before, and just let me try to explain again, that in our original strategy, when we started into cut and sew, we sent our high volume styles and fabrics to Asia, and our partners over there only had to learn a half dozen styles and they had big runs and they could get up and be efficient pretty quickly. We are challenging our Mexico team to learn all 400 styles, and to be flexible on how to cut and sew those and to be nimble depending on how volume comes and goes on certain styles. That is not an easy process with a brand new workforce, and so we’re backstopping that with people in the U.S. until we’re positive it can handle it. So there are gains happening and at certain times and then we step back a little bit and so, it’s too fluent for us to give you any exact numbers on that process. Barry Vogel - Barry Vogel & Associates: Having said that, again once you put a number out with analysts they just dwell on it and that $20 million number, you can see you keep on getting asked about how that’s going to play out? Is it fair to assume that in fiscal 2010 that it will be positive effect for Mexico for the full fiscal 2010 and to get to that $20 million, you mentioned $16 million in conversation with one of your questionnaires from fiscal 2011. As far as savings, I know that has nothing to do with volume, I don’t think looking at your volume was neutral. So if that assume without putting you to the wealthier, that might have positive $4 million effect from Mexican cut and sew in 2010 and the remaining $16 million, in fiscal 2011. Just to get that $20 million figure.

I would answer it this way, whatever benefit we get in the fourth quarter, you need to deduct from the fiscal ‘11 savings, it can’t be duplicated. I want to be sure everybody on the call is clear. I don’t know whether that’s $4 million or $8 million or $1 million or $10 million in the fourth quarter. I was giving an example of what you had to carry over. So, there’s no number out there for us, so what that’s going mean to us. Barry Vogel - Barry Vogel & Associates: :

Well, I think the greatest indicator of what that is providing us is to look at the difference on the lower volume and our operating margin. It’s significant and the largest component of our improvement of gross margin is cellular, but we’re not going to quantify that to any greater degree. Our position was we gave some targets of what we were going to save with the cellular process when we started this three, three and a half years ago. We’ve continued to get better at it. Our productivity per employee, our quality, our speed have all improved as a result of it, but to give you how much better it’s going to be compared to last year, compared to the following year, we’re not going to get into that.

We did say there in our comments is that you can look at our current cost structure, and what we’ve done and go forward with that because we had the reduction of workforce last year. We had the restructuring last year. We have a lot of things with that. So to sit there and say what period are we saving that money off of it would be more productive for you to take our current cost structure and trying go forward with it. Barry Vogel - Barry Vogel & Associates: Now Kurt, as far as retail is concerned, do you think you going to continue to consolidate your company-owned stores or you can just stick with them?

I’m not sure I understand the question Barry. Barry Vogel - Barry Vogel & Associates: You have a certain amount of company-owned stores, something you expanded under duress, but indeed it more base sales in an area. You’ve been talking about that a less, are there any retail stores that you might want to close to improve profits to the retail segment?

My answer to that would be that we are not contemplating vacating any markets that we’re in. Obviously, we have leases coming up in the next couple of years on stores that may or may not be the correct location and there maybe some stores isolated stores that closed, but we’ve invested heavily into these stores. They are our mainstay of our volume in the markets we’re in, it’s our intention to make this work and it continue to improve its performance. Barry Vogel - Barry Vogel & Associates: I have one more question for Mike. I know you have some dealer loans on your balance sheet and I believe there in other long term assets. Could you give us at the end of July, what those loans are in terms of dollars?

We don’t separate out our individual assets and everything within our balance sheet. We continue to monitor those and put appropriate reserves against them as we deem necessary, but I’m not going to dissect of the individual parts of my balance sheet at the present time. Barry Vogel - Barry Vogel & Associates: I think those cellular, if some of these deal loans go to cellular, because these guys go bankrupt. Are you going to tell us that in your filings?

Well, you’ll see that in my cash flows, as I boost or not boost my dad debt reserve. Barry Vogel - Barry Vogel & Associates: So what happened to bad debt reserves in the last quarter?

We booked a little over $2 million, which was about $1.5 million or $8 million less than last year at this time.

Your next question comes from David Cohen - Midwood Capital. David Cohen - Midwood Capital: If you guys have slightly touch on this in some answers, but I was wondering if you can speak to the very impressive sort of sequential decline in your SG&A, and how much of that is going to seasonal factors, but whether or not that $77 million is sort of the base if the volume constant?

We’re trying to get our SG&A to be as variable as possible. So as our volume comes down, it will comedown as well, some of it do the structural changes that we made last fall in late November, eliminating some positions as well and suspending some of our benefit programs, but I would assume that is our volume comes up there’s variable portion of that will still go up with it. This won’t be a run rate at this rate, no matter what the volume is. So the volume goes up 10% and I would suspect the SG&A would go up correlation to that. David Cohen - Midwood Capital: The variability was dramatic. It sequentially I mean $22 million our sales decline for a $10 million SG&A decline. So, if conversely sales went up $20 million, would you get a $10 million bump in SG&A?

No, but we have done a lot to take the cost out of our SG&A. A couple of million of it was just bad debt to loan as we show in our cash flow, we didn’t have as many that this quarter, and our commissions and our warranty and our advertising all pretty much go down with sales volume. So, but it is not going to bounce back at the same level because we are not going to put the costs back in. David Cohen - Midwood Capital: I noticed going back, I don’t know if it affected this quarter but let me know if it did. There’s some disclosure in the 10-K about reduction of LIFO reserve, reducing cost of good sold is that something that occurs on a quarterly basis or is this something annual calculation through out there?

LIFO is more annual calculation; it is based on your end of the year volume. There are some things in, but there is mainly end of the year calculation based on volume levels. David Cohen - Midwood Capital: The last years really it just affected in the fourth quarter.

That’s correct.

Your final question comes from Budd Bugatch - Raymond James. Budd Bugatch - Raymond James: Did you quantify the benefit cost of 401K match etc. that might come back on the P&L and maybe a guess as to when you think the Board or the Management team would start to bring those back on?

Budd, again we are not trying to be, but its as I said earlier it is too early to do that now, we want more clarity to the retail environment, we want more time to be adequately comfortable with what’s going on the last thing in the world we want to do, reinstitute some of these programs and have suspend them again six months later. So that we have got some internal targets that we have talked about perhaps everything want be turned on at the same level it was before we had suspended but at the time that we start making those decisions we would certainly let the investment community know of their impact and what they mean to us going forward. Budd Bugatch - Raymond James: What’s the key operable metric then to say, is it revenues, is it earnings?

Well to be a combination of revenues, earnings, cash position, all of those same rolled into one and how sustainable is the position going forward. Budd Bugatch - Raymond James: What was the savings and taking those out, Kurt have you given that.

That was part of that $60 million number. Budd Bugatch - Raymond James: I understood that I just know what part.

I didn’t no either Budd Bugatch - Raymond James: That you probably have a better idea than we do?

The other thing, Budd you have to and frankly I couldn’t give you the exact number. I know what it was when we took it out but now we have a lot less people. So reinstating it isn’t at the same price it is that we took it out. So, I just keep you grounded on that. Budd Bugatch - Raymond James: How much per person then?

Good try.

Thank you. There are no further questions at this time. I’d like to hand the floor back over to management for any closing comments.

Thank you everyone for being on the call today. I will be available this afternoon if you have any follow up questions. Have a good day.