Wholesale net sales for each of the last three fiscal years, allocated by product line, were as follows:

The wholesale segment, principally involved in the development of the Ethan Allen brand, encompasses all aspects of design, manufacture, sourcing, sale, and distribution of our broad range of home furnishings and accents. Wholesale revenue is generated upon the wholesale sale and shipment of our products to our network of independently operated design centers and Company operated design centers (see Company operated retail comments below) through its national distribution center and one other smaller fulfillment center.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

During the past year, independent retailers opened 15 new design centers and closed 16, two of which were relocations. We continue to promote the growth and expansion of our independent retailers through ongoing support in the areas of market analysis, site selection, and business development. As in the past, our independent retailers are required to enter into license agreements with us, which (i) authorize the use of certain Ethan Allen trademarks and (ii) require adherence to certain standards of operation, including a requirement to fulfill related warranty service agreements. We are not subject to any territorial or exclusive retailer agreements in North America. The wholesale segment also develops and implements related marketing and brand awareness programs.

Wholesale profitability includes (i) the wholesale gross margin, which represents the difference between the wholesale net sales price and the cost associated with manufacturing and/or sourcing the related product, and (ii) other operating costs associated with wholesale segment activities.

Approximately 75% of the products sold by the Company are manufactured in its North American plants. During fiscal 2016, the Company’s case goods manufacturing footprint increased 59,000 square feet, further increasing throughput in our Honduras facility. In our upholstery plants in Maiden, North Carolina we expanded production capacity and built a new R&D facility. A 300,000 square foot expansion is underway at our upholstery plant in Mexico which we anticipate completing during fiscal 2017. We operate four case good plants (two in Vermont including one sawmill, one in North Carolina, and one in Honduras), four upholstery plants (three at our North Carolina campus, and one in Mexico) and one home accent plant in New Jersey. We also source selected case goods, upholstery, and home accent items from third-party suppliers domestically and abroad.

As of June 30, 2016,2018, our wholesale backlog was $40.3$56.5 million (as compared to $63.7$47.4 million as of June 30, 2015)2017) which is anticipated to be serviced in the first quarter of fiscal 2017.2019. This backlog fluctuates based on the timing of net orders booked, manufacturing schedules and efficiency, the timing of sourced product receipts, the timing and volume of wholesale shipments, and the timing of various promotional events. Because orders may be rescheduled and/or canceled and the sourcing timing may change, the measure of backlog at a point in time is not necessarily indicative of future sales performance.

ForOur independent retailers are required to enter into license agreements with us, which (i) authorize the twelve months ended June 30, 2016, net orders booked atuse of certain Ethan Allen trademarks and (ii) require adherence to certain standards of operation, including a requirement to fulfill related warranty service agreements. We are not subject to any territorial or exclusive retailer agreements in North America.

Wholesale profitability includes (i) the wholesale level,gross margin, which includes orders generated by independently operatedrepresents the difference between the wholesale net sales price and Company operated design centers, totaled $470.7 million as compared to $487.4 million for the twelve months ended June 30, 2015. In any given period, net orders booked may be impacted bycost associated with manufacturing and/or sourcing the timing of floor sample orders received in connectionrelated product, and (ii) other operating costs associated with new product introductions. New product offerings may be made available to the retail network at any time during the year, including in connection with our periodic retailer conferences.wholesale segment activities.

Retail Segment Overview:Overview:

Retail net sales for each of the last three fiscal years are summarized below (in millions):

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Retail net sales for each of the last three fiscal years, allocated by product line, were as follows:

The retail segment sells home furnishings and accents to consumers through a network of Company operated design centers. The Company also offers access to its products to qualified independent interior designers through our interior design affiliate (“IDA”) program. Retail revenue is generated upon the retail sale and delivery of our products to our retail customers through our network of service centers. Retail profitability reflects (i) the retail gross margin, which represents the difference between the retail net sales price and the cost of goods, purchased primarily from the wholesale segment, and (ii) other operating costs associated with retail segment activities.

We measure the performance of our design centers based on net sales and written orders booked on a comparable period basis. Comparable design centers are those which have been operating for at least 15 months.months, including relocated design centers provided the original and relocated design center location had been operating for at least 15 months on a combined basis. During the first three months of operations of newly opened (including relocated) design centers, written orders are booked but minimal net sales are achieved through the delivery of products. Design centers we acquire from independent retailers are included in comparable design center sales in their 13th full month of Ethan Allen-owned operations. The frequency of our promotional events as well as the timing of the end of those events can also affect the comparability of orders booked during a given period.

We pursue further expansion of During fiscal 2018, the Company operated retail business by adding interior design professionals and expanding the IDA program, openingadded five new design centers relocating existing design centers and, when appropriate, acquiring design centersin the United States, including two acquired from independent retailers. During fiscal 2016 our reach was expanded further through our launch of our gift registry,retailers and through establishing licensing arrangements with Disney Consumer Products, an affiliate program with the Armyone relocation, and Air Force Exchange Service and marketing agreements with several leading national real estate brokerages. During fiscal 2016, we opened ten new design centers, six of which were relocations.closed five locations, including one relocation. The geographic distribution of retail design center locations is included under Item 2 of Part I of this Annual Report.

Retail net sales for each of the last three fiscal years, allocated by product line, were as follows:

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Products

Our strategy has been to position Ethan Allen as a preferred brand offering complimentary design service together with products of superior style, quality and value to provide consumers with a comprehensive, one-stop shopping solution for their home furnishing and interior design needs. In carrying out our strategy, we continue to expand our reach to a broader consumer base through a diverse selection of attractively priced products, designed to complement one another, reflecting current fashion trends in home decorating. During fiscal 2016,We continuously monitor changes in home fashion trends through attendance at international industry events and fashion shows, internal market research, and regular communication with our retailers and design center design consultants who provide valuable input on consumer trends. We believe that the Company continuedobservations and input gathered enable us to strengthen its product offerings by introducing newincorporate appropriate style details into our products to retail consumers in case goods, upholstery, and home accents, by introducing a very large collection of new products and existing products in new finishes under the umbrella of “Romantic Classics”, “Casual Classics”, and the expansion of our custom quick-ship program. Muchreact quickly to changing consumer tastes.

75% of our furniture is built by hand,artisans, one piece at a time, in our North American workshops. Most upholstery frames are hand-assembled and stitching is guided by hand. We select international partners who are as committed to quality and social responsibility as we are. All case goodgoods frames are made with premium lumber and veneers. We use best-in-class construction techniques, including mortise and tenon joinery and four-corner glued dovetail joinery on drawers. We combine technology with personal service and maintain an up-to-date broad range of styles and custom options in keeping with today’s home decorating trends. These factors continue to define Ethan Allen, positioning us as a fashion leader in the home fashion.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

furnishing industry.

The interior of our design centers, which were substantially refreshed during the past twothree fiscal years, are organized to facilitate display of our product offerings, both in room settings that project the category lifestyle and by product grouping to facilitate comparisons of the styles and tastes of our clients. To further enhance the experience, technology is used to expand the range of products viewed by including content from our website in applications used on large touch-screen flat panel displays.

We continuously monitor changes in home fashion trends through attendance at international industry events and fashion shows, internal market research, and regular communication with our retailers and design center design consultants who provide valuable input on consumer trends. We believe that the observations and input gathered enable us to incorporate appropriate style details into our products to react quickly to changing consumer tastes. 

Product Development and Sourcing Activities

Using a combination of on staff and outsourced product designers, we design the majority of the products we sell; all of whichsell. All our products are branded Ethan Allen. This important facet of our vertically integrated business enables us to control the design specifications and establish consistent levels of quality across the products in our own North American plants. To capitalize on this vertical integration, between the fall of 2014In addition to our seven U.S. manufacturing facilities, we have an upholstery manufacturing facility in Mexico and the spring of 2016, the Company undertook a significant redesign of products. Much of the product design took advantage of the Company’s customcase goods manufacturing capabilitiesfacility in its North American plants, where we manufacture and / or assemble approximatelyHonduras. Approximately 75% of the products we sell making us one ofare manufactured or assembled in these North American facilities. We selectively outsource the largest manufacturers of home furnishings in the United States. Our main manufacturing facilities are located in the Northeast and Southeast regions of the United States supported by an upholstery plant in Mexico and a case goods plant in Honduras. Our plants are located near sources of raw materials and skilled artisans. We source approximatelyremaining 25% of the products we sell, mostly from third-party suppliers, most of which are located outside the United States, primarily in Asia. We carefully select our sourcing partners and require them to provide products according to our specifications and quality standards. We believe that strategic investments in our manufacturing facilities balanced with outsourcing from foreign and domestic suppliers will accommodate significant future sales growth and allow us to maintain an appropriate degree of control over cost, quality and service to our customers.

Environmental Sustainability and Social Responsibility

We are focused on environmental and social responsibility and incorporating uniform environment,social, environmental, health and safety programs into our manufacturing standards.

Our “green” initiatives include but are not limited to the use of responsibly harvested Appalachian woods, water basedwater-based finishes and measuring our carbon footprint, greenhouse gases and recycled materials from our operations. We have eliminated the use of heavy metals and hydrochloroflourocarbons in all packaging. Our mattresses and custom upholstery use foam made without harmful chemicals and substances. We have implemented the Enhancing Furniture’s Environmental Culture (EFEC) environmental management system sponsored by the American Home Furnishing Alliance (AHFA) at all of our domestic manufacturing, distribution and service center facilities, and have begun to expandexpanded these effortefforts to our retail design centers.centers, which have now been registered in EFEC. Our Mexico and Honduras facilities have been audited and are registered under the AHFA's EFEC program. Our domestic manufacturing, distribution and service centers have also achieved Sustainable by Design (SBD) registration status under the EFEC program. Our Silao Mexico facility has also been audited and registered under the AHFA's EFEC program. SBD provides a framework for home furnishings companies to create and maintain a corporate culture of conservation and environmental stewardship by integrating socio-economic policies and sustainable business practices into their manufacturing operations and sourcing strategies.

The Company requires its sourcing facilities that manufacture Ethan Allen branded products to implement a labor compliance program and meet or exceed the standards established for preventing child labor, involuntary labor, coercion & harassment, discrimination, and restrictions to freedom of association. These facilities must also provide a safe and healthy environment in all workspaces, compliance with all local wage and hour laws and regulations, compliance with all applicable environmental laws and regulations, and they must authorize Ethan Allen and/or its designated agents (including third-party auditing companies) to engage in monitoring activities to confirm compliance.

We work to ensure our products are safe in our customers’ homes through responsible use of chemicals and manufacturing substances.

Raw Materials and Other Suppliers

The most important raw materials we use in furniture manufacturing are lumber, veneers, plywood, hardware, glue, finishing materials, glass, laminates, steel, fabrics, foam, and filling material. The various types of wood used in our products include cherry, ash, oak, maple, prima vera, African mahogany, birch, rubber wood and poplar.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Fabrics and other raw materials are purchased both domestically and outside the United States. We have no significant long-term supply contracts, and have sufficient alternate sources of supply to prevent disruption in supplying our operations. We maintain a number of sources for our raw materials, which we believe contribute to our ability to obtain competitive pricing. Lumber prices and availability fluctuate over time based on factors such as weather and demand. The cost of some of our raw materials such as foam and shipping costs are dependent on petroleum cost. Higher material prices, cost of petroleum, and costs of sourced products could have an adverse effect on margins.

Appropriate amounts of lumber and fabric inventory are typically stocked to maintain adequate production levels. We believe that our sources of supply for these materials are sufficient and that we are not dependent on any one supplier.

We enter into standard purchase agreements with certain foreign and domestic suppliers to source selected case goods, upholstery, and home accent items.products. The terms of these arrangements are customary for the industry and do not contain any long-term contractual obligations on our behalf. We believe we maintain good relationships with our suppliers.

Distribution and Logistics

We distribute our products through three distribution centers, owned by the Company, strategically located in New Jersey, Oklahoma, and Virginia. These distribution centers provide efficient cross-dock operations to receive and ship product from our manufacturing facilities and third-party suppliers to our retail network of Company and independently operated retail service centers. Retail service centers prepare products for delivery into clients’ homes. At June 30, 2016,2018, the Company operated retail design centers were supported by 1314 Company operated retail service centers and 1415 service centers operated by third parties.

While we manufacture to custom order the majority of our products, we also stock selected case goods, upholstery and home accents to provide for quick delivery of in-stock items and to allow for more efficient production runs. Wholesale shipmentsWe utilize independent carriers to ship our own fleet of trucks and trailers or are subcontracted with independent carriers. Our fleet of trucks are financed under capital lease agreements with remaining terms ranging from less than two to over three years, and all of our trailers are owned.products.

Our practice has been to sell our products at the same delivered cost to all Company and independently operated design centers in North America, regardless of their shipping point. This policy creates pricing credibility with our wholesale customers while providing our retail networksegment the opportunity to achieve more consistent margins by removing fluctuations attributable to the cost of shipping. Further, this policy eliminates the need for our independent retailers to carry significant amounts of inventory in their own warehouses. As a result, we obtain more accurate consumer product demand information.

Marketing Programs

Our multifaceted, multichannel marketing and advertising strategies are developed to drive traffic into our network ofboth to design centers and to ethanallen.com.our digital mediums. We believe these strategiesefforts give Ethan Allenus a strong competitive advantage in the home furnishings industry. We create and coordinate print, digital and television campaigns nationally, as well as assist in international and local marketing and promotional efforts. The Company’sindustry while benefiting our worldwide retail network of approximately 300 retail design centers along withas well as the over 6,000 independent members of theour Interior Design Affiliate program, benefit from these marketing efforts, and we believe these efforts position us to consistently fulfill our brand promise as America's Classic Design Brand.program.

Our team of advertising specialists creates consistent, clear messages thatwork to position Ethan Allen isas an authority on design, a leader in home fashion, designer servicesexemplary service, and classica source of style with everything for the well designed home. We use several forms of media to communicateeveryone. In our message, including social media, digital advertising, television (national and local), direct mail, newspapers and national shelter magazines. These messages are also conveyedmarketing campaigns, we capitalize on our website at ethanallen.com. A strong email marketing program delivers promotional messages, inspiration, design ideas and product brochures to a growing database of clients.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Our national television, social media, online and print advertising campaigns are designed to leverage ourEthan Allen's strong brand equity, finding creative and compelling ways to remind consumers ofpromote our tremendous range of products, services, special programs, and custom options. Coordinated local digital, televisionWe deliver these messages in a variety of ways – locally, nationally, and print advertising also serveglobally – to supportconnect and engage with our national programs.target audience and drive sales.

The Ethan AllenAs digital channels have taken on increasing importance, we continue to expand our digital marketing reach – supplementing traditional advertising strategies. Our channels include digital and social media, national and local television, direct mail, national and local newspapers, local and satellite radio, and local shelter magazines. Additionally, our robust email marketing program delivers inspiration, sales messages, design solutions, and product information to an ever-expanding database of current and potential clients.

Our direct mail magazine, which emphasizes the eclectic mixbreadth of our wide breadth of products and services, is aone of Ethan Allen's key marketing tool.tools. We publishproduce these magazines and sellmultiple times a year; in fiscal 2018, we distributed approximately 17 million copies. We distribute them to Company and independently operated design centers that use demographic informationtargeted marketing segments based on data collected internally and through independent market research to target potential clients. Given the importance of this advertising medium,research. We continually refine our direct mail marketing lists are continually refined to target those consumersclients and potential clients who are most likely to purchase, and improve the returnwhich provides better returns on direct mail expenditures. Approximately 23 million copies of our direct mail magazine were distributed to consumers during fiscal 2016.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

AtOur websites – ethanallen.com we provide ourand ethanallen.ca – undergo continuous conversion optimization to boost sales as clients and our associates with the tools they need to shop, design, and buy. The website features inspiring photography, engaging video content, and all our latest news and promotional information. This year we launched an enhanced user experience and streamlined the path to purchase by updating the designs to our category pages, product types, and checkout.

Ethan Allenpurchase. We also has local websites in various international regionshave a web presence to support our international licensees.licensees – in some cases, using local languages; in all cases, linking back to ethanallen.com. These websites someposition Ethan Allen in local languages, provide a regionalized presentation ofmanner consistent with our brand yet specific to the brand while also linking to our main website.region.

We launched an online specialty store in partnership with the Army and Air Force Exchange Service. The specialty online store accessible through shopmyexchange.com is an Exchange members-only website. The Army and Air Force Exchange Service is dedicated to ensuring active and retired soldiers, airmen, and their families have access to U.S. goods and services, wherever they serve or live. 

To enhance the Ethan Allen client experience, our design centers have interactive touchscreens, where users can browse our full product catalog, check out hundreds of fully designed rooms, print product descriptions, learn about promotions, and much more. Our design consultants utilize customized tablets so they can be more productive in our design centers and in our clients’ homes.

Our social media platforms offer fans and followers inspirational images, trend information, and design ideas, as well as tips for how to bring distinctive Ethan Allen style to their homes. We have a robust and loyal following on Facebook, Pinterest, Instagram, Twitter, Google+, YouTube, LinkedIn and Houzz. Our products are available to buy on Pinterest where we were one of the first brands to launch with Pinterest’s buyable pins program.

Our new mover and marketing program with major realtors brings Ethan Allen into targeted homes at the moment homeowners are most likely in the market for new furnishings. This program educates qualified consumers about our services and product offerings and is an extension of our designers’ grassroots marketing efforts.

We also have aA robust and informative extranet available toExtranet connects our retail network, keeping the lines of communication open among our retailers, design professionals, merchandisers, trainers, and design professionals. It is the primary source of communication in and among members of our retail network. It provides informationcorporate personnel. Information about every aspect of theEthan Allen's retail business at Ethan Allen,is shared here, including advertising materials, prototype floor plan displays, and extensive product details.

Retail Design Center Networks

Ethan Allen design centers are typically located in busy retail settings as freestanding destinations or as part of town centers, lifestyle centers, suburban strip malls or shopping malls, depending upon the real estate opportunities in a particular market. Our design centers average approximately 16,00015,000 square feet in size with 75%46% between 15,000 and 25,000 square feet and 20%50% less than or equal to 15,000 square feet and 5%4% greater than 25,000 square feet.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Combining technology with personal service in our design centers has allowed us to reduce the size of our design centers. AtAs of June 30, 20162018 we operated 1918 new design centers that have opened in the past three years, and these average 8,7009,300 square feet. These smaller footprint design centers reflect our direction as we move forward in repositioning our retail design center network.centers. These new and relocated design centers also reflect our shift from destination and shopping mall locations to lifestyle centers that better project our brand and offer increased traffic opportunities.

We strive to maintain consistency of presentation throughout theour retail design center networkcenters through a comprehensive set of standards and display planning assistance. These interior display design standards assist each design center in presenting a high quality image by using focused lifestyle settings and select product category groupings to display our products and information to facilitate design solutions and to educate consumers. We also create a consistent brand projection through our exterior facades and signage. The establishment of these standards has helped position Ethan Allen as a leader in the home furnishings retailing.industry.

We continue to strengthen the retail networkEthen Allen brand with many initiatives, including the opening of new and relocating design centers in desirable locations, updating presentations and floor plans, strengthening of the professionalism of our designers through training and certification, and the consolidation of certain design centers and service centers.

People

At June 30, 2016,2018 and June 30, 2017, the Company, , through its subsidiaries, had approximately 5,200 employees. The majority of our employees (“associates”), none of whom are represented by unions. Weemployed on a fulltime basis and we believe we maintain good relationships with our employees.employees, none of whom are represented by unions.

The retail network, which includes both Company subsidiaries and independently operated design centers, is staffed with a sales force of interior design consultants and service professionals who provide customers with complimentary home decorating and interior design solutions. Our interior design associates receive specialty training with respect to the distinctive design and quality features inherent in each of our products and programs. This enables them to more effectively communicate the elements of style and value that serve to differentiate us from our competition. As such, we believe our design consultants, and the complimentary service they provide, create a distinct competitive advantage over other home furnishing retailers. We continue to strengthen the level of service, professionalism, interior design competence, efficiency, and effectiveness of retail design center associates. The Company’s interior design affiliate program adds further strength and breadth to our interior design reach. We believe that this program augments the design center design staff to reach more clients and improve market penetration.

We recognize the importance of our retail design center network to our long-term success. Accordingly, we believe we (i) have established a strong management team within Company operated design centers and (ii) continue to work closely with our independent retailers in order to assist them. With this in mind, we make our services available to every design center, whether independently operated or Company operated, in support of their marketing efforts, including coordinated advertising, merchandising and display programs, and by providing extensive training seminars and educational materials. We believe that the development of design consultants, service and delivery personnel, and independent retailers is important for the growth of our business. As a result, we have committed to make available comprehensive retail training programs intended to increase the customer service capabilities of each individual.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Customer Service Offerings

We offer numerous customer service programs, each of which has been developed and introduced to consumers in an effort to make their shopping experience easier and more enjoyable.

Gift Card

This programallows customers to purchase and redeem gift cards through our website or at any participating retail design center, which can be used for any of our products or services.

Ethan Allen Consumer Credit Programs

The Ethan Allen Platinum program offers consumers (clients) a menu of custom financing options. Financing offered through this program is administered by a third-party financial institution and is granted to our customers on a non-recourse basis to the Company. Clients may apply for an Ethan Allen Platinum card at any participating design center or on-line at ethanallen.com.

Competition

The domestic and global home furnishings industry faces numerous challenges, which include an influx of low-priced products from overseas. As a result, there is a high degree of competition in our markets. We differentiate ourselves as a preferred brand by adhering to a business strategy focused on providing (i) high-quality, well designed and often custom, handmade products at good value, (ii) a comprehensive complement of home furnishing design solutions, including our complimentary design service, and (iii) excellence in customer service. We consider our vertical integration a significant competitive advantage in the current environment as it allows us to design, manufacture and source, distribute, market, and sell our products through one of the industry’s largest single-source retail networks.

The internet also provides a highly competitive medium for the sale of a significant amount of home furnishings each year, and we believe it is becoming increasingly important. Although much of that product is sold through commodity oriented, low priced and low service retailers, we believe consumers are spending more time window shopping on the internet and are thus better informed when they do visit our brick and mortar facilities. At Ethan Allen, the ultimate goal of our internet strategy is to drive traffic into our network of design centers by combining technology with excellent personal service. At ethanallen.com, customers have the opportunity to buy our products online but we take the process further. With so much of our product offering being custom, we encourage our website customers to get help from our network of interior design professionals. This complimentary interior design support creates a competitive advantage through our excellent personal service. This enhances the online experience and regularly leads to internet customers becoming clients of our network of interior design centers.

Industry globalization has provided us an opportunity to adhere to a blended sourcing strategy, establishing relationships with certain manufacturers, both domestically and outside the United States, to source selected case goods, upholstery, and home accent items. We intend to continue to balance our own North American production with opportunities to source from foreign and domestic manufacturers, as appropriate, in order to maintain our competitive advantage.

We believe the home furnishings industry competes primarily on the basis of product styling and quality, personal service, prompt delivery, product availability and price. We further believe that we effectively compete on the basis of each of these factors and that, more specifically, our complimentary interior design service, direct manufacturing, product presentations, website, and complimentary design servicewebsite create a distinct competitive advantage, further supporting our mission of providing consumers with a complete home decorating and design solution. We also believe that we differentiate ourselves further with the quality of our interior design service through our intensive training. Our objective is to continue to develop and strengthen our retail network by (i) expanding the Company operated retail business through the repositioning of and opening of new design centers, and (ii) obtaining and retaining independent retailers, encouraging such retailers to expand their business through the opening or relocation of new design centers with the objective of increasing the volume of their sales, (iii) further expanding our sales network through our IDA and realtor referral programs and (iv) further expanding our ecommerce.

The internet provides a highly competitive medium for the sale of a significant amount of home furnishings each year, and we believe it is becoming increasingly important. Much of that product is sold through commodity oriented, low priced and low service retailers. We believe consumers are spending more time researching on the internet and are thus better informed when they do visit our brick and mortar facilities. At Ethan Allen our internet strategy is to drive traffic into our design centers by combining technology with excellent personal service. Though our customers have the opportunity to buy our products on-line, we take the process further. With so much of our product customizable, we encourage our website customers to get personal help from our interior design professionals either in person or by chatting on-line with one of our qualified design consultants. This complimentary direct contact with one of our knowledgeable interior designers creates a competitive advantage through our excellent personal service. This enhances the online experience and regularly leads to internet customers becoming clients of our network of interior design centers.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

The internet provides a highly competitive medium for the sale of a significant amount of home furnishings each year, and we believe it is becoming increasingly important. Much of that product is sold through commodity oriented, low priced and low service retailers. We believe consumers are spending more time researching on the internet and are thus better informed when they do visit our brick and mortar facilities. At Ethan Allen our internet strategy is to drive traffic into our design centers by combining technology with excellent personal service. Though our customers have the opportunity to buy our products on-line, we take the process further. With so much of our product customizable, we encourage our website customers to get personal help from our interior design professionals either in person or by chatting on-line with one of our qualified design consultants. This complimentary direct contact with one of our knowledgeable interior designers creates a competitive advantage through our excellent personal service. This enhances the online experience and regularly leads to internet customers becoming clients of our network of interior design centers.

Trademarks

We currently hold, or have registration applications pending for, numerous trademarks, service marks and copyrights for the Ethan Allen name, logos and designs in a broad range of classes for both products and services in the United States and in many foreign countries. In addition, we have registered, or have applications pending for certain of our slogans utilized in connection with promoting brand awareness, retail sales and other services and certain collection names. We view such trademarks and service marks as valuable assets and have an ongoing program to diligently monitor and defend, through appropriate action, against their unauthorized use.

Executive Officers of the Registrant

Set forth in the table below is a list of our executive officers, together with certain biographical information, including their ages as of the date of this Report:

Item 1A.     Risk Factors

Thefollowing information describes informationdescribescertainsignificant risksrisksanduncertaintiesinherentinourbusinessthatshouldbecarefully considered, alongwithotherinformation containedelsewhereinthis AnnualReport and uncertainties inherent in our business that should be carefully considered, along with other information contained elsewhere in this Annual Report filings,whenmaking an investmentdecisionwithrespecttous.Ifoneormoreoftheserisksoccurs,theimpactonourbusiness,includingourfinancial condition, results ofoperations,and in other filings, when making an investment decision with respect to us. If one or more of these risks actually occurs, the impact on our business, including our financial condition, results of operations, and cash flowscash flows couldbe adverse. adverse.

An economic downturn Competitionfromoverseas manufacturersand domestic retailersmay materially adversely affect affectour business.business,operating resultsor financial condition.

Our wholesale business and results of operations are affected by international, national and regional economic conditions. Regional economic conditionssegment is involved in the United Statesdevelopment of our brand, which encompasses the design, manufacture, sourcing, sales and indistribution of our home furnishings products, and competes with other regionsU.S. and foreign manufacturers. Our retail network sells home furnishings to consumers through a network of the world where we have a concentration ofindependently operated and Company operated design centers, suchand competes against a diverse group of retailers ranging from specialty stores to traditional furniture and department stores, any of which may operate locally, regionally, nationally or globally, as Canada or China may impactwell as over the Company greater compared to economic conditions ininternet. We also compete with these and other parts of the world where we have lesser concentration ofretailers for appropriate retail locations as well as for qualified design centers. The United Statesconsultants and many other international economies experienced a major recession, which reduced the available market size formanagement personnel. Such competition could adversely affect our industry from historic peak levels. While we have recalibrated the footprint of our vertically integrated enterprise to be profitable with lower revenues than achieved at our historic peak, an economic downturn of significance or extended duration couldadversely affect consumer demand and discretionary spending habits and, as a result, our businessperformance, profitability, and cash flows.

Access to consumer credit could be interrupted and reduce sales and profitability.

Our ability to continue to access consumer credit for our clients could be negatively affected by conditions outside our control. If capital market conditions were to worsen meaningfully, there is a risk that our business partner that issues our private label credit card program may not be able to fulfill its obligations under that agreement. In addition, further tightening of credit markets may restrict the ability and willingness of customers to make purchases.future financial performance.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

WeIndustry globalization has led to increased competitive pressures brought about by the increasing volume of imported finished goods and components, particularly for case good products, and the development of manufacturing capabilities in other countries, specifically within Asia. The increase in overseas production has created over‐capacity for many manufacturers, including us, which has led to industry‐wide plant consolidation. In addition, because many foreign manufacturers are able to maintain substantially lower production costs, including the cost of labor and overhead, imported product may be unablecapable of being sold at a lower price to obtain sufficient external fundingconsumers, which, in turn, could lead to finance our operations and growth.some measure of further industry‐wide price deflation.

Historically, we have relied upon our cash from operations to fund our debt service, operations and growth. As we operate and expand our business, we may rely on external funding sources, including the proceeds from the issuance of additional debt or use of the $115 million revolving bank line of credit under our existing $150 million credit facility. The credit facility bears interest at a floating rate and there is a risk that the rate will increase and as we are not hedging our interest rate for the credit facility, our debt service costs could increase. Any unexpected reduction in cash flow from operations could increase our external funding requirements to levels above those currently available. There can be noWe cannot provide assurance that we will be able to establish or maintain relationships with sufficient or appropriate manufacturers, whether foreign or domestic, to supply us with selected case goods, upholstery and home accent items to enable us to maintain our competitive advantage. In addition, the emergence of foreign manufacturers has served to broaden the competitive landscape. Some of these competitors produce furniture types not experience unexpected cash flow shortfalls in themanufactured by us and may have greater financial resources available to them or lower costs of operating. This competition could adversely affect our future or that any increase in external funding required by such shortfalls will be available on acceptable terms or at all.financial performance.

Operating losses Failureto successfullyanticipateorrespondtochangesinconsumertastesandtrendsina timelymannercould reduce our liquidity andadversely impact our dividend policy.our business,operating results andfinancial condition.

Historically, we have reliedSales of our products are dependent upon consumer acceptance of our product designs, styles, quality and price. We continuously monitor changes in home design trends through attendance at international industry events and fashion shows, internal marketing research, and regular communication with our retailers and design consultants who provide valuable input on consumer tendencies. However, as with all retailers, our cash from operationsbusiness is susceptible to changes in consumer tastes and trends. Such tastes and trends can change rapidly and any delay or debt issuancesfailure to fundanticipate or respond to changing consumer tastes and trends in a timely manner could adversely impact our operationsbusiness, operating results and the payment of cash dividends. If the Company’s financial performance were to deteriorate resulting in financial losses we may not be able to fund a shortfall from operations and would require external funding. Some financing instruments used by the Company historically may not be available to the Company in the future. We cannot assure that additional sources of financing would be available to the Company on commercially favorable terms should the Company's capital requirements exceed cash available from operations and existing cash and cash equivalents. In such circumstances, the Company may reduce its quarterly dividends.condition.

Additional impairment charges could reduceOur successdependsupon our profitability.brand,marketingand advertising efforts andpricingstrategies. If wearenot ableto maintainandenhanceourbrand,orifwearenotsuccessfulintheseotherefforts,ourbusinessandoperatingresultscould be adverselyaffected.

Maintaining and enhancing our brand is critical to our ability to expand our base of customers and may require us to make substantial investments. Our advertising campaign utilizes television, direct mail, digital, newspapers, magazines and radio to maintain and enhance our existing brand equity. We have significant long-lived tangiblecannot provide assurance that our marketing, advertising and intangible assets recorded onother efforts to promote and maintain awareness of our balance sheets.brand will not require us to incur substantial costs. If these efforts are unsuccessful or we incur substantial costs in connection with these efforts, our business, operating results decline, we may incur impairment charges in the future, whichand financial condition could have a material impact on our financial results. We evaluate the recoverability of the carrying amount of our long-lived tangible and intangible assets on an ongoing basis. There can be no assurance that the outcome of such future reviews will not result in substantial impairment charges. Impairment assessment inherently involves judgments as to assumptions about expected future cash flows and the impact of market conditions on those assumptions. Future events and changing market conditions may impact our assumptions as to prices, costs or other factors that may result in changes in our estimates of future cash flows. Although we believe the assumptions we use in testing for impairment are reasonable, significant changes in any of our assumptions could produce a significantly different result.adversely affected.

We Weface changes changesin global andlocal economic conditions thatmayadverselyaffect consumerdemandand local economic conditions that may adversely affect consumer demand and spending, spending,our manufacturing operations or sources manufacturing operations or sourcesof merchandise and international operations.merchandise and international operations.

Historically, the home furnishings industry has been subject to cyclical variations in the general economy and to uncertainty regarding future economic prospects. Such uncertainty, as well as other variations in global economic conditions such as rising fuel costs, wage and benefit inflation, currency fluctuations, and increasing interest rates, may continue to cause inconsistent and unpredictable consumer spending habits, while increasing our own input costs. These risks, as well as industrial accidents or work stoppages, could also severely disrupt our manufacturing operations, which could have a material adverse effect on our financial performance.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

We import a portion of our merchandise from foreign countries and operate manufacturing plants in Mexico and Honduras and operate retail design centers in Canada. As a result, our ability to obtain adequate supplies or to control our costs may be adversely affected by events affecting international commerce and businesses located outside the United States, including natural disasters, changes in international trade, central bank actions, changes in the relationship of the U.S. dollar versus other currencies, labor availability and cost, and other governmental policies of the U.S. and the countries from which we import our merchandise or in which we operate facilities. The inability to import products from certain foreign countries or the imposition of significant tariffs could have a material adverse effect on our results of operations.

Competition from overseas manufacturers and domestic retailersThe Company’s business may be adversely affect our business, operating results or financial condition.affected by changes in U.S. policy related to imported merchandise.

Our wholesale business segmentA significant amount of the Company’s merchandise is involvedsourced from outside of the United States. The U.S. government is considering proposals for substantial changes to its trade and tax policies, which could include import restrictions, increased import tariffs, changes to or withdrawal from existing trade agreements, and border-adjustment taxes among other possible measures. Material changes in these policies could increase the development of our brand,Company’s tax obligations or require the Company to increase prices to customers, which encompasses the design, manufacture, sourcing, sales and distribution of our home furnishings products, and competes with other U.S. and foreign manufacturers. Our retail network sells home furnishings to consumers through a network of Company operated design centers, and competes against a diverse group of retailers ranging from specialty stores to traditional furniture and department stores, any of which may operate locally, regionally and nationally, as well as over the internet. We also compete with these and other retailers for appropriate retail locations as well as for qualified design consultants and management personnel. Such competition couldwould likely adversely affect our futuresales. Any significant change in U.S. policy related to imported merchandise could have a material adverse effect on the Company’s business and financial performance.results.

Industry globalization has led to increased competitive pressures brought about by the increasing volume of imported finished goods and components, particularly for case good products, and the development of manufacturing capabilities in other countries, specifically within Asia. The increase in overseas production capacity has created over-capacity for many manufacturers, including us, which has led to industry-wide plant consolidation. In addition, because many foreign manufacturers are able to maintain substantially lower production costs, including the cost of labor and overhead, imported product may be capable of being sold at a lower price to consumers, which, in turn, could lead to some measure of further industry-wide price deflation.

We cannot provide assurance that we will be able to establish or maintain relationships with sufficient or appropriate manufacturers, whether foreign or domestic, to supply us with selected case goods, upholstery and home accent items to enable us to maintain our competitive advantage. In addition, the emergence of foreign manufacturers has served to broaden the competitive landscape. Some of these competitors produce furniture types not manufactured by us and may have greater financial resources available to them or lower costs of operating. This competition could adversely affect our future financial performance.

Failure to successfully anticipate or respond to changes in consumer tastes and trends in a timely manner could adversely impact our business, operating results and financial condition.

Sales of our products are dependent upon consumer acceptance of our product designs, styles, quality and price. We continuously monitor changes in home design trends through attendance at international industry events and fashion shows, internal marketing research, and regular communication with our retailers and design consultants who provide valuable input on consumer tendencies. However, as with all retailers, our business is susceptible to changes in consumer tastes and trends. Such tastes and trends can change rapidly and any delay or failure to anticipate or respond to changing consumer tastes and trends in a timely manner could adversely impact our business, operating results and financial condition.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

An economic downturn may materiallyadverselyaffect our business.

Our numberbusiness and results of manufacturingoperations are affected by international, national and logistics sitesregional economic conditions. Regional economic conditions in the United States and in other regions of the world where we have a concentration of design centers such as Canada or China may increaseimpact the Company greater compared to economic conditions in other parts of the world where we have lesser concentration of design centers. An economic downturn of significance or extended duration could adversely affect consumer demand and discretionary spending habits and, as a result, our exposurebusiness performance, profitability, and cash flows.

Our business may be materially affected by changes to business disruptionsfiscal and tax policies. Potentially negative or unexpected tax consequences of these policies, or the uncertainty surrounding their potential effects, could adversely affect our results of operations and share price.

The U.S. Tax Cuts and Jobs Act of 2017 (the “TCJA”) was approved by the U.S. Congress on December 20, 2017 and signed into law on December 22, 2017. This legislation makes significant changes to the U.S. Internal Revenue Code of 1986, as amended (the “IRC”). Such changes include a reduction in the corporate tax rate from 35% to 21% and limitations on certain corporate deductions and credits, among other changes. In addition, the TCJA requires complex computations to be performed that were not previously required in U.S. tax law, significant judgments to be made in interpretation of the provisions of the TCJA and significant estimates in calculations, and the preparation and analysis of information not previously relevant or regularly produced.

While we have provided for the effect of the TCJA in our Consolidated Financial Statements the final impacts of the TCJA could be materially different from our expectations. For example, adverse changes in the underlying profitability and financial outlook of our operations or changes in tax law could lead to changes in our valuation allowances against deferred tax assets on our consolidated balance sheets, which could materially affect our results of operations. The U.S. Treasury Department, the Internal Revenue Service (the “IRS”), and other standard-setting bodies could interpret or issue guidance on how provisions of the TCJA will be applied or otherwise administered that is different from our interpretation. Finally, foreign governments may enact tax laws in response to the TCJA that could result in further changes to global taxation and materially affect our financial position and results of operations. The uncertainty surrounding the effect of the reforms on our financial results and business could also weaken confidence among investors in our financial condition. This could, in turn, have a materially adverse effect on the price of our ordinary shares.

Ournumberofmanufacturingandlogistics sitesmayincrease ourexposure to businessdisruptionsand could resultin higher transportation costs.transportationcosts.

We have a limited number of manufacturing sites in our case goodgoods and upholstery operations, consolidated our distribution network into fewer centers for both wholesale and retail segments, and operate a single home accents plant. Our upholstery operations consist of three upholstery plants at our North Carolina campus and one plant in Mexico. The Company operates three manufacturing plants (North Carolina, Vermont, and Honduras) and one sawmill in support of our case goods operations. Our plants require various raw materials and commodities such as logs and lumber for our case goodgoods plants and foam, springs and engineered hardwood board for our upholstery plants. As a result of the consolidation of our manufacturing operations into fewer facilities, if any of our manufacturing or logistics sites experience significant business interruption, our ability to manufacture products or deliver our products in a timely manner would likely be impacted. While we have long-standinglong‐standing relationships with multiple outside suppliers of our raw materials and commodities, there can be no assurance of their ability to fulfill our supply needs on a timely basis. The consolidation to fewer locations has resulted in longer distances for delivery and could result in higher costs to transport products if fuel costs increase significantly.

Fluctuationsintheprice,availabilityandqualityofrawmaterialscouldresultinincreasedcostsorcauseproductiondelays which mightresult ina decline in sales, either of which couldadverselyimpact our earnings.

We use various types of wood, foam, fibers, fabrics, leathers, and other raw materials in manufacturing our furniture. Certain of our raw materials, including fabrics, are purchased domestically and outside North America. Fluctuations in the price, availability and quality of raw materials could result in increased costs or a delay in manufacturing our products, which in turn could result in a delay in delivering products to our customers. For example, lumber prices fluctuate over time based on factors such as weather and demand, which in turn, impact availability. Production delays or upward trends in raw material prices could result in lower sales or margins, thereby adversely impacting our earnings.

In addition, certain suppliers may require extensive advance notice of our requirements in order to produce products in the quantities we desire. This long lead time may require us to place orders far in advance of the time when certain products will be offered for sale, thereby exposing us to risks relating to shifts in consumer demand and trends, and any significant downturn in the U.S. economy.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Our current and former manufacturing former manufacturingand retailretail operations and andproducts are subject aresubjectto increasingly stringent environmental,increasinglystringent environmental, health and safety requirements.and safety requirements.

We use and generate hazardous substances in our manufacturing and retail operations. In addition, both the manufacturing properties on which we currently operate and those on which we have ceased operations are and have been used for industrial purposes. Our manufacturing operations and, to a lesser extent, our retail operations involve risk of personal injury or death. We are subject to increasingly stringent environmental, health and safety laws and regulations relating to our products, current and former properties and our current operations. These laws and regulations provide for substantial fines and criminal sanctions for violations and sometimes require product recalls and/or redesign, the installation of costly pollution control or safety equipment, or costly changes in operations to limit pollution or decrease the likelihood of injuries. In addition, we may become subject to potentially material liabilities for the investigation and cleanup of contaminated properties and to claims alleging personal injury or property damage resulting from exposure to or releases of hazardous substances or personal injury because of an unsafe workplace.

In addition, noncompliance with, or stricter enforcement of, existing laws and regulations, adoption of more stringent new laws and regulations, discovery of previously unknown contamination or imposition of new or increased requirements could require us to incur costs or become the basis of new or increased liabilities that could be material.

Fluctuations in the price, availabilityThe Company's sales and quality of raw materialsoperating results could result in increased costs or cause production delays which might result in a decline in sales, either of which couldbe adversely impact our earnings.affected by product safety concerns.

If the Company's merchandise offerings do not meet applicable safety standards or consumers' expectations regarding safety, the Company could experience decreased sales, increased costs and/or be exposed to legal and reputational risk. Events that give rise to actual, potential or perceived product safety concerns could expose the Company to government enforcement action and/or private litigation. Reputational damage caused by real or perceived product safety concerns could negatively affect the Company's business and results of operations.

The Company reliesheavily oninformationand technologyto operateitsbusiness, andanydisruption toitstechnology infrastructure (including cyber attacks) or the internet could harm the Company's operations.

In the current environment, there are numerous and evolving risks to cybersecurity and privacy, including criminal hackers, hacktivists, state-sponsored intrusions, industrial espionage, employee malfeasance and human or technological error. High-profile security breaches at other companies and in government agencies have increased in recent years, and security industry experts and government officials have warned about the risks of hackers and cyberattacks targeting businesses such as ours. Computer hackers and others routinely attempt to breach the security of technology products, services and systems, and to fraudulently induce employees, customers, or others to disclose information or unwittingly provide access to systems or data. We useoperate many aspects of our business including financial reporting, and customer relationship management through server and web‐based technologies, and store various types of wood, foam, fibers, fabrics, leathers,data on such servers or with third‐parties who in turn store it on servers and in the “cloud”. Any disruption to the internet or to the Company's or its service providers' global technology infrastructure, including malware, insecure coding, “Acts of God,” attempts to penetrate networks, data theft or loss and human error, could have adverse effects on the Company's operations. A cyber attack of our systems or networks that impairs our information technology systems could disrupt our business operations and result in loss of service to customers. The risk of cyberattacks to our Company also includes attempted breaches of contractors, business partners, vendors and other raw materials in manufacturing our furniture. Certainthird parties. We have a comprehensive cybersecurity program designed to protect and preserve the integrity of our raw materials, including fabrics, are purchased domesticallyinformation technology systems. We have experienced and outside North America. Fluctuationsexpect to continue to experience actual or attempted cyber attacks of our IT systems or networks; however, none of these actual or attempted cyber attacks had a material impact on our operations or financial condition.

Additionally, we have access to sensitive customer information in the price, availabilityordinary course of business. If a significant data breach occurred, our reputation may be adversely affected, customer confidence may be diminished, or we may be subject to legal claims, or legal proceedings, including regulatory investigations and quality of raw materials could result in increased costsactions, may have a negative impact on our reputation, may lead to regulatory enforcement actions against us, and may materially adversely affect our business, operating results and financial condition. The loss, disclosure or a delay in manufacturing our products, which in turn could result in a delay in delivering products to our customers. For example, lumber prices fluctuate over time based on factors such as weather and demand, which in turn, impact availability. Production delays or upward trends in raw material prices could result in lower sales or margins, thereby adversely impacting our earnings.

In addition, certain suppliers may require extensive advance noticemisappropriation of our requirementsbusiness information may materially adversely affect our business, operating results and financial condition. Further, legislative or regulatory action in orderthese areas is evolving, and we may be unable to produce products inadapt our IT systems or to manage the quantities we desire. This long lead timeIT systems of third parties to accommodate these changes. Finally, if a significant data breach occurred, our reputation could be materially and adversely affected, confidence among our customers may require us to place orders far in advance of the time when certain products will be offered for sale, thereby exposing us to risks relating to shifts in consumer demand and trends, and any significant downturn in the U.S. economy.diminished.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

We depend on key personnelWhile we have invested and could be affected bycontinue to invest in information technology risk management, cybersecurity and disaster recovery plans, these measures cannot fully insulate the Company from technology disruptions or data theft or loss of their services.

The success of our business depends uponand the services of certain senior executives, and in particular, the services of M. Farooq Kathwari, Chairman of the Board, President and Chief Executive Officer, who is the only one of our senior executives who operates under a written employment agreement. The loss of any such person or other key personnel could have a materialresulting adverse effect on our businessthe Company's operations and results of operations.  financial results.

OurOur business is sensitive to increasing businessissensitivetoincreasinglaborcosts, competitivelabor costs, competitive labor markets,markets, our continued ability continuedabilitytoretain high-qualityhigh‐quality personneland risks ofof workstoppages.

The market for qualified employees and personnel in the retail and manufacturing industries is highly competitive. Our success depends upon our ability to attract, retain and motivate qualified artisans, professional and clerical associatesemployees and upon the continued contributions of these individuals. We cannot provide assurance that we will be successful in attracting and retaining qualified personnel. A shortage of qualified personnel may require us to enhance our wage and benefits package in order to compete effectively in the hiring and retention of qualified employees. Our labor and benefit costs may continue to increase and such increases may not be recovered. This could have a material adverse effect on our business, operating results and financial condition.

We depend onOurkey personneland could beaffectedby the lossof theirservices.

The success of our business depends upon the services of certain senior executives, and in particular, the services of M. Farooq Kathwari, Chairman of the Board, President and Chief Executive Officer, who is the only one of our brand, marketingsenior executives who operates under a written employment agreement. The loss of any such person or other key personnel could have a material adverse effect on our business and advertising effortsresults of operations.

We may be unable to obtain sufficient external funding to finance our operations and growth.

Historically, we have relied upon our cash from operations to fund our debt service, operations and pricing strategies. Ifgrowth. As we operate and expand our business, we may rely on external funding sources, including the proceeds from the issuance of additional debt or use of the $115 million revolving bank line of credit under our existing credit facility. The credit facility bears interest at a floating rate and there is a risk that the rate will increase and as we are not ablehedging our interest rate for the credit facility, our debt service costs could increase. Any unexpected reduction in cash flow from operations could increase our external funding requirements to maintainlevels above those currently available. There can be no assurance that we will not experience unexpected cash flow shortfalls in the future or that any increase in external funding required by such shortfalls will be available on acceptable terms or at all.

Access toconsumer credit could be interrupted and enhancereduce sales andprofitability.

Our ability to continue to access consumer credit for our brand, or if we are not successful in these other efforts,clients could be negatively affected by conditions outside our control. If capital market conditions have a material negative change, there is a risk that our business and operating results could be adversely affected.

Maintaining and enhancingpartner that issues our brand is critical to our ability to expand our base of customers and may require us to make substantial investments. Our advertising campaign utilizes television, direct mail, newspapers, magazines and radio to maintain and enhance our existing brand equity. We cannot provide assurance that our marketing, advertising and other efforts to promote and maintain awareness of our brand will not require us to incur substantial costs. If these efforts are unsuccessful or we incur substantial costs in connection with these efforts, our business, operating results and financial condition could be adversely affected.

Weprivate label credit card program may not be able to maintainfulfill its obligations under that agreement. In addition, the tightening of credit markets may restrict the ability and willingness of customers to make purchases.

Operating losses could reduce our current designliquidity and impact our dividend policy.

Historically, we have relied on our cash from operations or debt issuances to fund our operations and the payment of cash dividends. If the Company’s financial performance were to deteriorate resulting in financial losses we may not be able to fund a shortfall from operations and would require external funding. Some financing instruments used by the Company historically may not be available to the Company in the future. We cannot assure that additional sources of financing would be available to the Company on commercially favorable terms should the Company's capital requirements exceed cash available from operations and existing cash and cash equivalents. In such circumstances, the Company may reduce its quarterly dividends.

Additional impairment charges could reduce our profitability.

We have significant long‐lived tangible and intangible assets recorded on our balance sheets. If our operating results decline, we may incur impairment charges in the future, which could have a material impact on our financial results. We evaluate the recoverability of the carrying amount of our long‐lived tangible and intangible assets on an ongoing basis. There can be no assurance that the outcome of such future reviews will not result in substantial impairment charges. Impairment assessment inherently involves judgments as to assumptions about expected future cash flows and the impact of market conditions on those assumptions. Future events and changing market conditions may impact our assumptions as to prices, costs or other factors that may result in changes in our estimates of future cash flows. Although we believe the assumptions we use in testing for impairment are reasonable, significant changes in any of our assumptions could produce a significantly different result.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Wemaynotbeabletomaintainourcurrentdesigncenterlocationsatcurrentcosts.Wemayalsofailtosuccessfullyselect and secure design center locations at current costs. We may also fail to successfully select and secure design center locations.locations.

Our design centers are typically located in busy urban settings as freestanding destinations or as part of suburban strip malls or shopping malls, depending upon the real estate opportunities in a particular market. Our business competes with other retailers and as a result, our success may be affected by our ability to renew current design center leases and to select and secure appropriate retail locations for existing and future design centers.

Our results of results ofoperations for forany quarter arequarterare not necessarily indicative ofnecessarily indicative of our results of operationsresults of operations for a full year.year.

Sales of furniture and other home furnishing products fluctuate from quarter to quarter due to such factors as changes in global and regional economic conditions, changes in competitive conditions, changes in production schedules in response to seasonal changes in energy costs and weather conditions, changes in consumer order patterns, and the timing of various promotional events. From time to time, we have experienced, and may continue to experience, volatility with respect to demand for our home furnishing products. Accordingly, results of operations for any quarter are not necessarily indicative of the results of operations for a full year.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Failure to protect our intellectual property could adversely affect us.

We believe that our copyrights, trademarks, service marks, trade secrets, and all of our other intellectual property are important to our success. We rely on patent, trademark, copyright and trade secret laws, and confidentiality and restricted use agreements, to protect our intellectual property and may seek licenses to intellectual property of others. Some of our intellectual property is not covered by any patent, trademark, or copyright or any applications for the same. We cannot provide assurance that agreements designed to protect our intellectual property will not be breached, that we will have adequate remedies for any such breach, or that the efforts we take to protect our proprietary rights will be sufficient or effective. Any significant impairment of our intellectual property rights or failure to obtain licenses of intellectual property from third parties could harm our business or our ability to compete. Moreover, we cannot provide assurance that the use of our technology or proprietary know-howknow‐how or information does not infringe the intellectual property rights of others. If we have to litigate to protect or defend any of our rights, such litigation could result in significant expense.

The Company relies heavily on information and technology to operate its business, and any disruption to its technology infrastructure (including cyber attacks) or the internet could harm the Company's operations.

We operate many aspects of our business including financial reporting, and customer relationship management through server and web-based technologies, and store various types of data on such servers or with third-parties who in turn store it on servers and in the “cloud”. Any disruption to the internet or to the Company's or its service providers' global technology infrastructure, including malware, insecure coding, “Acts of God,” attempts to penetrate networks, data theft or loss and human error, could have adverse affects on the Company's operations.A cyber attack of our systems or networks that impairs our information technology systems could disrupt our business operations and result in loss of service to customers. We have a comprehensive cybersecurity program designed to protect and preserve the integrity of our information technology systems. We have experienced and expect to continue to experience actual or attempted cyber attacks of our IT systems or networks; however, none of these actual or attempted cyber attacks has had a material impact on our operations or financial condition. Additionally, we have access to sensitive customer information in the ordinary course of business. If a significant data breach occurred, our reputation may be adversely affected, customer confidence may be diminished, or we may be subject to legal claims, any of which may contribute to the loss of customers and have a material adverse impact on our business.While we have invested and continue to invest in information technology risk management, cybersecurity and disaster recovery plans, these measures cannot fully insulate the Company from technology disruptions or data theft or loss and the resulting adverse effect on the Company's operations and financial results.

We could incur substantial costs due to compliance with conflict mineral regulations, which may materially adversely affect our business, operating results, and financial condition.

The SEC has adopted rules regarding disclosure of the use of tantalum, tin, tungsten, and gold (commonly referred to as conflict minerals), which are mined from the Democratic Republic of the Congo and surrounding countries. This requirement could affect the sourcing of materials used in some of our products as well as the companies we use to manufacture our products. If our products are found to contain conflict minerals sourced from the Democratic Republic of the Congo or surrounding countries, the Company would take actions such as changing materials or designs to reduce the possibility that the purchase of conflict minerals may fund armed groups in the region. These actions could add engineering and other costs to the manufacture of our products.

We expect to incur costs to continue to upgrade our process to discover the origin of the tantalum, tin, tungsten, and gold used in our products, and to audit our conflict minerals disclosures. Our reputation and consequently our financial condition may also suffer if we have included conflict minerals originating in the Democratic Republic of the Congo or surrounding countries in our products, and those conflict minerals funded armed groups in the region.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Item 1B.    Unresolved Staff Comments

None.

Item 2.     Properties

Our 144,000 sq. ft. corporate headquarters, located in Danbury, Connecticut, and adjacent Ethan Allen Hotel and Conference Center, containing approximately 200 guestrooms, are owned by the Company. The hotel is used primarily for functions and accommodations for the general public as well as in connection with Ethan Allen functions and training programs.

We operate nine manufacturing facilities located in the U.S., Mexico and Honduras. All of theseThese facilities are owned by the Company and include four case goodgoods plants (including one sawmill) totaling 1,789,000 square feet, four upholstery furniture plants totaling 947,0001,261,000 square feet, and one home accent plant of 177,000 square feet. Our wholesale division also owns and operates three national distribution and fulfillment centers, one of which shares a facility with our manufacturing, which are a combined 1,001,000 square feet. Two of our case goods manufacturing facilities are located in Vermont, one is in North Carolina and one is in Honduras. We have three upholstery manufacturing facilities at our North Carolina campus, and one in Mexico. Our home accents plant is located in New Jersey, and our distribution facilities are located in New Jersey, Oklahoma, and Virginia .Virginia.

We own three and lease ten11 retail service centers, totaling 732,000approximately 775,000 square feet. Our retail service centers are located throughout the United States and Canada and serve to support our various retail sales districts.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

The location activity and geographic distribution of our retail design center network as offor fiscal years ended June 30 2016 isare as follows:

Of the 143148 Company operated retail design centers, 6650 of the properties are owned and 77 of the properties98 are leased from independent third parties. Of the 66 owned design centers, 17 are subject to land leases.leased. We own one and lease six additional retail properties, two of which are leasedwe lease to three independent Ethan Allen retailers, and four of which are leased to unaffiliated third parties. See Note 7 to the Consolidated Financial Statements included under Item 8 of this Annual Report for more information with respect to our operating lease obligations.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

We believe that all of our properties are well maintained and in good condition. We estimate that our manufacturing plants are currently operating at approximately 66%54% of capacity based on their current shifts and staffing. We believe we have additional capacity at selected facilities, which we could utilize with minimal additional capital expenditures.

Item 3.     Legal Proceedings

In the ordinary course of our business, we are party to various legal proceedings and claims which we believe are incidental to the operation of our business. Other than as described under Note 13 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K, we believe the ultimate outcome of these proceedings to which we are currently a party will not have a material adverse effect on our business, financial position, results of operations or cash flows.

Regulations issued under the Clean Air Act Amendments of 1990 required the industry to reformulate certain furniture finishes or institute process changes to reduce emissions of volatile organic compounds. Compliance with many of these requirements has been facilitated through the introduction of high solids coating technology and alternative formulations. In addition, we have instituted a variety of technical and procedural controls, including reformulation of finishing materials to reduce toxicity, implementation of high velocity low pressure spray systems, development of storm water protection plans and controls, and further development of related inspection/audit teams, all of which have served to reduce emissions per unit of production. We remain committed to implementing new waste minimization programs and/or enhancing existing programs with the objective of (i) reducing the total volume of waste, (ii) limiting the liability associated with waste disposal, and (iii) continuously improving environmental and job safety programs on the factory floor which serve to minimize emissions and safety risks for employees. In order toTo reduce the use of hazardous materials in the manufacturing process, we will continue to evaluate the most appropriate, cost-effective control technologies for finishing operations and production methods. We believe that our facilities are in material compliance with all such applicable laws and regulations. Our currently anticipated capital expenditures for environmental control facility matters are not material.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

Item 4.     Mine Safety Disclosures

Not applicable

applicable.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

PART II

Item 5.     Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is traded on the New York Stock Exchange (“NYSE”) under ticker symbol "ETH". The following table sets forth, for each quarterly period during the past two fiscal years, (i) the intraday high and low sales prices of our common stock as reported on the NYSE and (ii) the dividends per share declared by us: