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Ethan Allen Interiors Inc. F4Q10 (Qtr End 06/30/10) Earnings Call Transcript

Ethan Allen Interiors Inc. F4Q10 (Qtr End 06/30/10) Earnings Call Transcript

Ethan Allen Interiors Inc. (ETH)

F4Q10 (Qtr End 06/30/10) Earnings Call Transcript

August 5, 2010 11:00 am ET


Farooq Kathwari - Chairman, President & CEO

David Callen - VP of Finance & Treasurer


Robert Higginbotham - Goldman Sachs

John Baugh - Stifel Nicolaus

Brad Thomas - KeyBanc Capital

Budd Bugatch - Raymond James

Joe Feldman - Telsey Advisory Group

Joel Havard - Hilliard Lyons



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Mr. Callen, you may begin.

David Callen

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» Ethan Allen Interiors F3Q09 (Qtr End 3/31/09) Earnings Call Transcript

Thank you Nikki, good morning and welcome to the Investor And Analyst Call for the Fourth Quarter Ended June 30, 2010 for Ethan Allen Interiors Inc. I am David Callen, Vice President of Finance and Treasurer, and joining Mr. Farooq Kathwari, our Chairman, President and CEO, in this quarterly discussion. After I read a few administrative notes, Farooq will provide his opening remarks. I will then review some of the important financial highlights from the quarter and fiscal year. Then Farooq will close our prepared remarks with a detailed review of the business initiatives of the company and then open the phone lines for questions.

Please note that in the earnings release and in the course of our prepared remarks, reference has been made to certain non-GAAP information, which excludes the effect of restructuring impairments, transition charges and unusual income and tax impacts in the reported periods.

A reconciliation of this non-GAAP information to the most directly comparable GAAP measure was provided with the tables attached to the press release. As a reminder, comments from this call should be considered in conjunction with the company's reports filed with the SEC.

Any forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking comments reflect management's current best judgment and are subject to various assumptions, risks and uncertainties.

Actual future events or results could differ materially from those contemplated in the forward-looking statements. The company assumes no obligation to update or provide revision to any forward-looking statements at any time, for any reason.

Now to Farooq Kathwari for his opening remarks.

Farooq Kathwari

Yeah thank you David. And also thank you for participating in the earnings call. As you note, we had a good quarter, we continue to focus on our eight strategic priorities. The first seven focus on continuing to strengthen important aspects of our vertically intergraded structure, the eight and the last priority is to have strong financial results.

I believe, as we continue to improve the first seven priorities we will end with decent financial performance as well. During the quarter, our delivered sales increase by 17.8%, our retail division retail sales increase by 18.5%, our return or booked orders for the retail division were 23.5% with comparable return up 31.3%, our liquidity improved with cash and investments of 102.2 million as on June 30, 2010 compared to 53 million as of June 30, 2009.

Dave will provide more detailed financial information and after that I will discuss our strategic initiatives and also comment on the business prospects as we see them today.

Also while keeping in real that it is very hard to make future predications in these uncertain economic environment.

And with that back to Dave.

David Callen

Thank you Farooq. Net sales for the quarter were $163.3 million, up 17.8% from the prior year quarter. Our retail segment reported net delivered sales of $121.2 million up 18.5% versus the prior year quarter and comparable design in our net sales increased 25.2%, return ordered book in retail increased 23.5%, with comparable design center return sales up 31.3% versus the prior year quarter. The difference there largely attributable to having 14 fewer retail division design centers in this year end versus last.

Wholesale net delivered sales were $100.1 million up 17.5%, compared with the prior year quarter.

Consolidated gross margin for the quarter was 49.5%, compared to 48.7% in the prior year quarter, as we have previously discussed, we continued to incur some transition charges related to book our growth plan and for the ramping up of production and the convergent to custom case goods during the quarter.

These costs totaled $1.2 million or about $0.03 per diluted share, excluding these costs, our consolidated growth margin would have been 50.3% in the quarter.

We expect transition cost in our first quarter of fiscal 2011 to be about above half of what we have in this quarter as we began to offset those cost with improved yield over the coming quarters.

Pretax income reported for the quarter was $11.6 million, compared to a pretax loss of $23 million, in the prior year quarter. The current year quarter included a net benefit of $4.3 million, primarily from a change to our design commission plan that benefited the results by $5.2 million.

The US GAAP reconciliation table attached to the press release show the break up of these charges between the segments. A majority of the wholesale items affected cost of sales, and the retail items affected operating expenses.

Excluding these benefits, and the restructuring, impairment and related transition charges, the profit before tax would be $7.3 million, compared with a pretax loss on a comparable basis last year of $10.1 million.

With the conclusion of our fourth fiscal quarter, the company had a cumulative three year pretax loss. And as a result concluded that it was prudent to record valuation allowances against the deferred tax assets.

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