Ethan Allen Reports Results For Quarter Ended March 31, 2012

Ethan Allen Interiors Inc. (“Ethan Allen”, the “Company”, “We”, or “Our”) (NYSE:ETH) reported that net sales for the third quarter ended March 31, 2012 increased by 8.0% to 175.9 million and excluding special items, diluted earnings per share increased to $0.14 compared to $0.07 in the previous year quarter.

Farooq Kathwari, Chairman and CEO commented, “During our third quarter ended March 31 st with an 8% increase in sales, our adjusted net income per share doubled reflecting continued operating leverage from our vertically integrated structure. Our dividend was increased to $0.09, an increase of 29%. Our Retail division’s written (booked) orders during the quarter increased 11% including comparable design center growth of 8%. Our written (booked) orders for our Retail Division were $30 million greater than our shipments during the quarter.”

Mr. Kathwari further stated, “The recession has further accelerated our focus on major initiatives in all areas of our enterprise including a 60% change in our product offerings in less than one year. In addition, we continue to invest in acquiring talented interior design associates and management in our Retail division. While increasing our expenses, this investment provides an opportunity to grow our sales by enhancing our competitive advantage of providing complimentary interior design services.”

Three Months Ended March 31, 2012

Net sales for the quarter ended March 31, 2012 increased 8.0% over the prior year to $175.9 million. The Company’s Retail division net sales increased 12.3% to $131.4 million including comparable design center net sales growth of 9.4%. Net income for the quarter ended March 31, 2012 was $27.5 million or $0.94 per diluted share compared with the prior year of $3.5 million or $0.12 per diluted share. During the quarter the Company reversed deferred tax asset valuation allowances and certain other tax reserves resulting in $23.9 million in non-cash tax benefits in the quarter. Excluding these benefits and other special items in both periods, net income for the quarter ended March 31, 2012 was $4.0 million or $0.14 per diluted share compared with $2.0 million or $0.07 per diluted share in the prior year period.

Nine Months Ended March 31, 2012

Net sales for the nine months ended March 31, 2012 increased 8.6% over the prior year to $544.1 million. The Company’s Retail division net sales increased 12.6% to $415.7 million including comparable design center net sales growth of 10.2%. Written orders booked during the nine month period by the Retail division were 11.5% greater than the prior year quarter including comparable design center order growth of 8.7%.

Net income for the nine months ended March 31, 2012 was $42.4 million or $1.46 per diluted share compared with the prior year of $22.1 million or $0.76 per diluted share. Excluding the non-cash tax benefits and other special items in both periods, net income for the nine months ended March 31, 2012 was $19.7 million or $0.68 per diluted share compared with $10.8 million or $0.37 per diluted share in the prior year period.

Mr. Kathwari concluded, “During the fourth quarter we will complete the launch of new products. In addition, we will launch in June “Ethan Allen Express”, a new major initiative. The objective of this initiative is to expand our reach to more consumers. The program will consist of selected products with good price points and fast deliveries from our five lifestyles. Our plan is to strongly market this program during the next six months. As we stated in our previous press release, while recognizing the uncertain macro-economic conditions, we remain cautiously optimistic due to our many initiatives.”

Analyst Conference Call

The Company will conduct a conference call at 11:00 AM (Eastern) on Tuesday, April 24 th to discuss the financial results and its business initiatives. The live webcast and replay are accessible via the Company’s website at http://ethanallen.com/investors.

About Ethan Allen

Ethan Allen Interiors Inc. is a leading interior design company and manufacturer and retailer of quality home furnishings. The company offers free interior design service to its clients and sells a full range of furniture products and decorative accessories through ethanallen.com and a network of approximately 300 Design Centers in the United States and abroad. Ethan Allen owns and operates eight manufacturing facilities including five manufacturing plants and one sawmill in the United States plus two plants in Mexico and Honduras. Approximately seventy percent of its products are made in its United States plants. For more information on Ethan Allen's products and services, visit ethanallen.com.

This press release should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended June 30, 2011 (the “2011 Form 10-K”) and other reports filed with the Securities and Exchange Commission. This press release and related discussions contain forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect management’s current expectations concerning future events and results of the Company, and are subject to various assumptions, risks and uncertainties including specifically, and without limitation, those set forth in Part I, Item 1A “Risk Factors” of the 2011 Form 10-K. Accordingly, actual future events or results could differ materially from those contemplated by the forward-looking statements. The Company assumes no obligation to update or provide revision to any forward-looking statement at any time for any reason.
Ethan Allen Interiors Inc.
Selected Financial Information
Unaudited
(in thousands)
                     
 

Selected Consolidated Financial Data:
 
Three Months Ended Nine Months Ended
03/31/12 03/31/11 03/31/12 03/31/11
 
Net sales $ 175.9 $ 162.8 $ 544.1 $ 501.0
Gross margin 53.6 % 51.0 % 53.4 % 51.0 %
Operating margin 4.4 % 2.9 % 6.5 % 4.1 %
Operating margin (excluding special items*) 4.7 % 3.0 % 6.9 % 4.3 %
Net income $ 27.5 $ 3.5 $ 42.4 $ 22.1
Net income (excluding special items* and
unusual income tax effects) $ 4.0 $ 2.0 $ 19.7 $ 10.8
Operating cash flow $ 16.9 $ 37.8 $ 27.8 $ 40.6
Capital expenditures $ 8.4 $ 1.8 $ 19.8 $ 5.7
Acquisitions $ 0.5 $ 0.4 $ 0.5 $ 0.6
Treasury stock repurchases (settlement
date basis) $ 0.0 $ 0.0 $ 0.8 $ 5.4
 
EBITDA $ 12.3 $ 10.8 $ 49.4 $ 41.3
EBITDA as % of net sales 7.0 % 6.7 % 9.1 % 8.3 %
 
EBITDA (excluding special items*) $ 12.8 $ 10.9 $ 51.6 $ 40.9
EBITDA as % of net sales (excluding special items*) 7.3 % 6.7 % 9.5 % 8.2 %
 
 
 
 

Selected Financial Data by Business Segment:
Three Months Ended Nine Months Ended
03/31/12 03/31/11 03/31/12 03/31/11

Retail
Net sales $ 131.4 $ 117.0 $ 415.7 $ 369.1
Operating margin -5.0 % -6.2 % -2.5 % -3.5 %
Operating margin (excluding special items*) -5.0 % -6.1 % -2.1 % -3.4 %
 
 

Wholesale
Net sales $ 121.0 $ 104.1 $ 344.1 $ 312.5
Operating margin 15.0 % 12.7 % 14.4 % 11.2 %
Operating margin (excluding special items*) 15.4 % 12.7 % 14.4 % 11.4 %
 
* Special items consist of restructuring, impairment, transition charges and other certain items.
Related tax effects are calculated using a normalized income tax rate.
 
 
Ethan Allen Interiors Inc.
Condensed Consolidated Income Statements
Unaudited
(in thousands)
                     
 
 
Three Months Ended Nine Months Ended
03/31/12 03/31/11 03/31/12 03/31/11
 
Net sales $ 175,861 $ 162,822 $ 544,057 $ 501,008
Cost of sales   81,586     79,753     253,678     245,697  
Gross profit 94,275 83,069 290,379 255,311
Operating expenses:
Selling 44,281 39,147 130,147 118,542
General and administrative 42,191 39,056 124,864 115,758
Restructuring and impairment charge   16     109     5     393  
Total operating expenses   86,488     78,312     255,016     234,693  
Operating income 7,787 4,757 35,363 20,618
Interest and other income 157 1,128 362 5,453
Interest expense   2,189     2,773     6,814     8,649  
Income before income taxes 5,755 3,112 28,911 17,422
Income tax expense (benefit)   (21,793 )   (406 )   (13,484 )   (4,653 )
Net income $ 27,548   $ 3,518   $ 42,395   $ 22,075  
 
Basic earnings per common share:
Net income per basic share $ 0.95 $ 0.12 $ 1.47 $ 0.77
Basic weighted average shares outstanding 28,857 28,751 28,813 28,753
 
Diluted earnings per common share:
Net income per diluted share $ 0.94 $ 0.12 $ 1.46 $ 0.76
Diluted weighted average shares outstanding 29,236 28,987 29,085 28,953
 
 
Ethan Allen Interiors Inc.
Condensed Consolidated Balance Sheets
Unaudited
(in thousands)
           
 
 
 
March 31, June 30,

2012

2011
 
Assets
Current assets:
Cash and cash equivalents $ 73,130 $ 78,519
Marketable securities 11,259 12,909
Accounts receivable, net 17,571 15,036
Inventories 142,262 141,692
Prepaid expenses & other current assets 23,046 20,372
Deferred income taxes   1,163   -
Total current assets 268,431 268,528
 
Property, plant and equipment, net 297,211 294,853
Intangible assets, net 45,128 45,128
Restricted cash and investments 15,410 16,391
Other assets   7,251   3,425
 
Total Assets $ 633,431 $ 628,325
 
 
 
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of long-term debt 192 19
Customer deposits 61,512 62,649
Accounts payable 26,655 26,958
Accrued expenses & other current liabilities   55,575   64,990
Total current liabilities 143,934 154,616
 
Long-term debt 154,058 165,013
Other long-term liabilities 17,719 18,975
Deferred income taxes   -   8,034
Total liabilities 315,711 346,638
 
Shareholders' equity   317,720   281,687
 
Total Liabilities and Shareholders' Equity $ 633,431 $ 628,325
 
 
Ethan Allen Interiors Inc.
GAAP Reconciliation
Three and Nine Months Ended March 31, 2012 and 2011
Unaudited
(in thousands, except per share amounts)
        Three Months Ended       Nine Months Ended
March 31, March 31,
2012     2011 2012     2011

Net Income / Earnings Per Share
       
Net income $ 27,548 $ 3,518 $ 42,395 $ 22,075
Special items net of related tax effects * 327 69 1,375 (272 )
Unusual income tax effects   (23,894 )       (1,542 )   (24,037 )       (11,012 )
Net income (excluding special items* and
unusual income tax effects) $ 3,981       $ 2,045   $ 19,733       $ 10,791  
 
Basic weighted average shares outstanding 28,857 28,751 28,813 28,753
Earnings per basic share $ 0.95       $ 0.12   $ 1.47       $ 0.77  
Earnings per basic share (excluding special items*
and unusual income tax effects) $ 0.14       $ 0.07   $ 0.68       $ 0.38  
 
Diluted weighted average shares outstanding 29,236 28,987 29,085 28,953
Earnings per diluted share $ 0.94       $ 0.12   $ 1.46       $ 0.76  
Earnings per diluted share (excluding special
items* and unusual income tax effects) $ 0.14       $ 0.07   $ 0.68       $ 0.37  
 
 

Consolidated Operating Income / Operating Margin
Operating income $ 7,787 $ 4,757 $ 35,363 $ 20,618
Add: special items *   515         109     2,165         1,072  
Operating income (excluding special items*) $ 8,302       $ 4,866   $ 37,528       $ 21,690  
Net sales $ 175,861       $ 162,822   $ 544,057       $ 501,008  
Operating margin   4.4 %       2.9 %   6.5 %       4.1 %
Operating margin (excluding special items*)   4.7 %       3.0 %   6.9 %       4.3 %
 

Wholesale Operating Income / Operating Margin
Wholesale operating income $ 18,191 $ 13,253 $ 49,584 $ 35,076
Add: special items   499         -     131         679  
Wholesale operating income (excluding special items*) $ 18,690       $ 13,253   $ 49,715       $ 35,755  
Wholesale net sales $ 121,044       $ 104,119   $ 344,069       $ 312,467  
Wholesale operating margin   15.0 %       12.7 %   14.4 %       11.2 %
Wholesale operating margin (excluding special items*)   15.4 %       12.7 %   14.4 %       11.4 %
 

Retail Operating Income / Operating Margin
Retail operating income (loss) $ (6,549 ) $ (7,271 ) $ (10,578 ) $ (12,767 )
Add: special items   16         109     2,034         393  
Retail operating income (loss) (excluding special items*) $ (6,533 )     $ (7,162 ) $ (8,544 )     $ (12,374 )
Retail net sales $ 131,402       $ 117,029   $ 415,687       $ 369,066  
Retail operating margin   -5.0 %       -6.2 %   -2.5 %       -3.5 %
Retail operating margin (excluding special items*)   -5.0 %       -6.1 %   -2.1 %       -3.4 %
 
* Special items consist of restructuring, impairment, transition charges and certain other items.
Related tax effects are calculated using a normalized income tax rate.
 
Unaudited
(in thousands, except per share amounts)
        Three Months Ended       Nine Months Ended
March 31, March 31,
2012     2011 2012     2011
       

EBITDA
Net income $ 27,548 $ 3,518 $ 42,395 $ 22,075
Add: interest expense, net 2,037 2,527 6,419 7,807
Add: income tax expense (benefit) (21,793 ) (406 ) (13,484 ) (4,653 )
Add: depreciation and amortization   4,510         5,191     14,092         16,120  
EBITDA $ 12,302       $ 10,830   $ 49,422       $ 41,349  
Net sales $ 175,861       $ 162,822   $ 544,057       $ 501,008  
EBITDA as % of net sales   7.0 %       6.7 %   9.1 %       8.3 %
 
EBITDA $ 12,302 $ 10,830 $ 49,422 $ 41,349
Add: special items*   515         109     2,165         (428 )
Adjusted EBITDA $ 12,817       $ 10,939   $ 51,587       $ 40,921  
Net sales $ 175,861       $ 162,822   $ 544,057       $ 501,008  
Adjusted EBITDA as % of net sales   7.3 %       6.7 %   9.5 %       8.2 %
 
* Special items consist of restructuring, impairment, transition charges and certain other items.
Related tax effects are calculated using a normalized income tax rate.
 

Copyright Business Wire 2010

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