DANBURY, CN -- Ethan Allen Interiors Inc. today reported operating results for the three months ended Dec. 31, 2012. Net sales in the quarter increased 4.4% over the prior year to $191.3 million. The Company’s Retail division net sales increased 6.1% to $151.8 million including comparable design center growth of 4.9%. Retail division written orders recorded during the second quarter increased 1.2% over the 10.3% growth the prior year second quarter. Comparable design center written orders increased 0.1% over the 6.7% growth the prior year.

Excluding special items in both periods, net income for the quarter ended Dec. 31, 2012 was $11.4 million or $0.39 per diluted share compared with $8.6 million or $0.30 per diluted share in the prior year period. US GAAP net income for the quarter ended December 31, 2012 was $9.8 million or $0.34 per diluted share compared with the prior year of $8.1 million or $0.28 per diluted share. A reconciliation of this GAAP to non-GAAP measure is provided in the attached table.

Farooq Kathwari, chairman and CEO commented, “We are pleased with our results for the quarter ended December 31, 2012. Despite the challenging economic / political environment and the impact of Hurricane Sandy, our adjusted earnings per share increased 30%. Hurricane Sandy negatively impacted our written orders, delivered sales, and our manufacturing margins during the quarter. Twenty eight of our Retail division design centers and eight independent retailer locations were affected. No adjustment to earnings per share was made to reflect the impact of Hurricane Sandy which we estimate may have been approximately $0.02 to $0.03 per diluted share.”

Kathwari said, “During the quarter we expanded our international operations by entering the European and Montreal markets. We opened design centers in Brussels, Belgium and in Montreal, Canada and invested in start up costs which negatively impacted earnings by $0.02 per diluted share. We also wrote down the carrying value of two vacant manufacturing plants which resulted in a charge of $0.03 per diluted share. We expect to exit both these vacant properties during our third fiscal quarter. These start up costs and write down charges are treated as special items in the adjusted results for the quarter.

Ethan Allen Interiors Inc.
Selected Financial Information
Unaudited
(in millions)

Selected Consolidated Financial Data:

Three Months Ended

Six Months Ended

12/31/12

12/31/11

12/31/12

12/31/11

Net sales $ 191.3 $ 183.3 $ 378.7 $ 368.2
Gross margin 54.4 % 53.6 % 55.0 % 53.3 %
Operating margin 9.1 % 7.6 % 9.3 % 7.5 %
Operating margin (excluding special items*) 10.5 % 8.5 % 10.5 % 7.9 %
Net income $ 9.8 $ 8.1 $ 19.9 $ 14.8

Net income (excluding special items* and unusual income tax effects)

$ 11.4 $ 8.6 $ 22.5 $ 15.8
Operating cash flow $ 11.5 $ 4.7 $ 18.2 $ 11.0
Capital expenditures $ 5.2 $ 8.0 $ 13.6 $ 11.4
Acquisitions $ 0.0 $ 0.0 $ 0.6 $ 0.0

Treasury stock repurchases (settlement date basis)

$ 0.0 $ 0.0 $ 0.0 $ 0.8
EBITDA $ 21.7 $ 18.5 $ 44.2 $ 37.1
EBITDA as % of net sales 11.3 % 10.1 % 11.7 % 10.1 %
EBITDA (excluding special items*) $ 24.4 $ 20.2 $ 48.5 $ 38.8
EBITDA as % of net sales (excluding special items*) 12.7 % 11.0 % 12.8 % 10.5 %

Selected Financial Data by Business Segment:

Three Months Ended

Six Months Ended

12/31/12

12/31/11

12/31/12

12/31/11

Retail

Net sales $ 151.8 $ 143.1 $ 300.9 $ 284.3
Operating margin 4.0 % -1.8 % 2.3 % -1.4 %
Operating margin (excluding special items*) 4.6 % -0.3 % 3.2 % -0.7 %

Wholesale

Net sales $ 108.2 $ 106.6 $ 219.6 $ 223.0
Operating margin 8.2 % 14.7 % 11.3 % 14.1 %
Operating margin (excluding special items*) 9.9 % 14.4 % 12.1 % 13.9 %
* 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 Statements of Comprehensive Income
Unaudited
(in thousands)

Three Months Ended

Six Months Ended

12/31/12

12/31/11

12/31/12

12/31/11

Net sales $ 191,251 $ 183,275 $ 378,688 $ 368,196
Cost of sales 87,284 85,056 170,468 172,092
Gross profit 103,967 98,219 208,220 196,104
Selling general and administrative expenses 86,610 84,281 172,909 168,528
Operating income 17,357 13,938 35,311 27,576
Interest and other income 128 145 202 205
Interest expense 2,198 2,274 4,397 4,625
Income before income taxes 15,287 11,809 31,116 23,156
Income tax expense 5,441 3,732 11,206 8,309
Net income $ 9,846 $ 8,077 $ 19,910 $ 14,847
Basic earnings per common share:
Net income per basic share $ 0.34 $ 0.28 $ 0.69 $ 0.52
Basic weighted average shares outstanding 28,846 28,823 28,841 28,791
Diluted earnings per common share:
Net income per diluted share $ 0.34 $ 0.28 $ 0.68 $ 0.51
Diluted weighted average shares outstanding 29,223 29,069 29,182 29,010
Comprehensive income:
Net income $ 9,846 $ 8,077 $ 19,910 $ 14,847
Other comprehensive income
Currency translation adjustment (20 ) (543 ) 140 (2,241 )
Other 15 (10 ) 40 (1 )
Other comprehensive income (loss) net of tax (5 ) (553 ) 180 (2,242 )
Comprehensive income $ 9,841 $ 7,524 $ 20,090 $ 12,605
Ethan Allen Interiors Inc.
Condensed Consolidated Balance Sheets
Unaudited
(in thousands)
December 31, June 30,

2012

2012

Assets
Current assets:
Cash and cash equivalents $ 57,267 $ 79,721
Marketable securities 17,869 9,005
Accounts receivable, net 11,137 14,919
Inventories 142,385 155,739
Prepaid expenses & other current assets 20,258 23,408
Total current assets 248,916 282,792
Property, plant and equipment, net 299,153 295,695
Intangible assets, net 45,128 45,128
Restricted cash and investments 15,427 15,416
Other assets 6,752 5,757
Total Assets $ 615,376 $ 644,788
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of long-term debt 466 250
Customer deposits 46,676 65,465
Accounts payable 16,334 27,315
Accrued expenses & other current liabilities 52,882 58,047
Total current liabilities 116,358 151,077
Long-term debt 154,871 154,250
Other long-term liabilities 18,486 17,593
Total liabilities 289,715 322,920
Shareholders' equity 325,661 321,868
Total Liabilities and Shareholders' Equity $ 615,376 $ 644,788
Ethan Allen Interiors Inc.
GAAP Reconciliation
Three and Six Months Ended December 31, 2012 and 2011
Unaudited
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
December 31, December 31,
2012 2011 2012 2011

Net Income / Earnings Per Share

Net income $ 9,846 $ 8,077 $ 19,910 $ 14,847
Special items net of related tax effects * 1,693 1,073 2,715 1,048
Unusual income tax effects (139 ) (568 ) (151 ) (133 )

Net income (excluding special items* and unusual income tax effects)

$ 11,400 $ 8,582 $ 22,474 $ 15,762
Basic weighted average shares outstanding 28,846 28,823 28,841 28,791
Earnings per basic share $ 0.34 $ 0.28 $ 0.69 $ 0.52

Earnings per basic share (excluding special items* and unusual income tax effects)

$ 0.40 $ 0.30 $ 0.78 $ 0.55
Diluted weighted average shares outstanding 29,223 29,069 29,182 29,010
Earnings per diluted share $ 0.34 $ 0.28 $ 0.68 $ 0.51

Earnings per diluted share (excluding special items* and unusual income tax effects)

$ 0.39 $ 0.30 $ 0.77 $ 0.54

Consolidated Operating Income / Operating Margin

Operating income $ 17,357 $ 13,938 $ 35,311 $ 27,576
Add: special items * 2,666 1,690 4,276 1,650
Operating income (excluding special items*) $ 20,023 $ 15,628 $ 39,587 $ 29,226
Net sales $ 191,251 $ 183,275 $ 378,688 $ 368,196
Operating margin 9.1 % 7.6 % 9.3 % 7.5 %
Operating margin (excluding special items*) 10.5 % 8.5 % 10.5 % 7.9 %

Wholesale Operating Income / Operating Margin

Wholesale operating income $ 8,892 $ 15,702 $ 24,897 $ 31,393
Add: special items 1,774 (368 ) 1,774 (368 )
Wholesale operating income (excluding special items*) $ 10,666 $ 15,334 $ 26,671 $ 31,025
Wholesale net sales $ 108,172 $ 106,631 $ 219,589 $ 223,025
Wholesale operating margin 8.2 % 14.7 % 11.3 % 14.1 %
Wholesale operating margin (excluding special items*) 9.9 % 14.4 % 12.1 % 13.9 %

Retail Operating Income / Operating Margin

Retail operating income (loss) $ 6,017 $ (2,532 ) $ 7,065 $ (4,029 )
Add: special items 892 2,058 2,502 2,018
Retail operating income (loss) (excluding special items*) $ 6,909 $ (474 ) $ 9,567 $ (2,011 )
Retail net sales $ 151,827 $ 143,104 $ 300,906 $ 284,285
Retail operating margin 4.0 % -1.8 % 2.3 % -1.4 %
Retail operating margin (excluding special items*) 4.6 % -0.3 % 3.2 % -0.7 %

* Special items consist of restructuring, impairment, transition charges and certain other items.

Related tax effects are calculated using a normalized income tax rate.

Ethan Allen Interiors Inc.
GAAP Reconciliation
Three and Six Months Ended December 31, 2012 and 2011
Unaudited
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
December 31, December 31,
2012 2011 2012 2011

EBITDA

Net income $ 9,846 $ 8,077 $ 19,910 $ 14,847
Add: interest expense, net 2,056 2,124 4,111 4,382
income tax expense 5,441 3,732 11,206 8,309
depreciation and amortization 4,360 4,593 8,966 9,582
EBITDA $ 21,703 $ 18,526 $ 44,193 $ 37,120
Net sales $ 191,251 $ 183,275 $ 378,688 $ 368,196
EBITDA as % of net sales 11.3 % 10.1 % 11.7 % 10.1 %
EBITDA $ 21,703 $ 18,526 $ 44,193 $ 37,120
Add: special items* 2,666 1,690 4,276 1,650
EBITDA (excluding special items) $ 24,369 $ 20,216 $ 48,469 $ 38,770
Net sales $ 191,251 $ 183,275 $ 378,688 $ 368,196
EBITDA as % of net sales (excluding special items) 12.7 % 11.0 % 12.8 % 10.5 %
* Special items consist of restructuring, impairment, transition charges and certain other items.
Related tax effects are calculated using a normalized income tax rate.

Source: Ethan Allen Interiors Inc.

 

 

 

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