DANBURY, CT - Ethan Allen Interiors Inc. (NYSE: ETH) today reported operating results for the three and nine months ended March 31, 2014. Please refer to the accompanying financial statements and reconciliation to non-GAAP measures discussed below.
Fiscal 2014 Third Quarter Highlights:
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Net sales of $173.1 million increased 2.9% compared to third quarter of fiscal 2013
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Adjusted diluted earnings per share (EPS) grew 4.8% to $0.22; GAAP EPS increased 20.0% to $0.18 compared to $0.15 in the prior year period
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Adjusted Operating Income of $12.0 million increased 1.7% compared to third quarter of fiscal 2013; GAAP Operating Income increased 10.3% compared to third quarter of fiscal 2013
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Cash and securities increased 6.5% to $124.8 million compared to period ended March 31, 2013
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Ending backlogs remain strong including a 10.1% increase in the retail segment backlog over the prior year
Farooq Kathwari, Chairman and CEO commented, "While we are pleased with the strong financial results, the severe winter weather negatively impacted sales for the third quarter, notably during the January and February months. January comparable written orders were down by 13.4% to prior year, February was down by 1.7%. We did see good order growth in March as the weather improved with a 15.6% increase in comparable written orders. We are positioned with stronger backlogs going into the fourth quarter."
Mr. Kathwari concluded, "Our competitive advantages include our variety of styles from contemporary to casual, a strong retail network, a focus on quality products with approximately 70% made in our own North American workshops and our major focus on adding technology. We remain cautiously optimistic about increasing our sales and profitability."
Fiscal 2014 Third Quarter Financial Results:
Consolidated net sales for the quarter ended March 31, 2014 increased 2.9% over the prior year to $173.1 million. The Company's wholesale segment net sales increased 2.8%. The Company's retail segment net sales decreased 0.2% to $131.8 million including a comparable design center net sales increase of 2.1%. Retail division written orders recorded during the third quarter decreased 2.4% including a decrease of 0.5% in comparable design center written orders. Net income for the quarter ended March 31, 2014 was $5.3 million or $0.18 per diluted share compared with $4.4 million or $0.15 per diluted share in the prior year quarter. Adjusted earnings for the quarter were $0.22 per diluted share or $6.5 million compared to $0.21 per diluted share or $6.1 million in the prior year quarter.
Fiscal 2014 Year-to-Date Financial Results:
Year to date net sales were $547.8 million, up 0.2% from $546.8 million the prior year. Gross margin and adjusted operating profit margin were 54.4% and 9.0% respectively compared with 54.9% and 9.4% respectively the prior year. Adjusted net income year to date of $27.9 million compares with $28.5 million the prior year period and our adjusted earnings per diluted share for the nine months to date is $0.95 compared with $0.98 the prior year to date period.
Analyst Conference Call
Ethan Allen will conduct a conference call at 11:00 AM (Eastern) on Wednesday, April 23rd 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. To participate on the call, dial 866-814-8476 with conference ID# 1635000.
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 North American plants. For more information on Ethan Allen's products and services, visit ethanallen.com.
Non-GAAP Financial Information
This press release is intended to supplement, rather than to supersede, the Company's condensed consolidated financial statements. It contains references to the Company's (i) consolidated operating income/operating margin, (ii) wholesale operating income/operating margin, (iii) retail operating income/operating margin, (iv) net income, (v) earnings per share, and (vi) earnings before interest, taxes, depreciation and amortization ("EBITDA"), all excluding the effects of restructuring charges as a result of the Company's previous decision to consolidate facilities, and also excluding certain transition costs and non-operating income adjustments in both fiscal 2014 and fiscal 2013. A reconciliation of these financial measures to the most directly comparable financial measure reported in accordance with generally accepted accounting principles ("GAAP") is also provided at the end of this press release.
Management believes that excluding items which are deemed to be non-recurring in nature from financial measures such as operating income, operating margin, net income, and earnings per share, allows investors to more easily compare and evaluate the Company's financial performance relative to prior periods and industry comparables. These adjusted measures also aid investors in understanding the operating results of the Company absent such non-recurring or unusual events.
Management considers EBITDA an important indicator of the operational strength and performance of its business, including the ability of the Company to pay interest, service debt and fund capital expenditures. Given the nature of the Company's operations, including the tangible assets necessary to carry out its production and distribution activities, depreciation and amortization represent Ethan Allen's largest non-cash charges. As these non-cash charges do not affect the Company's ability to service debt or make capital expenditures, it is important to consider EBITDA in addition to, but not as a substitute for, operating income, net income and other measures of financial performance reported in accordance with GAAP, including cash flow measures such as operating cash flow.
This press release should also be read in conjunction with the Company's Annual Report on Form 10-K for the year ended June 30, 2013 (the "2013 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 2013 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.
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| Ethan Allen Interiors Inc. | |||||
| Selected Financial Information | |||||
| Unaudited | |||||
| (in millions) | |||||
| Selected Consolidated Financial Data: | |||||
| Three Months Ended | Nine Months Ended | ||||
| 03/31/14 | 03/31/13 | 03/31/14 | 03/31/13 | ||
| Net sales | $173.1 | $168.1 | $547.8 | $546.8 | |
| Gross margin | 53.8% | 54.6% | 54.4% | 54.9% | |
| Operating margin | 5.5% | 5.2% | 8.3% | 8.0% | |
| Operating margin (excluding special items*) | 6.9% | 7.0% | 9.0% | 9.4% | |
| Net income | $5.3 | $4.4 | $25.8 | $24.3 | |
| Net income (excluding special items* and | |||||
| unusual income tax effects) | $6.5 | $6.1 | $27.9 | $28.5 | |
| Operating cash flow | $17.4 | $26.3 | $40.0 | $44.4 | |
| Capital expenditures | $4.0 | $3.0 | $12.6 | $16.5 | |
| Acquisitions | $0.0 | $0.0 | $0.0 | $0.6 | |
| EBITDA | $14.1 | $13.1 | $58.5 | $57.3 | |
| EBITDA as % of net sales | 8.1% | 7.8% | 10.7% | 10.5% | |
| EBITDA (excluding special items*) | $16.5 | $16.2 | $62.5 | $64.6 | |
| EBITDA as % of net sales (excluding special items*) | 9.5% | 9.6% | 11.4% | 11.8% | |
| Selected Financial Data by Business Segment: | |||||
| Three Months Ended | Nine Months Ended | ||||
| 03/31/14 | 03/31/13 | 03/31/14 | 03/31/13 | ||
| Retail | |||||
| Net sales | $131.8 | $132.1 | $425.1 | $433.0 | |
| Operating margin | -1.2% | -1.7% | 0.6% | 1.1% | |
| Operating margin (excluding special items*) | 0.6% | 0.6% | 1.5% | 2.4% | |
| Wholesale | |||||
| Net sales | $111.1 | $108.1 | $337.5 | $327.7 | |
| Operating margin | 11.7% | 11,8% | 12.9% | 11.5% | |
| Operating margin (excluding special items*) | 11.7% | 11.9% | 12.9% | 12.1% | |
| * 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 | Nine Months Ended | ||||
| 03/31/14 | 03/31/13 | 03/31/14 | 03/31/13 | ||
| Net sales | $ 173,061 | $ 168,144 | $ 547,824 | $ 546,832 | |
| Cost of sales | 79,931 | 76,359 | 249,952 | 246,827 | |
| Gross profit | 93,130 | 91,785 | 297,872 | 300,005 | |
| Selling, general and administrative expenses | 83,578 | 83,125 | 252,526 | 256,034 | |
| Operating income | 9,552 | 8,660 | 45,346 | 43,971 | |
| Interest and other income | 103 | (10) | 228 | 192 | |
| Interest expense | 1,870 | 2,195 | 5,614 | 6,592 | |
| Income before income taxes | 7,785 | 6,455 | 39,960 | 37,571 | |
| Income tax expense | 2,527 | 2,081 | 14,113 | 13,287 | |
| Net income | $ 5,258 | $ 4,374 | $ 25,847 | $ 24,284 | |
| Basic earnings per common share: | |||||
| Net income per basic share | $ 0.18 | $ 0.15 | $ 0.89 | $ 0.84 | |
| Basic weighted average shares outstanding | 28,920 | 28,869 | 28,916 | 28,850 | |
| Diluted earnings per common share: | |||||
| Net income per diluted share | $ 0.18 | $ 0.15 | $ 0.88 | $ 0.83 | |
| Diluted weighted average shares outstanding | 29,271 | 29,273 | 29,284 | 29,213 | |
| Comprehensive income: | |||||
| Net income | $ 5,258 | $ 4,374 | $ 25,847 | $ 24,284 | |
| Other comprehensive income | |||||
| Currency translation adjustment | 142 | 300 | 126 | 440 | |
| Other | 31 | 7 | 91 | 47 | |
| Other comprehensive income net of tax | 173 | 307 | 217 | 487 | |
| Comprehensive income | $ 5,431 | $ 4,681 | $ 26,064 | $ 24,771 | |
| Ethan Allen Interiors Inc. | |||
| Condensed Consolidated Balance Sheets | |||
| Unaudited | |||
| (in thousands) | |||
| March 31, | June 30, | ||
| 2014 | 2013 | ||
| Assets | |||
| Current assets: | |||
| Cash and cash equivalents | $ 95,804 | $ 72,601 | |
| Marketable securities | 20,138 | 15,529 | |
| Accounts receivable, net | 16,003 | 12,277 | |
| Inventories | 145,055 | 137,256 | |
| Prepaid expenses & other current assets | 20,914 | 22,907 | |
| Total current assets | 297,914 | 260,570 | |
| Property, plant and equipment, net | 286,797 | 291,672 | |
| Intangible assets, net | 45,128 | 45,128 | |
| Restricted cash and investments | 8,907 | 15,433 | |
| Other assets | 6,154 | 4,482 | |
| Total Assets | $ 644,900 | $ 617,285 | |
| Liabilities and Shareholders' Equity | |||
| Current liabilities: | |||
| Current maturities of long-term debt | 496 | 480 | |
| Customer deposits | 65,200 | 59,098 | |
| Accounts payable | 24,107 | 22,995 | |
| Accrued expenses & other current liabilities | 51,053 | 50,366 | |
| Total current liabilities | 140,856 | 132,939 | |
| Long-term debt | 130,513 | 130,809 | |
| Other long-term liabilities | 20,657 | 19,180 | |
| Total liabilities | 292,026 | 282,928 | |
| Shareholders' equity | 352,874 | 334,357 | |
| Total Liabilities and Shareholders' Equity | $ 644,900 | $ 617,285 | |
| Ethan Allen Interiors Inc. | |||||
| GAAP Reconciliation | |||||
| Three and Nine Months Ended March 31, 2014 and 2013 | |||||
| Unaudited | |||||
| (in thousands, except per share amounts) | |||||
| Three Months Ended | Nine Months Ended | ||||
| March 31, | March 31, | ||||
| 2014 | 2013 | 2014 | 2013 | ||
| Net Income / Earnings Per Share | |||||
| Net income | $ 5,258 | $ 4,374 | $ 25,847 | $ 24,284 | |
| Special items net of related tax effects * | 1,531 | 1,968 | 2,553 | 4,683 | |
| Unusual income tax effects | (315) | (275) | (472) | (426) | |
| Net income (excluding special items* and | |||||
| unusual income tax effects) | $ 6,474 | $ 6,067 | $ 27,928 | $ 28,541 | |
| Basic weighted average shares outstanding | 28,920 | 28,869 | 28,916 | 28,850 | |
| Earnings per basic share | $ 0.18 | $ 0.15 | $ 0.89 | $ 0.84 | |
| Earnings per basic share (excluding special items* | |||||
| and unusual income tax effects) | $ 0.22 | $ 0.21 | $ 0.97 | $ 0.99 | |
| Diluted weighted average shares outstanding | 29,271 | 29,273 | 29,284 | 29,213 | |
| Earnings per diluted share | $ 0.18 | $ 0.15 | $ 0.88 | $ 0.83 | |
| Earnings per diluted share (excluding special | |||||
| items* and unusual income tax effects) | $ 0.22 | $ 0.21 | $ 0.95 | $ 0.98 | |
| Consolidated Operating Income / Operating Margin | |||||
| Operating income | $ 9,552 | $ 8,660 | $ 45,346 | $ 43,971 | |
| Add: special items * | 2,411 | 3,099 | 4,021 | 7,375 | |
| Operating income (excluding special items*) | $ 11,963 | $ 11,759 | $ 49,367 | $ 51,346 | |
| Net sales | $ 173,061 | $ 168,144 | $ 547,824 | $ 546,832 | |
| Operating margin | 5.5% | 5.2% | 8.3% | 8.0% | |
| Operating margin (excluding special items*) | 6.9% | 7.0% | 9.0% | 9.4% | |
| Wholesale Operating Income / Operating Margin | |||||
| Wholesale operating income | $ 13,009 | $ 12,754 | $ 43,507 | $ 37,651 | |
| Add: special items | - | 69 | - | 1,843 | |
| Wholesale operating income (excluding special items*) | $ 13,009 | $ 12,823 | $ 43,507 | $ 39,494 | |
| Wholesale net sales | $ 111,143 | $ 108,101 | $ 337,474 | $ 327,690 | |
| Wholesale operating margin | 11.7% | 11.8% | 12.9% | 11.5% | |
| Wholesale operating margin (excluding special items*) | 11.7% | 11.9% | 12.9% | 12.1% | |
| Retail Operating Income / Operating Margin | |||||
| Retail operating income | $ (1,591) | $ (2,283) | $ 2,411 | $ 4,782 | |
| Add: special items | 2,411 | 3,030 | 4,021 | 5,532 | |
| Retail operating income (excluding special items*) | $ 820 | $ 747 | $ 6,432 | $ 10,314 | |
| Retail net sales | $ 131,813 | $ 132,056 | $ 425,136 | $ 432,962 | |
| Retail operating margin | -1.2% | -1.7% | 0.6% | 1.1% | |
| Retail operating margin (excluding special items*) | 0.6% | 0.6% | 1.5% | 2.4% | |
| * Special items consist of restructuring, impairment, transition charges and certain other items. | |||||
| Related tax effects are calculated using a normalized income tax rate. | |||||
| GAAP Reconciliation | |||||
| Three and Nine Months Ended March 31, 2014 and 2013 | |||||
| Unaudited | |||||
| (in thousands, except per share amounts) | |||||
| Three Months Ended | Nine Months Ended | ||||
| March 31, | March 31, | ||||
| 2014 | 2013 | 2014 | 2013 | ||
| EBITDA | |||||
| Net income | $ 5,258 | $ 4,374 | $ 25,847 | $ 24,284 | |
| Add: interest expense, net | 1,739 | 2,054 | 5,239 | 6,165 | |
| income tax expense | 2,527 | 2,081 | 14,113 | 13,287 | |
| depreciation and amortization | 4,577 | 4,548 | 13,276 | 13,514 | |
| EBITDA | $ 14,101 | $ 13,057 | $ 58,475 | $ 57,250 | |
| Net sales | $ 173,061 | $ 168,144 | $ 547,824 | $ 546,832 | |
| EBITDA as % of net sales | 8.1% | 7.8% | 10.7% | 10.5% | |
| EBITDA | $ 14,101 | $ 13,057 | $ 58,475 | $ 57,250 | |
| Add: special items* | 2,411 | 3,099 | 4,021 | 7,375 | |
| EBITDA (excluding special items) | $ 16,512 | $ 16,156 | $ 62,496 | $ 64,625 | |
| Net sales | $ 173,061 | $ 168,144 | $ 547,824 | $ 546,832 | |
| EBITDA as % of net sales (excluding special items) | 9.5% | 9.6% | 11.4% | 11.8% | |
| * 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
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