DANBURY, Conn. - Ethan Allen Interiors Inc. (NYSE:ETH) today reported operating results for the three months ended September 30, 2013. Please refer to the accompanying financial statements and reconciliations to non-GAAP measures discussed below.

First Quarter Highlights:

Net sales of $181.7 million with adjusted operating profit margin of 9.2%

Retail division written orders increased 11.4% including an increase of 13.8% in comparable design center written orders on top of 9.1% comparable growth the prior year first quarter

Cash and securities of $120 million, an increase of $20 million over the prior year

Major focus on getting ready for the launch of our new initiative under the umbrella of “The New Eclecticism” starting in Fall 2013

Farooq Kathwari, Chairman and CEO commented, “We are pleased with our progress in re-positioning our brand from a leader in furniture to a leader in home fashion. Our written business by our retail division increased 11.4% with comparable written increasing 13.8% despite the uncertainty expressed by our clients as a result of the recent government shutdown.”

Mr. Kathwari continued, “Our net sales of $181.7 million compared to $187.4 million in the prior year reflected the lower backlogs we had at the beginning of the quarter this year, a comparison to a strong quarter the previous year, and higher clearance sales during this quarter to make room for new products for our October launch.”

Mr. Kathwari concluded, “We are very pleased with our progress of re-introducing Ethan Allen as a fashion brand and reaching a larger customer base. We have a strong marketing program that started in October. The “bickering” in Washington made consumers nervous otherwise we believe we would have had an opportunity to have even higher written business in the first quarter. We also saw continued hesitancy in the first two weeks of October. We now see our clients starting to get more focused on decorating their homes and as a result we remain cautiously optimistic as we move forward.”

Financial Results:

Net sales for the quarter ended September 30, 2013 decreased 3.1% over the prior year to $181.7 million. The Company’s Retail division net sales decreased 4.9% to $141.8 million including a comparable design center net sales decline of 3.0%. Retail division written orders recorded during the fourth quarter increased 11.4% including an increase of 13.8% in comparable design center written orders. Net income for the quarter ended September 30, 2013 was $9.0 million or $0.31 per diluted share compared with $10.1 million or $0.35 per diluted share in the prior year quarter. Adjusted earnings for the quarter were $0.33 per diluted share or $9.5 million compared to $0.38 per diluted share or $11.1 million in the prior year quarter.

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

Selected Consolidated Financial Data:

 

Three Months Ended

09/30/13

09/30/12

 
Net sales $ 181.7 $ 187.4
Gross margin 54.4 % 55.6 %
Operating margin 8.8 % 9.6 %
Operating margin (excluding special items*) 9.2 % 10.4 %
Net income $ 9.0 $ 10.1
Net income (excluding special items* and
unusual income tax effects) $ 9.5 $ 11.1
Operating cash flow $ 21.1 $ 6.7
Capital expenditures $ 3.3 $ 8.3
Acquisitions $ 0.0 $ 0.6
Treasury stock repurchases $ 0.0 $ 0.0
 
EBITDA $ 20.2 $ 22.5
EBITDA as % of net sales 11.1 % 12.0 %
 
EBITDA (excluding special items*) $ 21.0 $ 24.1
EBITDA as % of net sales (excluding special items*) 11.6 % 12.9 %
 
 
 
 

Selected Financial Data by Business Segment:

Three Months Ended

09/30/13

09/30/12

Retail

Net sales $ 141.8 $ 149.1
Operating margin -0.1 % 0.7 %
Operating margin (excluding special items*) 0.4 % 1.8 %
 
 

Wholesale

Net sales $ 113.2 $ 111.4
Operating margin 14.3 % 14.4 %
Operating margin (excluding special items*) 14.3 % 14.4 %
 
* 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 Statements of Comprehensive Income
Unaudited
(in thousands)
 
 
 

Three Months Ended

09/30/13

09/30/12

 
Net sales $ 181,659 $ 187,437
Cost of sales   82,916   83,184
Gross profit 98,743 104,253
Selling, general and administrative expenses   82,799   86,299
Operating income 15,944 17,954
Interest and other income 82 74
Interest expense   1,873   2,199
Income before income taxes 14,153 15,829
Income tax expense   5,119   5,765
Net income $ 9,034 $ 10,064
 
Basic earnings per common share:
Net income per basic share $ 0.31 $ 0.35
Basic weighted average shares outstanding 28,911 28,836
 
Diluted earnings per common share:
Net income per diluted share $ 0.31 $ 0.35
Diluted weighted average shares outstanding 29,288 29,141
 
Comprehensive income:
Net income $ 9,034 $ 10,064
Other comprehensive income
Currency translation adjustment 55 160
Other   18   25
Other comprehensive income (loss) net of tax   73   185
Comprehensive income $ 9,107 $ 10,249
 
       
Ethan Allen Interiors Inc.
Condensed Consolidated Balance Sheets
Unaudited
(in thousands)
 
 
 
 
September 30, June 30,

2013

2013

 
Assets
Current assets:
Cash and cash equivalents $ 91,224 $ 72,601
Marketable securities 13,431 15,529
Accounts receivable, net 12,549 12,277
Inventories 141,664 137,256
Prepaid expenses & other current assets   22,515   22,907
Total current assets 281,383 260,570
 
Property, plant and equipment, net 289,542 291,672
Intangible assets, net 45,128 45,128
Restricted cash and investments 14,934 15,433
Other assets   4,585   4,482
 
Total Assets $ 635,572 $ 617,285
 
 
 
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of long-term debt 485 480
Customer deposits 67,401 59,098
Accounts payable 25,783 22,995
Accrued expenses & other current liabilities   51,214   50,366
Total current liabilities 144,883 132,939
 
Long-term debt 130,712 130,809
Other long-term liabilities   19,036   19,180
Total liabilities 294,631 282,928
 
Shareholders' equity   340,941   334,357
 
Total Liabilities and Shareholders' Equity $ 635,572 $ 617,285
 
       
Ethan Allen Interiors Inc.
GAAP Reconciliation
Three Months Ended September 30, 2013 and 2012
Unaudited
(in thousands, except per share amounts)
Three Months Ended
September 30,
2013   2012

Net Income / Earnings Per Share

Net income $ 9,034 $ 10,064
Special items net of related tax effects * 533 1,022
Unusual income tax effects   (46 )     (12 )
Net income (excluding special items* and
unusual income tax effects) $ 9,521     $ 11,074  
Basic weighted average shares outstanding 28,911 28,836
Earnings per basic share $ 0.31     $ 0.35  
Earnings per basic share (excluding special items*
and unusual income tax effects) $ 0.33     $ 0.38  
 
Diluted weighted average shares outstanding 29,288 29,141
Earnings per diluted share $ 0.31     $ 0.35  
Earnings per diluted share (excluding special
items* and unusual income tax effects) $ 0.33     $ 0.38  
 
 

Consolidated Operating Income / Operating Margin

Operating income $ 15,944 $ 17,954
Add: special items *   840       1,610  
Operating income (excluding special items*) $ 16,784     $ 19,564  
 
Net sales $ 181,659     $ 187,437  
Operating margin   8.8 %     9.6 %
Operating margin (excluding special items*)   9.2 %     10.4 %
 
 

Retail Operating Income / Operating Margin

Retail operating income (loss) $ (204 ) $ 1,048
Add: special items   840       1,610  
Retail operating income (loss) (excluding special items*) $ 636     $ 2,658  
Retail net sales $ 141,827     $ 149,079  
Retail operating margin   -0.1 %     0.7 %
Retail operating margin (excluding special items*)   0.4 %     1.8 %
 
* 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 Months Ended September 30, 2013 and 2012
Unaudited
(in thousands, except per share amounts)
Three Months Ended
September 30,
2013   2012
 

EBITDA

Net income $ 9,034 $ 10,064
Add: interest expense, net 1,750 2,055
income tax expense 5,119 5,765
depreciation and amortization   4,289       4,606  
EBITDA $ 20,192     $ 22,490  
Net sales $ 181,659     $ 187,437  
EBITDA as % of net sales   11.1 %     12.0 %
 
EBITDA $ 20,192 $ 22,490
Add: special items*   840       1,610  
EBITDA (excluding special items) $ 21,032     $ 24,100  
Net sales $ 181,659     $ 187,437  
EBITDA as % of net sales (excluding special items)   11.6 %     12.9 %
 
* 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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