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Press release from Business Wire

Ethan Allen Reports Results for Quarter and Announces Cash Dividend

Tuesday, January 24, 2012

Ethan Allen Reports Results for Quarter and Announces Cash Dividend16:47 EST Tuesday, January 24, 2012 DANBURY, Conn. (Business Wire) -- Ethan Allen Interiors Inc. (“Ethan Allen”, the “Company”, “We”, or “Our”) (NYSE:ETH) reported that net sales for the second quarter ended December 31, 2011 increased by 5.7% to $183.3 million and excluding special items, diluted earnings per share increased to $0.30 compared to $0.19 in the previous year quarter. The Company also announced that its Board of Directors has declared a quarterly cash dividend of $0.07 per share, payable to shareholders of record as of April 10, 2012 to be paid on April 25, 2012. Farooq Kathwari, Chairman and CEO commented, “We are pleased with the strong 5.7% growth in sales as it builds upon the 21% growth in the previous year quarter. We continue to benefit from major initiatives during the last three years resulting in operating leverage with gross margin increasing to 53.6% from 51.8% and an increase in our adjusted diluted earnings per share for the quarter of 57.9%. Our written orders for the Retail division during the quarter increased 10.3% including comparable written orders which increased 6.7%. Our Retail backlog at December 31, 2011 was 9.4% higher than at this time last year.” Mr. Kathwari continued, “We are also pleased that strengthening of our liquidity and the balance sheet enables us to provide cash dividends. Our cash and securities at December 31, 2011 amounted to $92.8 million, an increase of $7.2 million from December 31 of last year. During the current quarter, we continued to repurchase our bonds, further reducing our debt by $10 million. Over the last twelve months we have reduced our total debt by $43.6 million.” Three Months Ended December 31, 2011 Net sales for the quarter ended December 31, 2011 increased 5.7% over the prior year to $183.3 million. The Company's Retail division net sales increased 9.2% to $143.1 million including comparable design center net sales growth of 6.5%. Net income for the quarter ended December 31, 2011 was $8.1 million or $0.28 per diluted share compared with the prior year of $14.7 million or $0.51 per diluted share. Excluding special items in both periods, net income for the quarter ended December 31, 2011 was $8.6 million or $0.30 per diluted share compared with $5.6 million or $0.19 per diluted share in the prior year period. Six Months Ended December 31, 2011 Net sales for the six months ended December 31, 2011 increased 8.9% over the prior year to $368.2 million. The Company's Retail division net sales increased 12.8% to $284.3 million including comparable design center net sales growth of 10.5%. Written orders booked during the six month period by the Retail division were 11.8% greater than the prior year quarter including comparable design center order growth of 9.1%. Net income for the six months ended December 31, 2011 was $14.8 million or $0.51 per diluted share compared with the prior year of $18.6 million or $0.64 per diluted share. Excluding special items in both periods, net income for the six months ended December 31, 2011 was $15.8 million or $0.54 per diluted share compared with $8.7 million or $0.30 per diluted share in the prior year period. Mr. Kathwari concluded, “We remain cautiously optimistic due to our many initiatives including major introductions of new products, acquiring qualified and entrepreneurial interior design associates, investing in our manufacturing and logistics, and adding technology in all areas of our enterprise. We also see improving trends in consumer attitudes. We look forward to discussing our initiatives further on the call tomorrow.” Analyst Conference Call The Company will conduct a conference call at 11:00 AM (Eastern) on Wednesday January 25th 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 a manufacturer and retailer of quality home furnishings. Ethan Allen offers free interior design service to its clients and sells a full range of furniture products and decorative accessories through ethanallen.com and through a network of approximately 300 Design Centers in the United States and abroad. Ethan Allen owns and operates seven manufacturing facilities in North America, including five manufacturing plants and one sawmill in the United States and one manufacturing plant in Mexico. 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 InformationUnaudited (in thousands)             Selected Consolidated Financial Data:   Three Months EndedSix Months Ended12/31/1112/31/1012/31/1112/31/10   Net sales $183.3 $173.3 $368.2 $338.2 Gross margin 53.6% 51.8% 53.3% 50.9% Operating margin 7.6% 6.0% 7.5% 4.7% Operating margin (excluding special items*) 8.5% 6.1% 7.9% 5.0% Net income (loss) $8.1 $14.7 $14.8 $18.6 Net income (loss) (excluding special items* and unusual income tax effects) $8.6 $5.6 $15.8 $8.7 Operating cash flow $4.7 $3.7 $11.0 $2.8 Capital expenditures $8.0 $2.5 $11.4 $4.0 Treasury stock repurchases (settlement date basis) $0.0 $0.0 $0.8 $5.4   EBITDA $18.5 $16.7 $37.1 $30.5 EBITDA as % of net sales 10.1% 9.6% 10.1% 9.0%   EBITDA (excluding special items*) $20.2 $16.7 $38.8 $30.0 EBITDA as % of net sales (excluding special items*) 11.0% 9.6% 10.5% 8.9%         Selected Financial Data by Business Segment:Three Months EndedSix Months Ended12/31/1112/31/1012/31/1112/31/10Retail Net sales $143.1 $131.0 $284.3 $252.0 Operating margin -1.8% -0.9% -1.4% -2.2% Operating margin (excluding special items*) -0.3% -0.9% -0.7% -2.1%     Wholesale Net sales $106.6 $100.8 $223.0 $208.3 Operating margin 14.7% 9.8% 14.1% 10.5% Operating margin (excluding special items*) 14.4% 9.8% 13.9% 10.8%   * 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 StatementsUnaudited (in thousands)               Three Months EndedSix Months Ended12/31/1112/31/1012/31/1112/31/10   Net sales $ 183,275 $ 173,345 $ 368,196 $ 338,186 Cost of sales   85,056   83,484     172,092     165,944   Gross profit 98,219 89,861 196,104 172,242 Operating expenses: Selling 42,246 40,068 85,866 79,395 General and administrative 42,006 39,259 82,673 76,702 Restructuring and impairment charge   29   59     (11)   284   Total operating expenses   84,281   79,386     168,528     156,381   Operating income 13,938 10,475 27,576 15,861 Interest and other income 145 1,168 205 4,325 Interest expense   2,274   2,902     4,625     5,876   Income before income taxes 11,809 8,741 23,156 14,310 Income tax expense (benefit)   3,732   (6,003)   8,309     (4,247) Net income $8,077$14,744   $14,847   $18,557     Basic earnings per common share: Net income per basic share $ 0.28 $ 0.51 $ 0.52 $ 0.65 Basic weighted average shares outstanding 28,823 28,728 28,791 28,753   Diluted earnings per common share: Net income per diluted share $ 0.28 $ 0.51 $ 0.51 $ 0.64 Diluted weighted average shares outstanding 29,069 28,921 29,010 28,936   Ethan Allen Interiors Inc.Condensed Consolidated Balance SheetsUnaudited (in thousands)               December 31, June 30, 20112011   Assets Current assets: Cash and cash equivalents $ 66,352 $ 78,519 Marketable securities 11,016 12,909 Accounts receivable, net 13,828 15,036 Inventories 136,197 141,692 Prepaid expenses & other current assets   20,330   20,372 Total current assets 247,723 268,528   Property, plant and equipment, net 291,098 294,853 Intangible assets, net 45,128 45,128 Restricted cash and investments 15,402 16,391 Other assets   3,020   3,425   Total Assets $602,371$628,325       Liabilities and Shareholders' Equity Current liabilities: Current maturities of long-term debt - 19 Customer deposits 46,561 62,649 Accounts payable 22,452 26,958 Accrued expenses & other current liabilities   61,593   64,990 Total current liabilities 130,606 154,616   Long-term debt 152,924 165,013 Other long-term liabilities 20,340 18,975 Deferred income taxes   8,067   8,034 Total liabilities 311,937 346,638   Shareholders' equity   290,434   281,687   Total Liabilities and Shareholders' Equity $602,371$628,325   Ethan Allen Interiors Inc.GAAP ReconciliationThree and Six Months Ended December 31, 2011 and 2010Unaudited (in thousands, except per share amounts)   Three Months Ended     Six Months EndedDecember 31,December 31,2011   20102011   2010Net Income / Earnings Per Share     Net income $ 8,077 $ 14,744 $ 14,847 $ 18,557 Special items net of related tax effects * 1,073 37 1,048 (341 ) Unusual income tax effects   (568 )     (9,193 )   (133 )     (9,470 ) Net income (excluding special items* and unusual income tax effects) $ 8,582     $ 5,588   $ 15,762     $ 8,746   Basic weighted average shares outstanding 28,823 28,728 28,791 28,753 Earnings per basic share $ 0.28     $ 0.51   $ 0.52     $ 0.65   Earnings per basic share (excluding special items* and unusual income tax effects) $ 0.30     $ 0.19   $ 0.55     $ 0.30     Diluted weighted average shares outstanding 29,069 28,921 29,010 28,936 Earnings per diluted share $ 0.28     $ 0.51   $ 0.51     $ 0.64   Earnings per diluted share (excluding special items* and unusual income tax effects) $ 0.30     $ 0.19   $ 0.54     $ 0.30       Consolidated Operating Income / Operating Margin Operating income $ 13,938 $ 10,475 $ 27,576 $ 15,861 Add: special items *   1,690       59     1,650       963   Operating income (excluding special items*) $ 15,628     $ 10,534   $ 29,226     $ 16,824     Net sales $ 183,275     $ 173,345   $ 368,196     $ 338,186   Operating margin   7.6 %     6.0 %   7.5 %     4.7 % Operating margin (excluding special items*)   8.5 %     6.1 %   7.9 %     5.0 %   Wholesale Operating Income / Operating Margin Wholesale operating income $ 15,702 $ 9,884 $ 31,393 $ 21,823 Add: special items   (368 )     -     (368 )     679   Wholesale operating income (excluding special items*) $ 15,334     $ 9,884   $ 31,025     $ 22,502   Wholesale net sales $ 106,631     $ 100,793   $ 223,025     $ 208,348   Wholesale operating margin   14.7 %     9.8 %   14.1 %     10.5 % Wholesale operating margin (excluding special items*)   14.4 %     9.8 %   13.9 %     10.8 %   Retail Operating Income / Operating Margin Retail operating income (loss) $ (2,532 ) $ (1,206 ) $ (4,029 ) $ (5,496 ) Add: special items   2,058       59     2,018       284   Retail operating income (loss) (excluding special items*) $ (474 )   $ (1,147 ) $ (2,011 )   $ (5,212 ) Retail net sales $ 143,104     $ 131,014   $ 284,285     $ 252,037   Retail operating margin   -1.8 %     -0.9 %   -1.4 %     -2.2 % Retail operating margin (excluding special items*)   -0.3 %     -0.9 %   -0.7 %     -2.1 %   * 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 ReconciliationThree and Six Months Ended December 31, 2011 and 2010Unaudited (in thousands, except per share amounts)   Three Months Ended     Six Months EndedDecember 31,December 31,2011   20102011   2010EBITDA     Net income $ 8,077 $ 14,744 $ 14,847 $ 18,557 Add: interest expense, net 2,124 2,605 4,382 5,280 Less: income tax expense (benefit) 3,732 (6,003 ) 8,309 (4,247 ) Add: depreciation and amortization   4,593       5,322     9,582       10,929   EBITDA $ 18,526     $ 16,668   $ 37,120     $ 30,519   Net sales $ 183,275     $ 173,345   $ 368,196     $ 338,186   EBITDA as % of net sales   10.1 %     9.6 %   10.1 %     9.0 %   EBITDA $ 18,526 $ 16,668 $ 37,120 $ 30,519 Add: special items*   1,690       59     1,650       (537 ) Adjusted EBITDA $ 20,216     $ 16,727   $ 38,770     $ 29,982   Net sales $ 183,275     $ 173,345   $ 368,196     $ 338,186   Adjusted EBITDA as % of net sales   11.0 %     9.6 %   10.5 %     8.9 %   * 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.Investor / Media:David R. Callen, 203-743-8305Vice President Finance & Treasurer