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Press release from Business Wire

Ethan Allen Reports Results for Quarter Ended March 31, 2012

Monday, April 23, 2012

Ethan Allen Reports Results for Quarter Ended March 31, 201218:09 EDT Monday, April 23, 2012 DANBURY, Conn. (Business Wire) -- 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 31st 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 24th 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 InformationUnaudited (in thousands)                         Selected Consolidated Financial Data:   Three Months EndedNine Months Ended03/31/1203/31/1103/31/1203/31/11   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 EndedNine Months Ended03/31/1203/31/1103/31/1203/31/11Retail 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 StatementsUnaudited (in thousands)                           Three Months EndedNine Months Ended03/31/1203/31/1103/31/1203/31/11   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 SheetsUnaudited (in thousands)                   March 31, June 30, 20122011   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 ReconciliationThree and Nine Months Ended March 31, 2012 and 2011Unaudited (in thousands, except per share amounts)         Three Months Ended       Nine Months EndedMarch 31,March 31,2012     20112012     2011Net 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 EndedMarch 31,March 31,2012     20112012     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.   Ethan Allen Interiors Inc.Investor / Media:David R. Callen, 203-743-8305Vice President Finance & Treasurer