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Press release from Business Wire

Ethan Allen Reports Results for Quarter Ended September 30, 2012

Wednesday, October 17, 2012

Ethan Allen Reports Results for Quarter Ended September 30, 201218:03 EDT Wednesday, October 17, 2012 DANBURY, Conn. (Business Wire) -- Ethan Allen Interiors Inc. (“Ethan Allen”, the “Company”, “We”, or “Our”) (NYSE:ETH) reported operating results for the three months ended September 30, 2012. Farooq Kathwari, Chairman and CEO commented, “We are pleased to see the benefits of substantially completing the transition of our major introduction of new products and the operating leverage of our vertically integrated business. Our gross margins improved to 55.6% from 52.9% and our operating income was $19.6 million, an increase of 43.9% after adjusting for a $1.6 million loss on the sale of vacant real estate. Excluding this real estate loss, our operating expenses were essentially flat compared to the previous year. Our adjusted net income per diluted share was $0.38 compared to $0.25 in the previous year quarter, an increase of 52%.” Mr. Kathwari continued, “Our sales increased 1.4% to $187.4 million over the 12.2% growth in the first quarter of the previous year. The previous year benefitted from shipments of design center samples of new products. We are also pleased that our written business (orders) in our retail division grew in the first quarter by 9.1% including 8.2% growth in comparable design center orders. This increase was over an 11.4% growth in comparable design center orders in the previous year.” Three Months Ended September 30, 2012 Net sales for the quarter ended September 30, 2012 increased 1.4% over the prior year to $187.4 million. The Company's Retail division net sales increased 5.6% to $149.1 million including comparable design center net sales growth of 5.0%. Retail division written orders recorded during the first quarter increased 9.1% over 13.2% growth the prior year's first quarter. Comparable design center written orders grew 8.2% over 11.4% growth the prior year. Net income for the quarter ended September 30, 2012 was $10.1 million or $0.35 per diluted share compared with the prior year of $6.8 million or $0.23 per diluted share. Excluding special items in both periods, net income for the quarter ended September 30, 2012 was $11.1 million or $0.38 per diluted share compared with $7.2 million or $0.25 per diluted share in the prior year period. Mr. Kathwari concluded, “Our competitive advantages arise from providing high quality products of the finest craftsmanship, offering complimentary design service through our 2,000 motivated interior design professionals, giving free local delivery, enhancing our technology in all aspects of the business, and through leveraging our vertically integrated structure. Executing against all of these elements helps us achieve our mission of ‘Luxury Made Affordable'. While economic conditions continue to be challenging, we remain cautiously optimistic about our future prospects.” Analyst Conference Call The Company will conduct a conference call at 10:00 AM (Eastern) on Thursday, October 18th 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 North American 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, 2012 (the “2012 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 2012 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 millions)     Selected Consolidated Financial Data:   Three Months Ended09/30/1209/30/11   Net sales $187.4 $184.9 Gross margin 55.6% 52.9% Operating margin 9.6% 7.4% Operating margin (excluding special items*) 10.4% 7.4% Net income $10.1 $6.8 Net income (excluding special items* and unusual income tax effects) $11.1 $7.2 Operating cash flow $6.7 $6.3 Capital expenditures $8.3 $3.4 Acquisitions $0.6 $0.0 Treasury stock repurchases (settlement date basis) $0.0 $0.8   EBITDA $22.5 $18.6 EBITDA as % of net sales 12.0% 10.1%   EBITDA (excluding special items*) $24.1 $18.6 EBITDA as % of net sales (excluding special items*) 12.9% 10.0%         Selected Financial Data by Business Segment:Three Months Ended09/30/1209/30/11Retail Net sales $149.1 $141.2 Operating margin 0.7% -1.1% Operating margin (excluding special items*) 1.8% -1.1%     Wholesale Net sales $111.4 $116.4 Operating margin 14.4% 13.5%   * 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 IncomeUnaudited(in thousands)   Three Months Ended09/30/1209/30/11   Net sales $ 187,437 $ 184,921 Cost of sales 83,18487,036 Gross profit 104,253 97,885 Operating expenses: Selling 44,533 43,620 General and administrative 41,76640,627 Total operating expenses 86,29984,247 Operating income 17,954 13,638 Interest and other income 74 60 Interest expense 2,1992,351 Income before income taxes 15,829 11,347 Income tax expense 5,7654,577 Net income $ 10,064$ 6,770   Basic earnings per common share: Net income per basic share $ 0.35 $ 0.24 Basic weighted average shares outstanding 28,836 28,760   Diluted earnings per common share: Net income per diluted share $ 0.35 $ 0.23 Diluted weighted average shares outstanding 29,141 28,951   Comprehensive income: Net income $ 10,064 $ 6,770 Other comprehensive income Currency translation adjustment 160 (1,698) Other 259 Other comprehensive income (loss) net of tax 185(1,689) Comprehensive income $ 10,249$ 5,081         Ethan Allen Interiors Inc.Condensed Consolidated Balance SheetsUnaudited (in thousands)                   September 30, June 30, 20122012   Assets Current assets: Cash and cash equivalents $ 73,913 $ 79,721 Marketable securities 10,670 9,005 Accounts receivable, net 14,644 14,919 Inventories 157,951 155,739 Prepaid expenses & other current assets   23,791   23,408 Total current assets 280,969 282,792   Property, plant and equipment, net 297,322 295,695 Intangible assets, net 45,128 45,128 Restricted cash and investments 15,422 15,416 Other assets   5,873   5,757   Total Assets $644,714$644,788       Liabilities and Shareholders' Equity Current liabilities: Current maturities of long-term debt 253 250 Customer deposits 60,924 65,465 Accounts payable 20,831 27,315 Accrued expenses & other current liabilities   61,328   58,047 Total current liabilities 143,336 151,077   Long-term debt 154,216 154,250 Other long-term liabilities   17,496   17,593 Total liabilities 315,048 322,920   Shareholders' equity   329,666   321,868   Total Liabilities and Shareholders' Equity $644,714$644,788Ethan Allen Interiors Inc.GAAP ReconciliationThree Months Ended September 30, 2012 and 2011Unaudited (in thousands, except per share amounts)         Three Months EndedSeptember 30,2012   2011Net Income / Earnings Per Share   Net income $ 10,064 $ 6,770 Special items net of related tax effects * 1,022 (25 ) Unusual income tax effects   (12 )     435   Net income (excluding special items* and unusual income tax effects) $ 11,074     $ 7,180   Basic weighted average shares outstanding 28,836 28,760 Earnings per basic share $ 0.35     $ 0.24   Earnings per basic share (excluding special items* and unusual income tax effects) $ 0.38     $ 0.25     Diluted weighted average shares outstanding 29,141 28,951 Earnings per diluted share $ 0.35     $ 0.23   Earnings per diluted share (excluding special items* and unusual income tax effects) $ 0.38     $ 0.25       Consolidated Operating Income / Operating Margin Operating income $ 17,954 $ 13,638 Add: special items *   1,610       (40 ) Operating income (excluding special items*) $ 19,564     $ 13,598     Net sales $ 187,437     $ 184,921   Operating margin   9.6 %     7.4 % Operating margin (excluding special items*)   10.4 %     7.4 %     Retail Operating Income / Operating Margin Retail operating income (loss) $ 1,048 $ (1,497 ) Add: special items   1,610       (40 ) Retail operating income (loss) (excluding special items*) $ 2,658     $ (1,537 ) Retail net sales $ 149,079     $ 141,181   Retail operating margin   0.7 %     -1.1 % Retail operating margin (excluding special items*)   1.8 %     -1.1 %   * 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 Months Ended September 30, 2012 and 2011Unaudited (in thousands, except per share amounts) Three Months EndedSeptember 30,20122011   EBITDA Net income $ 10,064 $ 6,770 Add: interest expense, net 2,055 2,258 income tax expense 5,765 4,577 depreciation and amortization   4,606     4,989   EBITDA $ 22,490   $ 18,594   Net sales $ 187,437   $ 184,921   EBITDA as % of net sales   12.0 %   10.1 %   EBITDA $ 22,490 $ 18,594 Add: special items*   1,610     (40 ) EBITDA (excluding special items) $ 24,100   $ 18,554   Net sales $ 187,437   $ 184,921   EBITDA as % of net sales (excluding special items)   12.9 %   10.0 %   * 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