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Press release from Business Wire

Ethan Allen Reports Results for Quarter Ended December 31, 2012

Tuesday, January 22, 2013

Ethan Allen Reports Results for Quarter Ended December 31, 201216:30 EST Tuesday, January 22, 2013 DANBURY, Conn. (Business Wire) -- Ethan Allen Interiors Inc. (NYSE: ETH) today reported operating results for the three months ended December 31, 2012. Net sales in the quarter increased 4.4% over the prior year to $191.3 million. The Company's Retail division net sales increased 6.1% to $151.8 million including comparable design center growth of 4.9%. Retail division written orders recorded during the second quarter increased 1.2% over the 10.3% growth the prior year second quarter. Comparable design center written orders increased 0.1% over the 6.7% growth the prior year. Excluding special items in both periods, net income for the quarter ended December 31, 2012 was $11.4 million or $0.39 per diluted share compared with $8.6 million or $0.30 per diluted share in the prior year period. US GAAP net income for the quarter ended December 31, 2012 was $9.8 million or $0.34 per diluted share compared with the prior year of $8.1 million or $0.28 per diluted share. A reconciliation of this GAAP to non-GAAP measure is provided in the attached table. Farooq Kathwari, Chairman and CEO commented, “We are pleased with our results for the quarter ended December 31, 2012. Despite the challenging economic / political environment and the impact of Hurricane Sandy, our adjusted earnings per share increased 30%. Hurricane Sandy negatively impacted our written orders, delivered sales, and our manufacturing margins during the quarter. Twenty eight of our Retail division design centers and eight independent retailer locations were affected. No adjustment to earnings per share was made to reflect the impact of Hurricane Sandy which we estimate may have been approximately $0.02 to $0.03 per diluted share.” Mr. Kathwari continued, “During the quarter we expanded our international operations by entering the European and Montreal markets. We opened design centers in Brussels, Belgium and in Montreal, Canada and invested in start up costs which negatively impacted earnings by $0.02 per diluted share. We also wrote down the carrying value of two vacant manufacturing plants which resulted in a charge of $0.03 per diluted share. We expect to exit both these vacant properties during our third fiscal quarter. These start up costs and write down charges are treated as special items in the adjusted results for the quarter. "We will discuss our many initiatives during the earnings call on Wednesday January 23rd. We have the opportunity to continue to grow our sales and earnings," Mr. Kathwari concluded. Analyst Conference Call Ethan Allen will conduct a conference call at 11:00 AM (Eastern) on Wednesday, January 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 866-814-1915 with conference ID# 1599997. 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 EndedSix Months Ended12/31/1212/31/1112/31/1212/31/11   Net sales $ 191.3 $ 183.3 $ 378.7 $ 368.2 Gross margin 54.4 % 53.6 % 55.0 % 53.3 % Operating margin 9.1 % 7.6 % 9.3 % 7.5 % Operating margin (excluding special items*) 10.5 % 8.5 % 10.5 % 7.9 % Net income $ 9.8 $ 8.1 $ 19.9 $ 14.8 Net income (excluding special items* and unusual income tax effects) $ 11.4 $ 8.6 $ 22.5 $ 15.8 Operating cash flow $ 11.5 $ 4.7 $ 18.2 $ 11.0 Capital expenditures $ 5.2 $ 8.0 $ 13.6 $ 11.4 Acquisitions $ 0.0 $ 0.0 $ 0.6 $ 0.0 Treasury stock repurchases (settlement date basis) $ 0.0 $ 0.0 $ 0.0 $ 0.8   EBITDA $ 21.7 $ 18.5 $ 44.2 $ 37.1 EBITDA as % of net sales 11.3 % 10.1 % 11.7 % 10.1 %   EBITDA (excluding special items*) $ 24.4 $ 20.2 $ 48.5 $ 38.8 EBITDA as % of net sales (excluding special items*) 12.7 % 11.0 % 12.8 % 10.5 %     Selected Financial Data by Business Segment:Three Months EndedSix Months Ended12/31/1212/31/1112/31/1212/31/11Retail Net sales $ 151.8 $ 143.1 $ 300.9 $ 284.3 Operating margin 4.0 % -1.8 % 2.3 % -1.4 % Operating margin (excluding special items*) 4.6 % -0.3 % 3.2 % -0.7 %   Wholesale Net sales $ 108.2 $ 106.6 $ 219.6 $ 223.0 Operating margin 8.2 % 14.7 % 11.3 % 14.1 % Operating margin (excluding special items*) 9.9 % 14.4 % 12.1 % 13.9 %   * 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 EndedSix Months Ended12/31/1212/31/1112/31/1212/31/11   Net sales $ 191,251 $ 183,275 $ 378,688 $ 368,196 Cost of sales   87,284     85,056     170,468   172,092   Gross profit 103,967 98,219 208,220 196,104 Selling general and administrative expenses   86,610     84,281     172,909   168,528   Operating income 17,357 13,938 35,311 27,576 Interest and other income 128 145 202 205 Interest expense   2,198     2,274     4,397   4,625   Income before income taxes 15,287 11,809 31,116 23,156 Income tax expense   5,441     3,732     11,206   8,309   Net income $9,846   $8,077   $19,910$14,847     Basic earnings per common share: Net income per basic share $ 0.34 $ 0.28 $ 0.69 $ 0.52 Basic weighted average shares outstanding 28,846 28,823 28,841 28,791   Diluted earnings per common share: Net income per diluted share $ 0.34 $ 0.28 $ 0.68 $ 0.51 Diluted weighted average shares outstanding 29,223 29,069 29,182 29,010   Comprehensive income: Net income $ 9,846 $ 8,077 $ 19,910 $ 14,847 Other comprehensive income Currency translation adjustment (20 ) (543 ) 140 (2,241 ) Other   15     (10)   40   (1) Other comprehensive income (loss) net of tax   (5)   (553)   180   (2,242) Comprehensive income $9,841   $7,524   $20,090$12,605       Ethan Allen Interiors Inc.Condensed Consolidated Balance SheetsUnaudited (in thousands)                 December 31, June 30, 20122012   Assets Current assets: Cash and cash equivalents $ 57,267 $ 79,721 Marketable securities 17,869 9,005 Accounts receivable, net 11,137 14,919 Inventories 142,385 155,739 Prepaid expenses & other current assets   20,258   23,408 Total current assets 248,916 282,792   Property, plant and equipment, net 299,153 295,695 Intangible assets, net 45,128 45,128 Restricted cash and investments 15,427 15,416 Other assets   6,752   5,757   Total Assets $615,376$644,788     Liabilities and Shareholders' Equity Current liabilities: Current maturities of long-term debt 466 250 Customer deposits 46,676 65,465 Accounts payable 16,334 27,315 Accrued expenses & other current liabilities   52,882   58,047 Total current liabilities 116,358 151,077   Long-term debt 154,871 154,250 Other long-term liabilities   18,486   17,593 Total liabilities 289,715 322,920   Shareholders' equity   325,661   321,868   Total Liabilities and Shareholders' Equity $615,376$644,788     Ethan Allen Interiors Inc.GAAP ReconciliationThree and Six Months Ended December 31, 2012 and 2011Unaudited (in thousands, except per share amounts)               Three Months EndedSix Months EndedDecember 31,December 31,2012   20112012   2011Net Income / Earnings Per Share Net income $ 9,846 $ 8,077 $ 19,910 $ 14,847 Special items net of related tax effects * 1,693 1,073 2,715 1,048 Unusual income tax effects   (139 )     (568 )   (151 )     (133 ) Net income (excluding special items* and unusual income tax effects) $ 11,400     $ 8,582   $ 22,474     $ 15,762   Basic weighted average shares outstanding 28,846 28,823 28,841 28,791 Earnings per basic share $ 0.34     $ 0.28   $ 0.69     $ 0.52   Earnings per basic share (excluding special items* and unusual income tax effects) $ 0.40     $ 0.30   $ 0.78     $ 0.55     Diluted weighted average shares outstanding 29,223 29,069 29,182 29,010 Earnings per diluted share $ 0.34     $ 0.28   $ 0.68     $ 0.51   Earnings per diluted share (excluding special items* and unusual income tax effects) $ 0.39     $ 0.30   $ 0.77     $ 0.54       Consolidated Operating Income / Operating Margin Operating income $ 17,357 $ 13,938 $ 35,311 $ 27,576 Add: special items *   2,666       1,690     4,276       1,650   Operating income (excluding special items*) $ 20,023     $ 15,628   $ 39,587     $ 29,226     Net sales $ 191,251     $ 183,275   $ 378,688     $ 368,196   Operating margin   9.1 %     7.6 %   9.3 %     7.5 % Operating margin (excluding special items*)   10.5 %     8.5 %   10.5 %     7.9 %   Wholesale Operating Income / Operating Margin Wholesale operating income $ 8,892 $ 15,702 $ 24,897 $ 31,393 Add: special items   1,774       (368 )   1,774       (368 ) Wholesale operating income (excluding special items*) $ 10,666     $ 15,334   $ 26,671     $ 31,025   Wholesale net sales $ 108,172     $ 106,631   $ 219,589     $ 223,025   Wholesale operating margin   8.2 %     14.7 %   11.3 %     14.1 % Wholesale operating margin (excluding special items*)   9.9 %     14.4 %   12.1 %     13.9 %   Retail Operating Income / Operating Margin Retail operating income (loss) $ 6,017 $ (2,532 ) $ 7,065 $ (4,029 ) Add: special items   892       2,058     2,502       2,018   Retail operating income (loss) (excluding special items*) $ 6,909     $ (474 ) $ 9,567     $ (2,011 ) Retail net sales $ 151,827     $ 143,104   $ 300,906     $ 284,285   Retail operating margin   4.0 %     -1.8 %   2.3 %     -1.4 % Retail operating margin (excluding special items*)   4.6 %     -0.3 %   3.2 %     -0.7 %   * 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, 2012 and 2011Unaudited (in thousands, except per share amounts)               Three Months EndedSix Months EndedDecember 31,December 31,2012   20112012   2011   EBITDA Net income $ 9,846 $ 8,077 $ 19,910 $ 14,847 Add: interest expense, net 2,056 2,124 4,111 4,382 income tax expense 5,441 3,732 11,206 8,309 depreciation and amortization   4,360       4,593     8,966       9,582   EBITDA $ 21,703     $ 18,526   $ 44,193     $ 37,120   Net sales $ 191,251     $ 183,275   $ 378,688     $ 368,196   EBITDA as % of net sales   11.3 %     10.1 %   11.7 %     10.1 %   EBITDA $ 21,703 $ 18,526 $ 44,193 $ 37,120 Add: special items*   2,666       1,690     4,276       1,650   EBITDA (excluding special items) $ 24,369     $ 20,216   $ 48,469     $ 38,770   Net sales $ 191,251     $ 183,275   $ 378,688     $ 368,196   EBITDA as % of net sales (excluding special items)   12.7 %     11.0 %   12.8 %     10.5 %   * 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 Contact:David R. Callen, 203-743-8305Vice President Finance & Treasurer