ETH Ethan Allen Interiors Inc

Ethan Allen Interiors Inc. ("Ethan Allen" or the "Company") (NYSE:ETH) today reported sales and earnings for the three and six months ended December 31, 2005. Three and Six Month Results Net delivered sales for the quarter ended December 31, 2005 increased 12.5% to $276.0 million from $245.3 million in the prior year quarter. Net delivered sales for the Company's Retail division increased 15.5% to $180.0 million, while Wholesale sales increased 16.2% to $187.5 million during that same period. Comparable Ethan Allen store delivered sales increased 12.5% over the prior year quarter. During that same period, Retail division written sales increased 10.2% while comparable store written sales increased 6.3%. For the six months ended December 31, 2005, net delivered sales increased 10.9% to $527.3 million from $475.6 million in the prior year comparable period. Net delivered sales for the Company's Retail division increased 13.7% to $338.4 million, while Wholesale sales increased 13.4% to $366.0 million during that same period. Comparable Ethan Allen store delivered sales increased 10.8% over the prior year comparable period. During that same period, Retail division written sales increased 14.2% while comparable store written sales increased 10.9%. For the quarter ended December 31, 2005, earnings per share increased 22.2% to $0.77 on net income of $26.2 million. This compares to earnings per share and net income of $0.63 and $23.1 million, respectively, in the prior year comparable period. For the six months ended December 31, 2005, earnings per share, which includes a pre-tax restructuring and impairment charge of $4.2 million related to the Company's planned conversion of one of its existing manufacturing facilities into a regional distribution center, amounted to $1.26 on net income of $43.3 million. This compares to earnings per share and net income of $1.14 and $41.9 million, respectively, in the prior year comparable period. Excluding the impact of the restructuring and impairment charge, earnings per share for the current period amounted to $1.34 on net income of $45.9 million. Farooq Kathwari, Chairman and CEO, commented: "We are very pleased with our results for the quarter. We believe that the structural changes undertaken within our business during the past three years, including initiatives to enhance our product offerings, our manufacturing, sourcing and logistics activities, our retail network, and our marketing efforts, played an important role in our ability to increase sales more than 12%, increase operating income 21%, and increase earnings per share 22%. In addition, during the quarter, we generated $20 million of operating cash, returning that same amount to our shareholders through the repurchase of stock and the payment of quarterly dividends." Mr. Kathwari continued: "In addition to the factors mentioned above, delivered sales and earnings for the quarter were favorably impacted by the continued implementation of one of our strategic plans, referred to as "Mission Possible", the objective of which is to reduce the lead time associated with the delivery of our products to the consumer. As a result of this initiative, we were able to substantially reduce our delivery time and backlog during the quarter, including orders that, if not for this initiative, would have likely resulted in delivered sales during the March fiscal quarter." Commenting on the outlook for the remainder of the fiscal year, Mr. Kathwari stated: "As mentioned previously, the quarter ended December 31, 2005 was a transitional quarter during which we made considerable progress with respect to a number of key initiatives, enabling us to reduce delivery times and increase shipments. While it has not been our practice to provide specific comments regarding quarterly earnings estimates, we have made an exception for next quarter in light of the effect that our initiatives had on second quarter results. For the fiscal third quarter ended March 31, 2006, we currently estimate that earnings per share will increase 8-12% over the prior year comparable period. Further, at this time, we believe that the current range of analyst estimates for the fiscal fourth quarter ended June 30, 2006 is within reach." Ethan Allen Interiors Inc. is a leading manufacturer and retailer of quality home furnishings. The Company sells a full range of furniture products and decorative accessories through an exclusive network of 313 retail stores in the United States and abroad, of which 132 are Company-owned. Ethan Allen has 11 manufacturing facilities, which include 2 sawmills, located throughout the United States. The Company will conduct a Conference Call at 11:00 AM (Eastern) on Wednesday, January 18th. The live webcast and replay are accessible via the Company's website at www.ethanallen.com/investors. This press release should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended June 30, 2005 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. 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. -0- *T Ethan Allen Interiors Inc. Selected Financial Information Unaudited (In millions) Selected Consolidated Financial Data: Three Months Ended Six Months Ended 12/31/05 12/31/04 12/31/05 12/31/04 Net Sales $ 276.0 $ 245.3 $ 527.3 $ 475.6 Gross Margin 50.7% 48.7% 50.5% 48.3% Operating Margin 16.0% 14.9% 13.7% 14.2% Operating Margin (ex restructuring & impairment charge) 16.0% 14.9% 14.5% 14.2% Net Income $ 26.2 $ 23.1 $ 43.3 $ 41.9 Net Income (ex restructuring & impairment charge) $ 26.2 $ 23.1 $ 45.9 $ 41.9 Operating Cash Flow $ 20.5 $ 29.4 $ 66.1 $ 66.8 Capital Expenditures $ 16.3 $ 7.9 $ 21.1 $ 15.4 Treasury Stock Repurchases (settlement date basis) $ 14.3 $ 20.5 $ 51.1 $ 39.1 EBITDA $ 50.9 $ 43.1 $ 84.3 $ 79.4 EBITDA as % of Net Sales 18.4% 17.6% 16.0% 16.7% EBITDA (ex restructuring & impairment charge) $ 50.9 $ 43.1 $ 88.5 $ 79.4 EBITDA as % of Net Sales (ex restructuring & impairment charge) 18.4% 17.6% 16.8% 16.7% Selected Financial Data by Business Segment: Three Months Ended Six Months Ended Retail 12/31/05 12/31/04 12/31/05 12/31/04 Net Sales $ 180.0 $ 155.8 $ 338.4 $ 297.5 Operating Margin 5.2% 3.8% 3.3% 3.0% Three Months Ended Six Months Ended Wholesale 12/31/05 12/31/04 12/31/05 12/31/04 Net Sales $ 187.5 $ 161.3 $ 366.0 $ 322.7 Operating Margin 17.9% 16.6% 17.3% 17.1% Operating Margin (ex restructuring & impairment charge) 17.9% 16.6% 18.5% 17.1% Ethan Allen Interiors Inc. Condensed Consolidated Statements of Operations (In thousands, except per share amounts) Three Months Six Months Ended December 31, Ended December 31, 2005 2004 2005 2004 (unaudited) (unaudited) Net sales $ 276,003 $ 245,252 $ 527,317 $ 475,598 Cost of sales 136,149 125,808 260,923 245,772 Gross profit 139,854 119,444 266,394 229,826 Operating expenses: Selling 54,511 47,678 107,951 91,842 General and administrative 41,055 35,243 81,720 70,673 Restructuring and impairment charges - (52) 4,241 (219) Total operating expenses 95,566 82,869 193,912 162,296 Operating income 44,288 36,575 72,482 67,530 Interest and other miscellaneous income 1,161 1,301 1,203 1,246 Interest and other related financing costs 2,974 138 3,402 287 Income before income tax expense 42,475 37,738 70,283 68,489 Income tax expense 16,311 14,604 26,989 26,597 Net income $ 26,164 $ 23,134 $ 43,294 $ 41,892 Basic earnings per share: Net income per share $ 0.79 $ 0.65 $ 1.29 $ 1.17 Basic weighted average shares outstanding 33,078 35,601 33,499 35,906 Diluted earnings per share: Net income per share $ 0.77 $ 0.63 $ 1.26 $ 1.14 Diluted weighted average shares outstanding 33,845 36,564 34,236 36,831 Ethan Allen Interiors Inc. Condensed Consolidated Balance Sheets (In thousands) December 31, June 30, 2005 2005 (unaudited) Assets Current Assets: Cash and cash equivalents $175,008 $ 3,448 Accounts receivable, net 22,870 28,019 Inventories 194,491 186,479 Prepaid expenses and other current assets 42,350 46,443 Total current assets 434,719 264,389 Property, plant, and equipment, net 281,385 275,211 Intangible assets, net 85,249 82,897 Other assets 6,556 5,889 Total Assets $807,909 $628,386 Liabilities and Shareholders' Equity Current Liabilities: Current maturities of long-term debt and capital lease obligations $ 221 $ 240 Customer deposits 48,618 53,654 Accounts payable 33,999 19,352 Accrued expenses and other current liabilities 60,462 60,720 Total current liabilities 143,300 133,966 Long-term debt 202,687 12,270 Other long-term liabilities 12,109 12,445 Deferred income taxes 31,936 35,637 Total liabilities 390,032 194,318 Shareholders' equity 417,877 434,068 Total Liabilities and Shareholders' Equity $807,909 $628,386 *T