ETH Ethan Allen Interiors Inc

Ethan Allen Interiors Inc. (�Ethan Allen� or the �Company�) (NYSE:ETH) today reported sales and earnings for the three months ended September 30, 2006. Net delivered sales for the quarter ended September 30, 2006 amounted to $242.8 million as compared to $251.3 million in the prior year quarter. Net delivered sales for the Company�s Retail division increased 4.8% to $166.0 million, while Wholesale sales decreased 12.8% to $155.6 million during that same period. Comparable Ethan Allen design center delivered sales decreased 1.7% as compared to the prior year quarter. The Company previously announced, on September 6, 2006, a plan to consolidate one of its case goods manufacturing facilities and convert one of its upholstery manufacturing facilities into a regional distribution center. As a result, the Company recorded a pre-tax restructuring and impairment charge of $13.9 million ($8.7 million, after-tax), or $0.27 per share, in the quarter ended September 30, 2006. In the prior year comparable period, the Company recorded a pre-tax restructuring and impairment charge totaling $4.2 million ($2.6 million, after-tax), or $0.08 per share, related to the conversion of another of its manufacturing facilities into a regional distribution center. Including the aforementioned after-tax restructuring and impairment charges, earnings per share amounted to $0.26 on net income of $8.5 million for the quarter ended September 30, 2006 as compared to earnings per share and net income of $0.49 and $17.1 million, respectively, in the prior year comparable period. Excluding the impact of these restructuring and impairment charges, earnings per share amounted to $0.53 on net income of $17.2 million for the three months ended September 30, 2006, as compared to earnings per share and net income of $0.57 and $19.7 million, respectively, in the prior year comparable period. During the quarter, the Company utilized $16.7 million of available cash from operations to repurchase 478,300 shares of its common stock in the open market. In July, the Company�s Board of Directors increased the then remaining share repurchase authorization to 2,500,000 shares. As of September 30, 2006, the Company had a remaining authorization to repurchase an additional 2,473,000 shares. Farooq Kathwari, Chairman and CEO, commented: "We are pleased to report operating earnings, ex-restructuring, of 11.6% of sales despite a weak retail environment for home furnishings and challenging prior year comparisons which, together, resulted in a 3.4% decline in sales. During the quarter, we generated nearly $37 million in operating cash. During that same period, we utilized $17 million for stock repurchases and an additional $22 million for capital expenditures and acquisitions.� Mr. Kathwari further stated: �We continue to make progress in our efforts to position Ethan Allen as an interior design service company by strengthening the professionalism of our associates, developing stylish products which enable us to provide one-stop design service, opening new design centers in key markets, and shortening the delivery time of our products to our clients. We believe these efforts, along with our marketing initiatives, provide us a great competitive advantage and opportunity to grow our business.� Commenting on business trends, Mr. Kathwari continued: "As previously stated, we saw positive trends in September. However, as has been reported by many, the retail environment remains difficult. In addition, sales in the prior year quarter benefited from our initiative to reduce delivery times. While this initiative has been very positive for our clients, it has reduced our forward visibility and made comparisons to the prior year more challenging. As a result, we plan to provide a further update in the coming weeks in order to report whether we believe the trends experienced in September are sustainable throughout the second quarter.� 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 307 design centers in the United States and abroad, of which 141 are Company-owned. Ethan Allen has 9 manufacturing facilities, which include 2 sawmills, located throughout the United States. The Company will conduct a Conference Call at 11:00 AM (Eastern) on Monday, October 23rd. 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, 2006 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. Ethan Allen Interiors Inc. Selected Financial Information Unaudited (In millions) � Selected Consolidated Financial Data: Three Months Ended 9/30/06� 9/30/05� Net Sales $ 242.8� $ 251.3� Gross Margin 52.0% 50.4% Operating Margin 5.9% 11.2% Operating Margin (ex restructuring & impairment charges) 11.6% 12.9% Net Income $ 8.5� $ 17.1� Net Income (ex restructuring & impairment charges) $ 17.2� $ 19.7� � Operating Cash Flow $ 36.9� $ 45.6� Capital Expenditures $ 15.7� $ 4.8� Treasury Stock Repurchases (settlement date basis) $ 17.7� $ 36.8� � EBITDA $ 22.0� $ 33.4� EBITDA as % of Net Sales 9.0% 13.3% EBITDA (ex restructuring & impairment charges) $ 35.9� $ 37.6� EBITDA as % of Net Sales (ex restructuring & impairment charges) 14.8% 15.0% � Selected Financial Data by Business Segment: Three Months Ended Retail 9/30/06� 9/30/05� Net Sales $ 166.0� $ 158.4� Operating Margin 1.7% 1.1% � Three Months Ended Wholesale 9/30/06� 9/30/05� Net Sales $ 155.6� $ 178.4� Operating Margin 7.3% 16.7% Operating Margin (ex restructuring & impairment charges) 16.3% 19.1% Ethan Allen Interiors Inc. Condensed Consolidated Statements of Operations Unaudited (In thousands, except per share amounts) � � � � � Three Months Ended September 30, � � 2006� � � 2005� � Net sales $ 242,823� $ 251,314� Cost of sales 116,494� 124,774� Gross Profit 126,329� 126,540� Operating Expenses: Selling 55,038� 53,440� General and administrative 43,125� 40,665� Restructuring and impairment charge 13,936� 4,241� Total operating expenses 112,099� 98,346� Operating Income 14,230� 28,194� Interest and other miscellaneous income 2,232� 42� Interest and other related financing costs 2,938� 428� Income before income tax expense 13,524� 27,808� Income tax expense 5,072� 10,678� Net Income $ 8,452� $ 17,130� � Basic earnings per share: Net income per share $ 0.27� $ 0.50� Basic weighted average shares outstanding 31,815� 33,921� � Diluted earnings per share: Net income per share $ 0.26� $ 0.49� Diluted weighted average shares outstanding 32,631� 34,628� Ethan Allen Interiors Inc. Condensed Consolidated Balance Sheets (In thousands) � � � September 30, June 30, 2006� 2006� � � (unaudited) � � � Assets Current Assets: Cash and cash equivalents $ 163,636� $ 173,801� Accounts receivable, net 20,824� 22,179� Inventories 180,011� 189,650� Prepaid expenses and other current assets 38,864� 38,126� Total current assets 403,335� 423,756� � Property, plant, and equipment, net 298,917� 294,170� Intangible assets, net 88,259� 87,899� Other assets 5,971� 6,416� Total Assets $ 796,482� $ 812,241� � Liabilities and Shareholders' Equity Current Liabilities: Current maturities of long-term debt and capital lease obligations $ 39� $ 39� Customer deposits 52,578� 53,203� Accounts payable 25,076� 28,549� Accrued expenses and other current liabilities 67,981� 63,927� Total current liabilities 145,674� 145,718� � Long-term debt 202,778� 202,748� Other long-term liabilities 12,182� 12,151� Deferred income taxes 31,908� 34,182� Total liabilities 392,542� 394,799� � Shareholders' equity 403,940� 417,442� Total Liabilities and Shareholders' Equity $ 796,482� $ 812,241� Ethan Allen Interiors Inc. ("Ethan Allen" or the "Company") (NYSE:ETH) today reported sales and earnings for the three months ended September 30, 2006. Net delivered sales for the quarter ended September 30, 2006 amounted to $242.8 million as compared to $251.3 million in the prior year quarter. Net delivered sales for the Company's Retail division increased 4.8% to $166.0 million, while Wholesale sales decreased 12.8% to $155.6 million during that same period. Comparable Ethan Allen design center delivered sales decreased 1.7% as compared to the prior year quarter. The Company previously announced, on September 6, 2006, a plan to consolidate one of its case goods manufacturing facilities and convert one of its upholstery manufacturing facilities into a regional distribution center. As a result, the Company recorded a pre-tax restructuring and impairment charge of $13.9 million ($8.7 million, after-tax), or $0.27 per share, in the quarter ended September 30, 2006. In the prior year comparable period, the Company recorded a pre-tax restructuring and impairment charge totaling $4.2 million ($2.6 million, after-tax), or $0.08 per share, related to the conversion of another of its manufacturing facilities into a regional distribution center. Including the aforementioned after-tax restructuring and impairment charges, earnings per share amounted to $0.26 on net income of $8.5 million for the quarter ended September 30, 2006 as compared to earnings per share and net income of $0.49 and $17.1 million, respectively, in the prior year comparable period. Excluding the impact of these restructuring and impairment charges, earnings per share amounted to $0.53 on net income of $17.2 million for the three months ended September 30, 2006, as compared to earnings per share and net income of $0.57 and $19.7 million, respectively, in the prior year comparable period. During the quarter, the Company utilized $16.7 million of available cash from operations to repurchase 478,300 shares of its common stock in the open market. In July, the Company's Board of Directors increased the then remaining share repurchase authorization to 2,500,000 shares. As of September 30, 2006, the Company had a remaining authorization to repurchase an additional 2,473,000 shares. Farooq Kathwari, Chairman and CEO, commented: "We are pleased to report operating earnings, ex-restructuring, of 11.6% of sales despite a weak retail environment for home furnishings and challenging prior year comparisons which, together, resulted in a 3.4% decline in sales. During the quarter, we generated nearly $37 million in operating cash. During that same period, we utilized $17 million for stock repurchases and an additional $22 million for capital expenditures and acquisitions." Mr. Kathwari further stated: "We continue to make progress in our efforts to position Ethan Allen as an interior design service company by strengthening the professionalism of our associates, developing stylish products which enable us to provide one-stop design service, opening new design centers in key markets, and shortening the delivery time of our products to our clients. We believe these efforts, along with our marketing initiatives, provide us a great competitive advantage and opportunity to grow our business." Commenting on business trends, Mr. Kathwari continued: "As previously stated, we saw positive trends in September. However, as has been reported by many, the retail environment remains difficult. In addition, sales in the prior year quarter benefited from our initiative to reduce delivery times. While this initiative has been very positive for our clients, it has reduced our forward visibility and made comparisons to the prior year more challenging. As a result, we plan to provide a further update in the coming weeks in order to report whether we believe the trends experienced in September are sustainable throughout the second quarter." 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 307 design centers in the United States and abroad, of which 141 are Company-owned. Ethan Allen has 9 manufacturing facilities, which include 2 sawmills, located throughout the United States. The Company will conduct a Conference Call at 11:00 AM (Eastern) on Monday, October 23rd. 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, 2006 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 -------------------- 9/30/06 9/30/05 -------- --------- Net Sales $ 242.8 $ 251.3 Gross Margin 52.0% 50.4% Operating Margin 5.9% 11.2% Operating Margin (ex restructuring & impairment charges) 11.6% 12.9% Net Income $ 8.5 $ 17.1 Net Income (ex restructuring & impairment charges) $ 17.2 $ 19.7 Operating Cash Flow $ 36.9 $ 45.6 Capital Expenditures $ 15.7 $ 4.8 Treasury Stock Repurchases (settlement date basis) $ 17.7 $ 36.8 EBITDA $ 22.0 $ 33.4 EBITDA as % of Net Sales 9.0% 13.3% EBITDA (ex restructuring & impairment charges) $ 35.9 $ 37.6 EBITDA as % of Net Sales (ex restructuring & impairment charges) 14.8% 15.0% Selected Financial Data by Business Segment: --------------------------------------------- Three Months Ended -------------------- Retail 9/30/06 9/30/05 --------------------------------------------- -------- --------- Net Sales $ 166.0 $ 158.4 Operating Margin 1.7% 1.1% Three Months Ended -------------------- Wholesale 9/30/06 9/30/05 --------------------------------------------- -------- --------- Net Sales $ 155.6 $ 178.4 Operating Margin 7.3% 16.7% Operating Margin (ex restructuring & impairment charges) 16.3% 19.1% *T -0- *T Ethan Allen Interiors Inc. Condensed Consolidated Statements of Operations Unaudited (In thousands, except per share amounts) ---------------------------------------------------------------------- Three Months Ended September 30, 2006 2005 ---------------------------------------------------------------------- Net sales $242,823 $251,314 Cost of sales 116,494 124,774 -------- -------- Gross Profit 126,329 126,540 Operating Expenses: Selling 55,038 53,440 General and administrative 43,125 40,665 Restructuring and impairment charge 13,936 4,241 -------- -------- Total operating expenses 112,099 98,346 -------- -------- Operating Income 14,230 28,194 Interest and other miscellaneous income 2,232 42 Interest and other related financing costs 2,938 428 -------- -------- Income before income tax expense 13,524 27,808 Income tax expense 5,072 10,678 -------- -------- Net Income $ 8,452 $ 17,130 ======== ======== Basic earnings per share: ------------------------------------------- Net income per share $ 0.27 $ 0.50 ======== ======== Basic weighted average shares outstanding 31,815 33,921 Diluted earnings per share: ------------------------------------------- Net income per share $ 0.26 $ 0.49 ======== ======== Diluted weighted average shares outstanding 32,631 34,628 *T -0- *T Ethan Allen Interiors Inc. Condensed Consolidated Balance Sheets (In thousands) ---------------------------------------------------------------------- September 30, June 30, 2006 2006 (unaudited) ---------------------------------------------------------------------- Assets Current Assets: Cash and cash equivalents $ 163,636 $ 173,801 Accounts receivable, net 20,824 22,179 Inventories 180,011 189,650 Prepaid expenses and other current assets 38,864 38,126 --------- ---------- Total current assets 403,335 423,756 Property, plant, and equipment, net 298,917 294,170 Intangible assets, net 88,259 87,899 Other assets 5,971 6,416 --------- ---------- Total Assets $ 796,482 $ 812,241 ========= ========== Liabilities and Shareholders' Equity Current Liabilities: Current maturities of long-term debt and capital lease obligations $ 39 $ 39 Customer deposits 52,578 53,203 Accounts payable 25,076 28,549 Accrued expenses and other current liabilities 67,981 63,927 --------- ---------- Total current liabilities 145,674 145,718 Long-term debt 202,778 202,748 Other long-term liabilities 12,182 12,151 Deferred income taxes 31,908 34,182 --------- ---------- Total liabilities 392,542 394,799 Shareholders' equity 403,940 417,442 --------- ---------- Total Liabilities and Shareholders' Equity $ 796,482 $ 812,241 ========= ========== *T