Item 2.02
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Results of Operations and Financial
Condition
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The information contained within Item 2.02 of this Form 8-K and the
Exhibits attached hereto shall not be deemed “filed” for purposes of
Section 18 of the Securities Exchange Act of 1934 and shall not be deemed incorporated
by reference in any filing under the Securities Act of 1933, except as shall be
expressly set forth by specific reference in such filing.
On January 23, 2008, Ethan Allen Interiors Inc. (“Ethan
Allen” or the “Company”) issued a press release setting forth its
operating results for the three and six months ended December 31, 2007. A copy of the
press release is attached hereto as Exhibit 99.1 and hereby incorporated by
reference.
Also on January 23, 2008 Ethan Allen conducted a conference call during
which certain unaudited, non-GAAP financial information related to the Company’s
operations for the three and six months ended December 31, 2007 and December 31, 2006
was disclosed. This information is set forth in the attached Exhibit 99.2.
Exhibits 99.1 and 99.2 include references to the Company's (i)
consolidated operating profit, (ii) wholesale operating profit, (iii) net income, (iv)
earnings per share, and (v) earnings before interest, taxes, depreciation and
amortization (“EBITDA”), all excluding the effects of a restructuring and
impairment charge recorded during the three months ended September 30, 2006 as a result
of the Company's decision to consolidate two manufacturing facilities, converting one
of those facilities into a regional distribution center. A reconciliation of these
financial measures to the most directly comparable financial measure reported in
accordance with generally accepted accounting principles (“GAAP”) is also
provided in Exhibit 99.2.
Management believes that excluding items which are deemed to be
non-recurring in nature from financial measures such as operating profit, wholesale
operating profit, net income, and earnings per share, allows investors to more easily
compare and evaluate the Company's financial performance relative to prior periods and
industry comparables. These adjusted measures also aid investors in understanding the
operating results of the Company absent such non-recurring or unusual
events.
Management considers EBITDA an important indicator of the operational
strength and performance of its business, including the ability of the Company to pay
interest, service debt and fund capital expenditures. Given the nature of the Company's
operations, including the tangible assets necessary to carry out its production and
distribution activities, depreciation and amortization represent Ethan Allen's largest
non-cash charges. As these non-cash charges do not affect the Company's ability to
service debt or make capital expenditures, it is important to consider EBITDA in
addition to, but not as a substitute for, operating income, net income and other
measures of financial performance reported in accordance with GAAP, including cash flow
measures such as operating cash flow. Further, EBITDA is one measure used to determine
compliance with the Company's existing credit facility.