ETH Ethan Allen Interiors Inc

Ethan Allen Interiors Inc. (“Ethan Allen” or the “Company”) (NYSE:ETH) today reported operating results for the three and six months ended December 31, 2009.

Three Months Ended December 31, 2009

Net delivered sales for the quarter ended December 31, 2009 amounted to $143.3 million as compared to $189.6 million in the prior year quarter. Net delivered sales for the Company’s Retail division were $107.1 million compared with $147.2 million the prior year quarter. Wholesale net sales were $84.5 million versus $108.8 million the prior year quarter. Comparable Ethan Allen design center net delivered sales were 25.3% lower than the prior year quarter while comparable written orders were 6.1% lower. The Company’s Retail backlog has increased 34% and the Wholesale backlog is up 54% from the prior year second quarter.

For the quarter ended December 31, 2009, diluted loss per share amounted to $0.12 on a loss of $3.3 million, which includes $3.9 million in transition costs and a $0.8 million restructuring and impairment charge for previously announced actions. This compares to diluted earnings per share and net income of $0.19 and $5.5 million, respectively, for the prior year. Excluding the impact of the transition costs and restructuring and impairment charges and the impact of tax valuation allowances recorded, diluted loss per share amounted to $0.06 for the current quarter.

Six Months Ended December 31, 2009

For the six months ended December 31, 2009, net delivered sales totaled $279.5 million as compared to $395.4 million in the prior year comparable period. Net delivered sales for the Company’s Retail division were $210.3 million compared with $303.1 million the prior year. Wholesale net sales were $165.8 million versus $230.1 million the prior year.

For the six months ended December 31, 2009, diluted loss per share amounted to $0.58 on a loss of $16.9 million, which includes $12.4 million in transition costs and a $1.6 million restructuring and impairment charges for previously announced actions. This compares to diluted earnings per share and net income of $0.45 and $12.9 million, respectively, for the prior year, which included a restructuring benefit of $1.6 million due to the gain on the sale of properties closed in fiscal 2008. Excluding the impact of the transition costs and restructuring and impairment charges in both periods and the impact of tax valuation allowances recorded, diluted loss per share amounted to $0.25 in the current period compared to diluted earnings per share of $0.41 in the prior year comparable period.

Farooq Kathwari, Chairman, President and CEO commented, “The challenges of the past year have provided us an opportunity to significantly strengthen many elements of our vertically integrated enterprise while at the same time increasing our cash position from June 30 by 44% to $76 million at December 31, 2009.”

Mr. Kathwari continued, “The consolidation and restructuring initiatives did result in lower delivered sales in the December quarter while increasing our backlogs. Our plants, retail and logistics have absorbed most of the operational changes and transition costs during the last six months. This includes the training of 274 new upholstery associates and the conversion of our case goods products to custom. We expect to significantly lower these costs in the third and fourth quarters of this fiscal year."

Mr. Kathwari added, “We have strong marketing initiatives in place. While we need to remain cautious, we are continuing with our plans to increase production in both our domestic wood and upholstery products. We will discuss these efforts as well as our other initiatives in detail during our conference call.”

Analyst Conference Call

The Company will conduct a Conference Call at 11:00 AM (Eastern) on Thursday, January 28th. 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 six manufacturing facilities in the United States, which includes one sawmill, and one manufacturing facility in Mexico, and manufactures approximately sixty-five percent of its products in its United States 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/A for the year ended June 30, 2009 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 thousands, except per share amounts)             Three Months Ended   Six Months Ended   12/31/09      

12/31/08

  12/31/09      

12/31/08

    Net sales $ 143,302 $ 189,558 $ 279,492 $ 395,399 Cost of sales   74,278     87,757   152,159     181,657   Gross profit 69,024 101,801 127,333 213,742 Operating expenses: Selling 33,801 48,721 67,406 104,023 General and administrative 39,729 42,967 79,709 89,025 Restructuring and impairment charge   777     26   1,589     (1,604 ) Total operating expenses   74,307     91,714   148,704     191,444   Operating income (loss) (5,283 ) 10,087 (21,371 ) 22,298 Interest and other miscellaneous income 1,020 1,113 1,817 2,213 Interest expense and other related financing costs   2,978     2,932   5,959     5,833   Income (loss) before income taxes (7,241 ) 8,268 (25,513 ) 18,678 Income tax expense (benefit)   (3,903 )   2,780   (8,596 )   5,768   Net income (loss) $ (3,338 ) $ 5,488 $ (16,917 ) $ 12,910     Basic earnings per common share: Net income (loss) per basic share $ (0.12 ) $ 0.19 $ (0.58 ) $ 0.45 Basic weighted average shares outstanding 28,917 28,739 28,922 28,721   Diluted earnings per common share: Net income (loss) per diluted share $ (0.12 ) $ 0.19 $ (0.58 ) $ 0.45 Diluted weighted average shares outstanding 28,917 28,739 28,922 28,793   Ethan Allen Interiors Inc. Condensed Consolidated Balance Sheets Unaudited (in thousands)                   December 31, June 30,

2009

2009

  Assets Current assets: Cash and cash equivalents $ 76,138 $ 52,960 Accounts receivable, net 12,581 13,086 Inventories 141,991 156,519 Prepaid expenses & other current assets 10,536 21,060 Deferred income taxes   14,899   8,077 Total current assets 256,145 251,702   Property, plant and equipment, net 313,528 333,599 Intangible assets, net 45,128 45,128 Other assets   17,669   16,056   Total Assets $ 632,470 $ 646,485       Liabilities and Shareholders' Equity Current liabilities: Current maturities of long-term debt $ 43 $ 42 Customer deposits 36,573 31,691 Accounts payable 23,236 22,199 Accrued expenses & other current liabilities   56,251   58,531 Total current liabilities 116,103 112,463   Long-term debt 203,165 203,106 Other long-term liabilities   25,323   24,993 Total liabilities 344,591 340,562   Shareholders' equity   287,879   305,923   Total Liabilities and Shareholders' Equity $ 632,470 $ 646,485   Ethan Allen Interiors Inc. Selected Financial Information Unaudited (in millions)    

Selected Consolidated Financial Data:

                  Three Months Ended Six Months Ended   12/31/09  

12/31/08

  12/31/09  

12/31/08

  Net sales $ 143.3 $ 189.6 $ 279.5 $ 395.4 Gross margin 48.2% 53.7% 45.6% 54.1% Operating margin -3.7% 5.3% -7.6% 5.6% Operating margin (ex restructuring, impairment & plant transition charges ) -0.4% 5.3% -2.6% 5.2% Net income (loss) ($3.3) $ 5.5 ($16.9) $ 12.9 Net income (loss) (ex restructuring, impairment & plant transition charges ) ($1.6) $ 5.5 ($7.3) $ 11.8   Operating cash flow $ 3.9 ($2.4) $ 20.8 $ 15.7 Capital expenditures $ 2.8 $ 5.1 $ 5.3 $ 16.1 Acquisitions $ 0.0 $ 0.3 $ 0.0 $ 0.6 Treasury stock repurchases (settlement date basis) $ 0.0 $ 0.0 $ 0.0 $ 0.0   EBITDA $ 1.1 $ 17.3 ($1.7) $ 36.6 EBITDA as % of net sales 0.8% 9.1% -0.6% 9.2% EBITDA (ex restructuring, impairment and plant transition charges ) $ 5.8 $ 17.3 $ 5.7 $ 35.0 EBITDA as % of net sales (ex restructuring, impairment and plant transition charges ) 4.0% 9.2% 2.0% 8.8%        

Selected Financial Data by Business Segment:

Three Months Ended Six Months Ended   12/31/09  

12/31/08

  12/31/09  

12/31/08

Retail

Net sales $ 107.1 $ 147.2 $ 210.3 $ 303.1 Operating margin -9.1% -2.2% -10.1% -2.1% Operating margin (ex restructuring, impairment & plant transition charges ) -8.1% -2.1% -9.2% -2.7%    

Wholesale

Net sales $ 84.5 $ 108.8 $ 165.8 $ 230.1 Operating margin 1.2% 7.9% -2.2% 8.9% Operating margin (ex restructuring, impairment & plant transition charges ) 5.4% 7.9% 5.2% 9.1%   Ethan Allen Interiors Inc. GAAP Reconciliation Three and Six Months Ended December 31, 2009 and 2008 Unaudited (in thousands, except per share amounts)             Three Months Ended Six Months Ended December 31, December 31,   2009       2008   2009       2008

Net Income / Earnings Per Share

        Net income (loss) $ (3,338) $ 5,488 $ (16,917) $ 12,910 Add: restructuring, impairment and plant transition charges (credit), net of related tax effect   1,710       17   9,603

 

    (1,109) Net income (loss) (excluding restructuring impairment and plant transition charges) $ (1,628)     $ 5,505 $ (7,314)     $ 11,801   Earnings (loss) per basic share $ (0.12)     $ 0.19 $ (0.58)     $ 0.45 Earnings (loss) per basic share (excluding restructuring, impairment and plant transition charges (credit)) $ (0.06)     $ 0.19 $ (0.25)     $ 0.41 Basic weighted average shares outstanding 28,917 28,739 28,922 28,721   Earnings (loss) per diluted share $ (0.12)     $ 0.19 $ (0.58)     $ 0.45 Earnings (loss) per diluted share (excluding restructuring, impairment and plant transition charges (credit)) $ (0.06)     $ 0.19 $ (0.25)     $ 0.41 Diluted weighted average shares outstanding 28,917 28,739 28,922 28,793  

Consolidated Operating Income / Operating Margin

Operating income (loss) $ (5,283) $ 10,087 $ (21,371) $ 22,298 Add: restructuring, impairment and plant transition charges (credit)   4,677       26   13,995       (1,604) Operating income (loss) (excluding restructuring, impairment and plant transition charges) $ (606)     $ 10,113 $ (7,376)     $ 20,694   Net sales $ 143,302     $ 189,558 $ 279,492     $ 395,399 Operating margin   -3.7%       5.3%   -7.6%       5.6% Operating margin (excluding restructuring, impairment and plant transition charges)   -0.4%       5.3%   -2.6%       5.2%  

Wholesale Operating Income / Operating Margin

Wholesale operating income (loss) $ 1,022 $ 8,580 $ (3,638) $ 20,465 Add: restructuring, impairment and plant transition charges (credit)   3,523       -   12,179       408 Wholesale operating income (excluding restructuring, impairment and plant transition charges) $ 4,545     $ 8,580 $ 8,541     $ 20,873 Wholesale net sales $ 84,499     $ 108,848 $ 165,780     $ 230,143 Wholesale operating margin   1.2%       7.9%   -2.2%       8.9% Wholesale operating margin (excluding restructuring, impairment and plant transition charges)   5.4%       7.9%   5.2%       9.1%  

Retail Operating Income / Operating Margin

Retail operating income (loss) $ (9,792) $ (3,185) $ (21,141) $ (6,237) Add: restructuring, impairment and plant transition charges (credit)   1,154       26   1,816       (2,012) Retail operating income (loss) (excluding restructuring, impairment and plant transition charges (credit)) $ (8,638)     $ (3,159) $ (19,325)     $ (8,249) Retail net sales $ 107,123     $ 147,183 $ 210,273     $ 303,053 Retail operating margin   -9.1%       -2.2%   -10.1%       -2.1% Retail operating margin (excluding restructuring, impairment and plant transition charges)   -8.1%       -2.1%   -9.2%       -2.7%   Ethan Allen Interiors Inc. GAAP Reconciliation Three and Six Months Ended December 31, 2009 and 2008 Unaudited (in thousands, except per share amounts)           Three Months Ended Six Months Ended December 31, December 31,   2009       2008   2009       2008        

EBITDA

Net income (loss) $ (3,338) $ 5,488 $ (16,917) $ 12,910 Add: interest expense (income), net 2,731 2,565 5,497 5,073 Add: income tax expense (benefit) (3,903) 2,780 (8,596) 5,768 Add: depreciation and amortization (including plant accelerated depreciation)   5,633       6,490   18,330       12,808 EBITDA $ 1,123     $ 17,323 $ (1,686)     $ 36,559 Net sales $ 143,302     $ 189,558 $ 279,492     $ 395,399 EBITDA as % of net sales   0.8%       9.1%   -0.6%       9.2%   EBITDA $ 1,123 $ 17,323 $ (1,686) $ 36,559 Add: restructuring, impairment and plant transition charges (credit)   4,677       26   7,365       (1,604) Adjusted EBITDA $ 5,800     $ 17,349 $ 5,679     $ 34,955 Net sales $ 143,302     $ 189,558 $ 279,492     $ 395,399 Adjusted EBITDA as % of net sales   4.0%       9.2%   2.0%       8.8%