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Ethan Allen Interiors Inc. (“Ethan Allen”, the “Company”, “We”, or “Our”) (NYSE:ETH) reported operating results for the three months ended September 30, 2011.

Net sales for the quarter ended September 30, 2011 increased 12.2% over the prior year to $184.9 million. The Company’s Retail division net sales increased 16.7% to $141.2 million including comparable design center net sales growth of 14.9%. Written orders booked during the quarter by the Retail division were 13.2% greater than the prior year quarter including comparable design center order growth of 11.4%.

Farooq Kathwari, Chairman and CEO commented, “We are gratified to see continued improvements in our sales and profitability. Our focus of providing ‘aspirational and attainable’ offerings with complimentary design services is helping us differentiate in a very positive manner.”

Net income for the quarter ended September 30, 2011 was $6.8 million or $0.23 per diluted share compared with the prior year of $3.8 million or $0.13 per diluted share. Excluding special items in both periods, net income for the quarter ended September 30, 2011 was $7.2 million or $0.25 per diluted share compared with $3.2 million or $0.11 per diluted share in the prior year period.

Mr. Kathwari continued, “Many major changes we undertook in the last three years demonstrate the impact of our vertically integrated structure. Our adjusted operating income grew 116% and our adjusted net income grew 127%. We also continued to maintain strong liquidity with $105.9 million of cash and securities while continuing to invest in our operations and also reducing our debt.”

Mr. Kathwari concluded, “We plan to continue with our marketing and operational initiatives including introduction of a major product program reaching a larger consumer base and a strong adverting program getting across our total value proposition of style, quality, value, and personal service. While the economic environment remains challenging, we remain cautiously optimistic primarily due to the implementation of our various initiatives. However, we are also preparing for contingencies if the overall economic conditions were to deteriorate.”

Analyst Conference Call

The Company will conduct a conference call at 11:00 AM (Eastern) on Tuesday October 25th 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.

About Ethan Allen

Ethan Allen Interiors Inc. is a leading interior design company and a manufacturer and retailer of quality home furnishings. Ethan Allen offers free interior design service to its clients and sells a full range of furniture products and decorative accessories through ethanallen.com and through a network of approximately 300 Design Centers in the United States and abroad. Ethan Allen owns and operates seven manufacturing facilities in North America, including five manufacturing plants and one sawmill in the United States and one manufacturing plant in Mexico. Approximately seventy percent of its products are made 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 for the year ended June 30, 2011 (the “2011 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 2011 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 Information Unaudited (in thousands)    

Selected Consolidated Financial Data:

  Three Months Ended 09/30/11 09/30/10   Net sales $ 184.9 $ 164.8 Gross margin 52.9 % 50.0 % Operating margin 7.4 % 3.3 % Operating margin (excluding special items*) 7.4 % 3.8 % Net income $ 6.8 $ 3.8

Net income (excluding special items* and unusual income tax effects)

$ 7.2 $ 3.2 Operating cash flow $ 6.3 ($0.9 ) Capital expenditures $ 3.4 $ 1.5 Acquisitions $ 0.0 $ 0.0

Treasury stock repurchases (settlement date basis)

$ 0.8 $ 5.4   EBITDA $ 18.6 $ 13.9 EBITDA as % of net sales 10.1 % 8.4 %   EBITDA (excluding special items*) $ 18.6 $ 13.3 EBITDA as % of net sales (excluding special items*) 10.0 % 8.0 %      

Selected Financial Data by Business Segment:

Three Months Ended

 

09/30/11 09/30/10

Retail

Net sales $ 141.2 $ 121.0 Operating margin -1.1 % -3.5 % Operating margin (excluding special items*) -1.1 % -3.4 %    

Wholesale

Net sales $ 116.4 $ 107.6 Operating margin 13.5 % 11.1 % Operating margin (excluding special items*) 13.5 % 11.7 %   * 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 Income Statements Unaudited (in thousands)       Three Months Ended 09/30/11 09/30/10   Net sales $ 184,921 $ 164,841 Cost of sales   87,036     82,460 Gross profit 97,885 82,381 Operating expenses: Selling 43,620 39,327 General and administrative 40,667 37,443 Restructuring and impairment charge   (40 )   225 Total operating expenses   84,247     76,995 Operating income 13,638 5,386 Interest and other income 60 3,157 Interest expense   2,351     2,974 Income before income taxes 11,347 5,569 Income tax expense   4,577     1,756 Net income $ 6,770   $ 3,813   Basic earnings per common share: Net income per basic share $ 0.24 $ 0.13 Basic weighted average shares outstanding 28,760 28,779   Diluted earnings per common share: Net income per diluted share $ 0.23 $ 0.13 Diluted weighted average shares outstanding 28,951 28,950       Ethan Allen Interiors Inc. Condensed Consolidated Balance Sheets Unaudited (in thousands)     September 30,

  June 30,  

2011 2011 Assets Current assets: Cash and cash equivalents $ 79,376 $ 78,519 Marketable securities 11,107 12,909 Accounts receivable, net 14,643 15,036 Inventories 141,050 141,692 Prepaid expenses & other current assets   21,255   20,372 Total current assets 267,431 268,528   Property, plant and equipment, net 291,535 294,853 Intangible assets, net 45,128 45,128 Restricted cash and investments 15,395 16,391 Other assets   3,243   3,425   Total Assets $ 622,732 $ 628,325       Liabilities and Shareholders' Equity Current liabilities: Current maturities of long-term debt - 19 Customer deposits 57,742 62,649 Accounts payable 23,061 26,958 Accrued expenses & other current liabilities   68,438   64,990 Total current liabilities 149,241 154,616   Long-term debt 162,861 165,013 Other long-term liabilities 18,542 18,975 Deferred income taxes   7,932   8,034 Total liabilities 338,576 346,638   Shareholders' equity   284,156   281,687   Total Liabilities and Shareholders' Equity $ 622,732 $ 628,325       Ethan Allen Interiors Inc. GAAP Reconciliation Three Months Ended September 30, 2011 and 2010 Unaudited (in thousands, except per share amounts)   Three Months Ended September 30, 2011   2010

Net Income / Earnings Per Share

Net income $ 6,770 $ 3,813 Special items net of related tax effects * (25 ) (378 ) Unusual income tax effects   435       (277 )

Net income (excluding special items* and unusual income tax effects)

$ 7,180     $ 3,158     Basic weighted average shares outstanding 28,760 28,779 Earnings per basic share $ 0.24     $ 0.13  

Earnings per basic share (excluding special items* and unusual income tax effects)

$ 0.25     $ 0.11     Diluted weighted average shares outstanding 28,951 28,950 Earnings per diluted share $ 0.23     $ 0.13  

Earnings per diluted share (excluding special items* and unusual income tax effects)

$ 0.25     $ 0.11      

Consolidated Operating Income / Operating Margin

Operating income $ 13,638 $ 5,386 Add: special items *   (40 )     904   Operating income (excluding special items*) $ 13,598     $ 6,290     Net sales $ 184,921     $ 164,841   Operating margin   7.4 %     3.3 % Operating margin (excluding special items*)   7.4 %     3.8 %  

Wholesale Operating Income / Operating Margin

Wholesale operating income $ 15,691 $ 11,939 Add: special items   -       679   Wholesale operating income (excluding special items*) $ 15,691     $ 12,618   Wholesale net sales $ 116,394     $ 107,555   Wholesale operating margin   13.5 %     11.1 % Wholesale operating margin (excluding special items*)   13.5 %     11.7 %  

Retail Operating Income / Operating Margin

Retail operating income (loss) $ (1,497 ) $ (4,290 ) Add: special items   (40 )     225   Retail operating income (loss) (excluding special items*) $ (1,537 )   $ (4,065 ) Retail net sales $ 141,181     $ 121,023   Retail operating margin   -1.1 %     -3.5 % Retail operating margin (excluding special items*)   -1.1 %     -3.4 %   * 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 Reconciliation Three Months Ended September 30, 2011 and 2010 Unaudited (in thousands, except per share amounts)   Three Months Ended September 30, 2011   2010      

EBITDA

Net income $ 6,770 $ 3,813 Add: interest expense, net 2,258 2,675 Less: income tax expense 4,577 1,756 Add: depreciation and amortization   4,989       5,607   EBITDA $ 18,594     $ 13,851   Net sales $ 184,921     $ 164,841   EBITDA as % of net sales   10.1 %     8.4 %   EBITDA $ 18,594 $ 13,851 Add: special items*   (40 )     (596 ) Adjusted EBITDA $ 18,554     $ 13,255   Net sales $ 184,921     $ 164,841   Adjusted EBITDA as % of net sales   10.0 %     8.0 %   * Special items consist of restructuring, impairment, transition charges and certain other items. Related tax effects are calculated using a normalized income tax rate.