Ethan Allen Reports Results for Quarter Ended September 30, 2012

Ethan Allen Reports Results for Quarter Ended September 30, 2012

DANBURY, Conn.--(BUSINESS WIRE)-- Ethan Allen Interiors Inc. ("Ethan Allen", the "Company", "We", or "Our") (NYS: ETH) reported operating results for the three months ended September 30, 2012.


Farooq Kathwari, Chairman and CEO commented, "We are pleased to see the benefits of substantially completing the transition of our major introduction of new products and the operating leverage of our vertically integrated business. Our gross margins improved to 55.6% from 52.9% and our operating income was $19.6 million, an increase of 43.9% after adjusting for a $1.6 million loss on the sale of vacant real estate. Excluding this real estate loss, our operating expenses were essentially flat compared to the previous year. Our adjusted net income per diluted share was $0.38 compared to $0.25 in the previous year quarter, an increase of 52%."

Mr. Kathwari continued, "Our sales increased 1.4% to $187.4 million over the 12.2% growth in the first quarter of the previous year. The previous year benefitted from shipments of design center samples of new products. We are also pleased that our written business (orders) in our retail division grew in the first quarter by 9.1% including 8.2% growth in comparable design center orders. This increase was over an 11.4% growth in comparable design center orders in the previous year."

Three Months Ended September 30, 2012

Net sales for the quarter ended September 30, 2012 increased 1.4% over the prior year to $187.4 million. The Company's Retail division net sales increased 5.6% to $149.1 million including comparable design center net sales growth of 5.0%. Retail division written orders recorded during the first quarter increased 9.1% over 13.2% growth the prior year's first quarter. Comparable design center written orders grew 8.2% over 11.4% growth the prior year.

Net income for the quarter ended September 30, 2012 was $10.1 million or $0.35 per diluted share compared with the prior year of $6.8 million or $0.23 per diluted share. Excluding special items in both periods, net income for the quarter ended September 30, 2012 was $11.1 million or $0.38 per diluted share compared with $7.2 million or $0.25 per diluted share in the prior year period.

Mr. Kathwari concluded, "Our competitive advantages arise from providing high quality products of the finest craftsmanship, offering complimentary design service through our 2,000 motivated interior design professionals, giving free local delivery, enhancing our technology in all aspects of the business, and through leveraging our vertically integrated structure. Executing against all of these elements helps us achieve our mission of 'Luxury Made Affordable'. While economic conditions continue to be challenging, we remain cautiously optimistic about our future prospects."

Analyst Conference Call

The Company will conduct a conference call at 10:00 AM (Eastern) on Thursday, October 18th 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 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 eight manufacturing facilities including five manufacturing plants and one sawmill in the United States plus two plants in Mexico and Honduras. Approximately seventy percent of its products are made in its North American 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, 2012 (the "2012 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 2012 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 millions)

Selected Consolidated Financial Data:

Three Months Ended

09/30/12

09/30/11

Net sales

$187.4

$184.9

Gross margin

55.6%

52.9%

Operating margin

9.6%

7.4%

Operating margin (excluding special items*)

10.4%

7.4%

Net income

$10.1

$6.8

Net income (excluding special items* and

unusual income tax effects)

$11.1

$7.2

Operating cash flow

$6.7

$6.3

Capital expenditures

$8.3

$3.4

Acquisitions

$0.6

$0.0

Treasury stock repurchases (settlement

date basis)

$0.0

$0.8

EBITDA

$22.5

$18.6

EBITDA as % of net sales

12.0%

10.1%

EBITDA (excluding special items*)

$24.1

$18.6

EBITDA as % of net sales (excluding special items*)

12.9%

10.0%

Selected Financial Data by Business Segment:

Three Months Ended

09/30/12

09/30/11

Retail

Net sales

$149.1

$141.2

Operating margin

0.7%

-1.1%

Operating margin (excluding special items*)

1.8%

-1.1%

Wholesale

Net sales

$111.4

$116.4

Operating margin

14.4%

13.5%

* 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 Statements of Comprehensive Income
Unaudited
(in thousands)

Three Months Ended

09/30/12

09/30/11

Net sales

$ 187,437

$ 184,921

Cost of sales

83,184

87,036

Gross profit

104,253

97,885

Operating expenses:

Selling

44,533

43,620

General and administrative

41,766

40,627

Total operating expenses

86,299

84,247

Operating income

17,954

13,638

Interest and other income

74

60

Interest expense

2,199

2,351

Income before income taxes

15,829

11,347

Income tax expense

5,765

4,577

Net income

$ 10,064

$ 6,770

Basic earnings per common share:

Net income per basic share

$ 0.35

$ 0.24

Basic weighted average shares outstanding

28,836

28,760

Diluted earnings per common share:

Net income per diluted share

$ 0.35

$ 0.23

Diluted weighted average shares outstanding

29,141

28,951

Comprehensive income:

Net income

$ 10,064

$ 6,770

Other comprehensive income

Currency translation adjustment

160

(1,698)

Other

25

9

Other comprehensive income (loss) net of tax

185

(1,689)

Comprehensive income

$ 10,249

$ 5,081

Ethan Allen Interiors Inc.

Condensed Consolidated Balance Sheets

Unaudited

(in thousands)

September 30,

June 30,

2012

2012

Assets

Current assets:

Cash and cash equivalents

$

73,913

$

79,721

Marketable securities

10,670

9,005

Accounts receivable, net

14,644

14,919

Inventories

157,951

155,739

Prepaid expenses & other current assets

23,791

23,408

Total current assets

280,969

282,792

Property, plant and equipment, net

297,322

295,695

Intangible assets, net

45,128

45,128

Restricted cash and investments

15,422

15,416

Other assets

5,873

5,757

Total Assets

$

644,714

$

644,788

Liabilities and Shareholders' Equity

Current liabilities:

Current maturities of long-term debt

253

250

Customer deposits

60,924

65,465

Accounts payable

20,831

27,315

Accrued expenses & other current liabilities

61,328

58,047

Total current liabilities

143,336

151,077

Long-term debt

154,216

154,250

Other long-term liabilities

17,496

17,593

Total liabilities

315,048

322,920

Shareholders' equity

329,666

321,868

Total Liabilities and Shareholders' Equity

$

644,714

$

644,788

Ethan Allen Interiors Inc.

GAAP Reconciliation

Three Months Ended September 30, 2012 and 2011

Unaudited

(in thousands, except per share amounts)

Three Months Ended

September 30,

2012

2011

Net Income / Earnings Per Share

Net income

$

10,064

$

6,770

Special items net of related tax effects *

1,022

(25

)

Unusual income tax effects

(12

)

435

Net income (excluding special items* and

unusual income tax effects)

$

11,074

$

7,180

Basic weighted average shares outstanding

28,836

28,760

Earnings per basic share

$

0.35

$

0.24

Earnings per basic share (excluding special items*

and unusual income tax effects)

$

0.38

$

0.25

Diluted weighted average shares outstanding

29,141

28,951

Earnings per diluted share

$

0.35

$

0.23

Earnings per diluted share (excluding special

items* and unusual income tax effects)

$

0.38

$

0.25

Consolidated Operating Income / Operating Margin

Operating income

$

17,954

$

13,638

Add: special items *

1,610

(40

)

Operating income (excluding special items*)

$

19,564

$

13,598

Net sales

$

187,437