Securities and Exchange Commission
Washington, D.C. 20549
----------------------------
FORM 11-K
Annual Report
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
(Mark One):
(X) Annual Report pursuant to Section 15(d) of the Securities Exchange Act
of 1934 (No Fee Required) for the fiscal year ended December 31, 2000
OR
( ) Transition Report pursuant to Section 15(d) of the Securities Exchange
Act of 1934 (No Fee Required)
For the transition period from _____ to _____
Commission file Number 1-11806
A. Full title of plan and the address of plan, if different from
that of the issuer named below:
THE ETHAN ALLEN RETIREMENT SAVINGS PLAN
B. Name of issuer of the securities held pursuant to the plan and
the address of its principal office:
ETHAN ALLEN INTERIORS INC.
ETHAN ALLEN DRIVE
DANBURY, CT 06811
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Financial Statements and Schedule
December 31, 2000 and 1999
(With Independent Auditors' Report Thereon)
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
TABLE OF CONTENTS
PAGE
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Independent Auditors' Report 1
Statements of Net Assets Available for Plan Benefits, 2
December 31, 2000 and 1999
Statement of Changes in Net Assets Available for Plan Benefits, 3
Year Ended December 31, 2000
Notes to Financial Statements 4
SCHEDULE:
Schedule of Assets Held for Investment Purposes at End of Year 11
All other schedules have been omitted since they are not applicable.
INDEPENDENT AUDITORS' REPORT
Ethan Allen Retirement Committee and Participants
The Ethan Allen Retirement Savings Plan:
We have audited the accompanying statements of net assets available for plan
benefits of The Ethan Allen Retirement Savings Plan (the "Plan") as of December
31, 2000 and 1999, and the related statement of changes in net assets available
for plan benefits for the year ended December 31, 2000. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits as of December
31, 2000 and 1999 and the changes in net assets available for plan benefits for
the year ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States of America.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes at end of year, as of December 31, 2000 is presented for
purposes of additional analysis and is not a required part of the basic
financial statements but is supplementary information required by the Department
of Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. This supplemental schedule is the
responsibility of the Plan's management. The supplemental schedule has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/ KPMG LLP
June 26, 2001
Stamford, Connecticut
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Statements of Net Assets Available for Plan Benefits
December 31, 2000 and 1999
2000 1999
------------ -----------
Assets:
Investments, at fair value $137,114,591 $140,140,707
Participant loans 5,020,839 4,375,076
------------ ------------
Total investments 142,135,430 144,515,783
Employer contributions receivable 4,333,180 2,843,785
Employee contributions receivable 208,317 315,932
------------ ------------
Total assets 146,676,927 147,675,500
Liabilities:
Refunds payable for excess contributions 22,805 18,062
------------ ------------
Net assets available for plan benefits $146,654,122 $147,657,438
============ ============
See accompanying notes to financial statements.
2
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Statement of Changes in Net Assets Available for Plan Benefits
Year ended December 31, 2000
Additions to net assets:
Net depreciation
in fair value of investments $(18,300,129)
Interest income 421,012
Dividend income 10,915,874
------------
Net investment loss (6,963,243)
------------
Contributions:
Employer contributions 4,360,068
Employee contributions 12,863,980
------------
Total contributions 17,224,048
------------
Other receipts 48,895
------------
Total additions 10,309,700
------------
Deductions from net assets:
Distributions to participants (11,175,288)
Other disbursements (85,546)
Administrative expenses (52,182)
------------
Total deductions (11,313,016)
------------
Net decrease (1,003,316)
Net assets available for plan benefits:
Beginning of year 147,657,438
------------
End of year $146,654,122
============
See accompanying notes to financial statements.
3
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2000 and 1999
(1) PLAN DESCRIPTION
The Ethan Allen Retirement Savings Plan (the "Plan") is a defined
contribution savings plan sponsored and administered by Ethan Allen
Interiors Inc. (the "Company").
The following brief description is provided for general information
purposes only. Participants should refer to the Plan Document for a more
complete description of the Plan's provisions.
GENERAL
The Plan was formed effective July 1, 1994 through the merger of the
Retirement Program of Ethan Allen Inc. (the "Retirement Program") into
the Ethan Allen 401(k) Employee Savings Plan (the "401(k) Plan"). As a
result of the merger on July 1, 1994, all participant investments in the
Retirement Program (except for the Ethan Allen Interiors Inc. restricted
stock which was transferred directly) were liquidated and the proceeds
were transferred to the Plan, allocated to participants' accounts and
invested, as directed, by each participant. On January 1, 1999, the name
of the Plan was changed from The Ethan Allen Profit Sharing and 401(k)
Retirement Plan to The Ethan Allen Retirement Savings Plan.
In 1999, the Plan was offered to all employees of the Company who
completed 1,000 hours of service during their first year of employment or
subsequent Plan year. In 2000, the Plan was amended to allow all
employees who have completed at least three consecutive months of service
with the Company to be eligible to enroll in the Plan. The Plan is
subject to the provisions of the Employee Retirement Income Security Act
of 1974 ("ERISA").
CONTRIBUTIONS AND VESTING
In 2000, participants may contribute from 1% to 20% (1% to 15% in 1999)
of their compensation (as defined in the Plan) up to a maximum tax
deferred contribution of $10,500 in 2000 ($10,000 in 1999) to the 401(k)
portion of the Plan. Effective January 1, 2000, the Company matches $1.00
for $1.00 on the first $500 of before-tax contributions and then $0.50 on
the $1.00 up to a $1,000. The maximum Company match is $1,000 annually.
Prior to January 2000, the Company matched $0.50 on the $1.00 up to
$1,000 of before-tax contributions up to the annual maximum match of
$1,000. Participants may, in addition, contribute amounts in excess of
their tax deferred contribution on an after-tax basis in the amount of 1%
to 20% of their compensation. The participant's tax-deferred contribution
and after-tax contribution, in the aggregate, may not exceed 20% of their
compensation.
Employer contributions, if any, to the profit sharing portion of the
Plan, on behalf of each participant are determined by the Board of
Directors of the Company at the close of each fiscal year, although the
maximum amount that can be contributed to a participant's account in any
year is the lesser of (i) $30,000 (or, if greater, 25% of the dollar
limitation in effect under Section 415(b)(1)(A) of the Internal Revenue
Code) or (ii) 25% of the participant's compensation for that Plan year,
reduced by any other contributions on the participant's behalf to any
other defined contribution plans of the Company. The actual contribution,
if any, is made in the ensuing year. The Company declared no profit
sharing contributions for the Plan in 2000 and 1999.
4
(Continued)
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2000 and 1999
Participants who are employed by the Company on the last day of the Plan
year are entitled to the employee match. Participant contributions,
employer 401(k) contributions and profit sharing contributions are 100%
vested immediately.
During 2000 and 1999, certain participants contributed $22,805 and
$18,062, respectively, in excess of the allowable qualified contribution.
The excess contribution amounts are reflected as a Plan liability at
December 31, 2000 and 1999. The excess contributions were refunded in the
subsequent year within the penalty free deadline.
INVESTMENT OF FUNDS
During 2000 and 1999, the amounts contributed to the Plan were invested
in one of the following funds at the direction of the participants. A
brief description of the funds is as follows:
American Century Stable Asset Fund - The Stable Asset Fund invests
in a diversified portfolio of high-quality investments issued by
major financial institutions and in collateralized stable value
vehicles, including guaranteed investment contracts. The fund is
managed by SEI Trust Company and Dwight Asset Management Company.
American Century Select Investors Fund - The Select Investors Fund
invests in common stocks considered by fund managers to have a
better than average prospect for appreciation. In addition, 80% of
the fund's stock investments must have a record of paying or have
committed to paying regular dividends.
American Century Ultra Investors Fund - The Ultra Investors Fund
invests in medium to large-sized companies that show accelerating
growth and earnings.
American Century International Equity Fund - The International
Equity Fund invests in common stocks of foreign companies
considered to have better than average prospects for appreciation.
Ethan Allen Restricted/Unrestricted Stock Funds - At December 31,
2000 and 1999, the Plan held 440,298 and 478,566, respectively,
restricted shares of common stock of the Company, and 373,540 and
332,556, respectively, of unrestricted shares of common stock of
the Company. All of the restricted shares are subject to proxies
granted to Mr. Kathwari, the Chairman of the Board of Directors,
President and Chief Executive Officer of the Company, which expire
on the earlier of Mr. Kathwari's termination of employment with the
Company or March 22, 2003, and 399,733 of these shares are
restricted from being sold by the Plan, other than to the Company,
in accordance with applicable securities laws. During 2000, the
Company purchased approximately 26,000 of restricted shares at a
market value of approximately $776,000. Additionally, the Ethan
Allen Restricted Stock Fund restricts participants from
transferring their balances from this fund to other funds of the
Plan. No such restrictions exist on investments in the Ethan Allen
Unrestricted Stock Fund.
Ethan Allen Interiors Inc. common stock is publicly traded and had
a readily ascertainable market value of $33.50 and $32.06 per share
at December 31, 2000 and 1999, respectively.
5
(Continued)
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2000 and 1999
All share and per share amounts have been adjusted to reflect a 3
for 2 stock split effected on May 21, 1999.
Lord Abbott Developing Growth Fund - The Lord Abbott Developing
Growth Fund invests in a diversified portfolio of small company
stocks with long-range growth potential.
American Century Strategic Allocation Conservative Fund - The
Strategic Allocation Conservative Fund invests in a diversified
portfolio of stocks, bonds and money market securities with an
emphasis on quality bonds and money market securities over stocks.
The Fund's targeted mix of assets is 45% bonds, 40% stocks, and 15%
money market securities.
American Century Strategic Allocation Moderate Fund - The Strategic
Allocation Moderate Fund invests in a diversified portfolio of
stocks, bonds and money market securities. The Fund's targeted mix
of assets is 60% stocks, 30% bonds and 10% money market securities.
American Century Strategic Allocation Aggressive Fund - The
Strategic Allocation Aggressive Fund invests in a diversified
portfolio of stocks, bonds and money market securities. The Fund's
targeted mix of assets is 75% stocks, 20% bonds and 5% money market
securities.
Charles Schwab Personal Choice(R) Retirement Fund - The Personal
Choice(R) Retirement Fund allows the investor to purchase mutual
funds, stocks and bonds offered through Charles Schwab & Co., Inc.
Participants must transfer a minimum of $2,500 from their current
plan balance to elect this option. Participants may transfer up to
a maximum of 50% of their fully vested balance.
American Century Vista Investors Fund - The Vista Investors Fund
invests in common stocks of growing small- to medium-sized
companies considered to have better than average prospects for
appreciation.
American Century Value Fund - The Value Fund invests primarily in
equity securities of well established companies that appear to be
undervalued at the time of purchase.
LOANS
The Loan Fund is a non-contributory fund used to account for and
administer loans to participants. Each participant may apply to the Plan
administrator for a loan against the 401(k) portion of that participant's
account. The maximum amount which may be borrowed by the participant is
limited to the lesser of (a) $50,000 or (b) 50% of the 401(k) portion of
such participant's account at the time of such loan. The term of these
loans generally shall not exceed the earlier of five years or such
participant's termination of service, and in certain circumstances,
greater than five years as defined in the Plan document.
6
(Continued)
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2000 and 1999
Loans are processed the first day of each month. The Plan administrator
has determined that loans shall bear interest equal to the Prime Rate as
of the preceding month's close plus 1%. The Prime Rate during 2000 and
1999 ranged from 8.50% to 9.50% and 7.75% to 8.50%, respectively.
PARTICIPANTS' ACCOUNTS
A separate account is maintained for each participant. Net investment
income/(loss) is allocated daily to each participant's account on a
proportional basis according to account balances so that each account
bears its proportionate share of income or loss. Employer profit sharing
contributions are allocated to each participant based on each
participant's compensation to total compensation of all participants
during the year. In 2000 and 1999, administrative expenses, other than
certain transaction fees borne by the participants, were paid by the Plan
sponsor.
DISTRIBUTIONS AND WITHDRAWALS
Participants may elect to receive their benefits when they reach 59-1/2,
or when they leave the Company. The Plan also provides death benefits to
the designated beneficiary of eligible participants. An employee may
withdraw any or all of his after-tax 401(k) contribution ($250 minimum)
at any time; early withdrawal of before-tax and Company match 401(k)
contributions may only be made by a participant upon attaining the age of
59-1/2 or because of serious financial hardship, subject to limitations.
Distributions are usually made in cash. If your account includes shares
of Company stock, a participant can elect to receive a distribution in
cash or stock.
In no event shall distributions commence later than sixty days after the
close of the Plan year in which the latest of the following events
occurs: the participant's attainment of age 59-1/2; the tenth anniversary
of the date on which the participant began participating in the Plan; or
the participant's termination date. These provisions notwithstanding,
participants who are no longer active employees must commence
distributions from the Plan within a year of attaining the age of 71-1/2.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements have been prepared on the accrual
basis of accounting.
VALUATION OF INVESTMENTS HELD IN TRUST
Under the terms of a trust agreement between Chase Manhattan Bank, N.A.
(the "Trustee") and the Company, the Trustee administers a trust fund on
behalf of the Plan. The value of the investments and changes therein of
this trust have been reported to the Plan by the Trustee, as determined
through the use of quoted market prices, except for the guaranteed
investment contracts, which are valued at contract value. Purchases and
sales of securities are recorded on a trade-date basis.
Loans to participants are valued at face value which approximates fair
value.
7
(Continued)
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2000 and 1999
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities"
("SFAS No. 133"). SFAS No. 133 requires that an entity recognize all
derivatives and measure those instruments at fair value.
SFAS No. 133 is effective for fiscal years beginning after June 15, 2000.
Pursuant to SFAS No. 137, the Plan is required to adopt SFAS No. 133
effective January 1, 2001. Management has determined that the impact of
the adoption of SFAS No. 133 would not be significant to the Plan's
financial statements.
(3) INVESTMENTS
The following table presents the Plan's investments which represent 5% or
more of the Plan's net assets available for plan benefits at December 31,
2000 and 1999:
2000 1999
------------ -----------
Investments at fair value as determined by quoted
market price:
Mutual funds:
American Century Select Investors Fund $28,290,478 $31,021,657
American Century Ultra Investors Fund 25,428,442 29,752,664
American Century International Equity Fund 7,701,135 8,101,896
American Century Strategic Allocation
Moderate Fund 9,447,321 9,104,635
Common stock:
Ethan Allen Interiors Inc. - Restricted 14,795,821 15,349,355
Ethan Allen Interiors Inc. - Unrestricted 12,518,501 10,663,086
Collective trust:
American Century Stable Asset Fund 20,834,695 20,259,314
(4) USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, and changes therein, and disclosure of
contingent assets and liabilities. Actual results may differ from those
estimates.
8
(Continued)
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2000 and 1999
(5) OBLIGATION FOR PLAN BENEFITS
Although the Plan is intended to be permanent, the Company expressly
reserves the right to amend or terminate the Plan at any time. In the
event that the Plan is terminated, participants are entitled to 100
percent of the current value of their vested account.
(6) PARTIES-IN-INTEREST
Certain Plan investments are shares of mutual funds managed by J.P.
Morgan/American Century. J.P. Morgan/American Century is the recordkeeper
as defined by the Plan, therefore, transactions involving these mutual
funds qualify as party-in-interest transactions. Fees paid by the Plan
for the investment management service amounted to $52,182 for the year
ended December 31, 2000.
(7) PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA.
(8) TAX STATUS
The Company has received a determination letter from the Internal Revenue
Service dated May 2, 1996 stating that the Plan is a qualified plan under
Section 401(a) of the Internal Revenue Code and the corresponding trust
is exempt from income tax under Section 501(a) of the Internal Revenue
Code. The Plan has been amended since receiving the determination letter.
However, the Company and legal counsel believes that the Plan continues
to be administered in accordance with the applicable sections of the
Internal Revenue Code.
(9) RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
Net assets available for plan benefits identified in the financial
statements presented herein have not been reduced for participant
benefits payable of $189,371 and $83,526 at December 31, 2000 and 1999,
respectively. However, these amounts have been identified as a reduction
to net assets available for plan benefits in the Form 5500 to be filed
with the Internal Revenue Service.
9
(Continued)
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2000 and 1999
The following is a reconciliation of net assets available for plan benefits
reported in these financial statements and on the Form 5500:
DECEMBER 31, 2000 DECEMBER 31, 1999
----------------- -----------------
Net assets available for plan benefits per the
financial statements $146,654,122 $147,657,438
Benefits payable to participants (189,371) (83,526)
------------ ------------
Net assets available for plan benefits per the
Form 5500 $146,464,751 $147,573,912
============ ============
The following is a reconciliation of benefits paid to participants reported in
these financial statements and on the Form 5500:
YEAR ENDED DECEMBER
31, 2000
-------------------
Benefits paid to participants per the
financial statements $11,175,288
Add: Benefits payable to participants at
year-end 189,371
Less: Benefits payable to participants at
previous year-end (83,526)
-----------
Benefits paid to participants per the
Form 5500 $11,281,133
===========
Benefits payable to participants are recorded on the Form 5500 for benefit
claims that have been processed and approved for payment prior to the Plan
year-end, but not yet paid as of that date.
(10) SUBSEQUENT EVENTS
As described in the press release issued on June 7, 2001, the Company
announced plans to consolidate three of its manufacturing facilities in
Island Pond, Vermont, Frewsburg, New York and Asheville, North Carolina.
As a result, the Plan was amended to allow participants of the Plan at
these divisions to change their percentage of deduction without waiting
until the first of the month.
10
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Schedule of Assets Held for Investment Purposes at End of Year
December 31, 2000
IDENTITY OF ISSUE, BORROWER, DESCRIPTION OF INVESTMENT INCLUDING MATURITY DATE,
LESSOR OR SIMILAR PARTY RATE OF INTEREST, COLLATERAL, PAR, OF MATURITY VALUE CURRENT VALUE
- ------------------------------------------------------ ---------------------------------------------------- --------------
*American Century Stable Asset Fund Collective Trust $ 20,834,695
*American Century Select Investors Fund Mutual fund 28,290,478
*American Century Ultra Investors Fund Mutual fund 25,428,442
*American Century International Equity Fund Mutual fund 7,701,135
*Ethan Allen Interiors Inc. Restricted Common Stock 14,795,821
*Ethan Allen Interiors Inc. Unrestricted Common Stock 12,518,501
*American Century Strategic Allocation Conservative Mutual fund
Fund 1,766,470
*American Century Strategic Allocation Moderate Fund Mutual fund 9,447,321
*American Century Strategic Allocation Aggressive Mutual fund
Fund 4,077,821
*American Century Vista Investors Fund Mutual fund 6,607,525
*American Century Value Fund Mutual fund 3,783,931
Lord Abbott Fund Developing Growth Fund Mutual fund 400,412
Charles Schwab Personal Choice(R)Retirement Fund Mutual fund 1,462,039
* Participant loans Loans made to Plan participants at prime plus 1% (9.5%-10.5%) 5,020,839
------------
Total investments $142,135,430
============
* Denotes a party-in-interest to the Plan.
See accompanying independent auditors' report.
11
SIGNATURES
The Plan, pursuant to the requirements of the Securities Exchange Act of
1934, Ethan Allen Interiors, Inc., as administrator of the Retirement Program of
Ethan Allen Inc., has duly caused this annual report to be signed on its behalf
by the undersigned thereunto duly authorized.
THE ETHAN ALLEN RETIREMENT SAVINGS PLAN
By: Ethan Allen Interiors Inc.
Date: June 29, 2001 By: /s/ Michele Bateson
-------------------------------
Name: Michele Bateson
Title: Corporate Controller