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, 2001
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 Supplemental Schedule
December 31, 2001 and 2000
(With Independent Auditors' Report Thereon)
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
TABLE OF CONTENTS
Page
----
Independent Auditors' Report 1
Statements of Net Assets Available for Plan Benefits, December 31, 2001 and 2000 2
Statement of Changes in Net Assets Available for Plan Benefits, Year ended December 31, 2001 3
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, 2001 and 2000, and the related statement of changes in net assets available
for plan benefits for the year ended December 31, 2001. 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, 2001 and 2000 and the changes in net assets available for plan benefits of
the plan for the year ended December 31, 2001 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, 2001 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 20, 2002
Stamford, Connecticut
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Statements of Net Assets Available for Plan Benefits
December 31, 2001 and 2000
2001 2000
------------ ------------
Assets:
Investments, at fair value $136,333,117 $137,114,591
Participant loans 5,207,058 5,020,839
------------ ------------
Total investments 141,540,175 142,135,430
Employer contributions receivable 4,362,130 4,333,180
Employee contributions receivable 449,572 208,317
------------ ------------
Total assets 146,351,877 146,676,927
Liabilities:
Refunds payable for excess contributions 49,878 22,805
------------ ------------
Net assets available for plan benefits $146,301,999 $146,654,122
============ ============
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, 2001
Additions to net assets:
Net depreciation in fair value of investments $ (8,660,214)
Interest income 453,456
Dividend income 1,990,298
--------------
Net investment loss (6,216,460)
--------------
Contributions:
Employer contributions 4,514,910
Employee contributions 13,686,421
--------------
Total contributions 18,201,331
--------------
Transfer in of Carriage House 401(k) 313,817
--------------
Total additions 12,298,688
--------------
Deductions from net assets:
Distributions to participants 12,598,172)
Administrative expenses (52,639)
--------------
Total deductions (12,650,811)
--------------
Net decrease (352,123)
Net assets available for plan benefits:
Beginning of year 146,654,122
--------------
End of year $ 146,301,999
==============
See accompanying notes to financial statements.
3
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
(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.
The Plan is offered to all employees who have completed at least three
consecutive months of service with the Company. Effective January 1, 2001,
the Plan was amended and restated. The amendments included extending
eligibility to the employees of the newly acquired Dublin facility and the
merger of the Carriage House 401(k) plan relating to the purchase of
retail stores in Wisconsin. The Plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974 (ERISA).
CONTRIBUTIONS AND VESTING
Participants may contribute from 1% to 20% of their compensation (as
defined in the Plan) up to a maximum tax deferred contribution of $10,500
in 2001 and 2000 to the 401(k) portion of the Plan. Effective January 1,
2002, participants may contribute from 1% to 100% of their compensation up
to the maximum allowable contribution. 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 Company match
follows the participants' investment choices as of the date paid. The
maximum Company match is $1,000 annually. 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) $35,000 (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 2001 and 2000.
4 (Continued)
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
Participants who are employed by the Company on the last day of the Plan
year are entitled to receive the employer match contributions. Participant
contributions, employer 401(k) contributions and profit sharing
contributions are 100% vested immediately.
During 2001 and 2000, certain participants contributed $49,878 and
$22,805, respectively, in excess of the allowable qualified contribution.
The excess contribution amounts are reflected as a Plan liability at
December 31, 2001 and 2000. The excess contributions were refunded in the
subsequent year within the penalty free deadline.
INVESTMENT OF FUNDS
During 2001 and 2000, 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.
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,
2001 and 2000, the Plan held 397,435 and 440,298, respectively,
restricted shares of common stock of the Company, and 329,328 and
373,540, 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 360,871 of these shares are restricted from
being sold by the Plan, other than to the Company, in accordance
with applicable securities laws. During 2001, the Company purchased
approximately 40,834 of restricted shares at a market value of
approximately $1,427,819. 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 $40.68 and $33.50 per share at
December 31, 2001 and 2000, respectively.
5 (Continued)
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
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. This fund was replaced
during the year with the American Century Brokerage Fund.
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.
AMERICAN CENTURY BROKERAGE FUND -- The fund allows investors to
purchase mutual funds, stocks, and bonds offered through American
Century. This fund replaced the Schwab Personal Choice Brokerage
Service offered in 2000.
LOANS
The Loan Fund is a noncontributory fund used to account for and administer
loans to participants. Each participant may apply to JP Morgan / American
Century, the recordkeeper, 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.
Loans are processed by the recordkeeper upon approval of the application.
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 2001 and 2000 ranged from 6.0% to 9.5% and 8.5% to 9.5%,
respectively.
6 (Continued)
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
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 2001 and 2000, 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 and participant
rollover contributions 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 70-1/2.
(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, which
approximates fair value. These contracts are fully benefit responsive and
are credited with actual earnings on the underlying investments and are
charged for plan withdrawals and administration expenses charged by the
issuer of the respective contracts. There are no reserves against the
contract value for credit risk of the contract issuer or otherwise. The
crediting interest rates ranged from 5.96% to 7.00% for 2001. 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, 2001 and 2000
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS" 133). SFAS 133 requires that an entity
recognize all derivatives as either assets or liabilities in the Statement
of Net Assets Available for Plan Benefits and measure those instruments at
fair value. The Plan adopted SFAS 133 in 2001 and the resulting adoption
did not have a material impact on the Plan 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,
2001 and 2000:
2001 2000
------------ -------------
Investments at fair value as determined by quoted market price:
Mutual funds:
American Century Select Investors Fund $ 23,499,182 $ 28,290,478
American Century Ultra Investors Fund 23,393,481 25,428,442
American Century International Equity Fund 6,140,421 7,701,135
American Century Strategic Allocation Moderate Fund 10,218,458 9,447,321
Common stock:
Ethan Allen Interiors Inc. - Restricted 16,546,306 14,795,821
Ethan Allen Interiors Inc. - Unrestricted 13,709,262 12,518,501
Collective trust:
American Century Stable Asset Fund 23,984,724 20,834,695
(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.
(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% 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 $44,638 for the
year ended December 31, 2001.
8 (Continued)
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 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 21, 2002 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 $279,531 and $189,371 at December 31, 2001 and 2000,
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.
The following is a reconciliation of net assets available for plan
benefits reported in these financial statements and on the Form 5500:
DECEMBER 31
----------------------------------
2001 2000
-------------- --------------
Net assets available for plan benefits per the financial statements $ 146,301,999 $ 146,654,122
Benefits payable to participants (279,531) (189,371)
-------------- --------------
Net assets available for plan benefits per the Form 5500 $ 146,022,468 $ 146,464,751
============== =============
9 (Continued)
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
The following is a reconciliation of benefits paid to participants
reported in these financial statements and on the Form 5500:
YEAR ENDED
DECEMBER 31,
2001
-------------
Benefits paid to participants per the financial statements $ 12,598,172
Add benefits payable to participants at year-end 279,531
Less benefits payable to participants at previous year-end (189,371)
-------------
Benefits paid to participants per the Form 5500 $ 12,688,332
=============
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
Effective as of January 1, 2002, the Plan increased its limits for
participant after-tax contributions from 20% to 100%. In addition,
effective April 1, 2002, the trading restrictions relating to the portion
of Company profit sharing contributions invested in Ethan Allen Restricted
stock were lifted.
On April 30, 2002, the Company announced it will close its Randolph, VT
manufacturing facility, employing approximately 154 employees. The Company
will also close the lumber operations at its Orleans, VT facility, which
will reduce the number of employees by 69 from the current employee base
of 501.
10
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Schedule of Assets Held for Investment Purposes at End of Year
December 31, 2001
IDENTITY OF ISSUE, BORROWER, DESCRIPTION OF INVESTMENT INCLUDING MATURITY DATE,
LESSOR, OR SIMILAR PARTY RATE OF INTEREST, COLLATERAL, PAR, OR MATURITY VALUE CURRENT VALUE
- -------------------------------------------------------- ---------------------------------------------------- -------------
*American Century Stable Asset Fund Collective Trust $ 23,984,724
*American Century Select Investors Fund Mutual fund 23,499,182
*American Century Ultra Investors Fund Mutual fund 23,393,481
*American Century International Equity Fund Mutual fund 6,140,421
*Ethan Allen Interiors Inc. Restricted Common Stock 16,546,306
*Ethan Allen Interiors Inc. Unrestricted Common Stock 13,709,262
*American Century Strategic Allocation Conservative Fund Mutual fund 2,313,372
*American Century Strategic Allocation Moderate Fund Mutual fund 10,218,458
*American Century Strategic Allocation Aggressive Fund Mutual fund 4,272,796
*American Century Vista Investors Fund Mutual fund 5,246,784
*American Century Value Fund Mutual fund 5,225,986
Lord Abbott Fund Developing Growth Fund Mutual fund 684,994
*American Century Brokerage Fund Mutual fund 1,097,351
*Participant loans Loans made to Plan participants at
prime plus 1% (6.0%-9.5%) 5,207,058
-------------
Total investments $ 141,540,175
=============
* 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 27, 2002 By: /s/ Edward D. Teplitz
--------------------------------
Name: Edward D. Teplitz
Title: Vice President, Finance