THE ETHAN ALLEN RETIREMENT SAVINGS PLAN
Financial Statements and Schedules
December 31, 1998 and 1997
(With Independent Auditors' Report Thereon)
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, 1998
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 Schedules
December 31, 1998 and 1997
(With Independent Auditors' Report Thereon)
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Table of Contents
Independent Auditors' Report
Statements of Net Assets Available for Plan Benefits,
With Fund Information, December 31, 1998 and 1997
Statements of Changes in Net Assets Available for Plan Benefits, With
Fund Information, Years Ended December 31, 1998 and 1997
Notes to Financial Statements
Schedules (1):
Line 27a - Schedule of Assets Held for Investment Purposes Schedule 1
Line 27d - Schedule of Reportable (5%) Transactions Schedule 2
(1) All other schedules have been omitted since they are not applicable.
Independent Auditors' Report
Plan Administrative Committee and Participants
The Ethan Allen Retirement Savings Plan:
We have audited the accompanying statements of net assets available for plan
benefits, with fund information, of The Ethan Allen Retirement Savings Plan (the
"Plan") as of December 31, 1998 and 1997, and the related statements of changes
in net assets available for plan benefits, with fund information, for the years
then ended. 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 generally accepted auditing
standards. 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, 1998 and 1997 and the changes in net assets available for plan benefits for
the years then ended in conformity with generally accepted accounting
principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of (1) assets
held for investment purposes as of December 31, 1998 and (2) reportable (5%)
transactions for the year ended December 31, 1998, are presented for purposes of
additional analysis and are not a required part of the basic financial
statements but are 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. These supplemental schedules are the
responsibility of the Plan's management. The Fund Information in the statements
of net assets available for plan benefits and the statements of changes in net
assets available for plan benefits is presented for purposes of additional
analysis rather than to present the net assets available for plan benefits and
changes in net assets available for plan benefits of each fund. The supplemental
schedules and Fund Information have been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion, are
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
/S/ KPMG LLP
June 14, 1999
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Statement of Net Assets Available for Plan Benefits,
With Fund Information, Continued
December 31, 1998
American
Twentieth Century
Twentieth Twentieth Century Strategic
Benham Century Select Century Ultra International Restricted Unrestricted Allocation
Preservation Investors Investors Equity Ethan Allen Ethan Allen Conservative
Fund Fund Fund Fund Stock Fund Stock Fund Fund
---------- ---------- ---------- ---------- ---------- ---------- ----------
Assets:
Investments, at fair value $ -- 24,649,934 19,740,597 4,870,262 14,147,493 9,746,479 1,490,868
Investments, at contract value 19,592,689 -- -- -- -- -- --
Participant loans -- -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total investments 19,592,689 24,649,934 19,740,597 4,870,262 14,147,493 9,746,479 1,490,868
Employer contributions receivable 451,512 550,492 534,393 153,676 -- 246,669 59,384
Employee contributions receivable 23,265 29,482 29,774 9,458 -- 15,634 2,869
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total assets 20,067,466 25,229,908 20,304,764 5,033,396 14,147,493 10,008,782 1,553,121
Liabilities:
Refunds payable for excess
contributions 15,757 3,552 3,861 -- -- -- 628
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net assets available for
plan benefits $20,051,709 25,226,356 20,300,903 5,033,396 14,147,493 10,008,782 1,552,493
========== ========== ========== ========== ========== ========== ==========
-2-
THE ETHAN ALLEN (Continued)
RETIREMENT SAVINGS PLAN
Statement of Net Assets Available for Plan Benefits,
With Fund Information
December 31, 1998
American American
Century Century Twentieth
Strategic Strategic Charles Schwab Century
Allocation Allocation Personal Vista American
Moderate Aggressive Choice(R) Investors Century Loan
Fund Fund Retirement Fund Fund Value Fund Fund Total
---------- ---------- ---------- ---------- ---------- ---------- ----------
Assets:
Investments, at fair value $ 7,720,362 2,798,257 619,438 2,010,211 3,220,052 -- 91,013,953
Investments, at contract value -- -- -- -- -- -- 19,592,689
Participant loans -- -- -- -- -- 3,054,477 3,054,477
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total investments 7,720,362 2,798,257 619,438 2,010,211 3,220,052 3,054,477 113,661,119
Employer contributions receivable 232,829 151,472 -- 122,857 112,264 -- 2,615,548
Employee contributions receivable 11,588 8,109 -- 7,584 7,171 -- 144,934
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total assets 7,964,779 2,957,838 619,438 2,140,652 3,339,487 3,054,477 116,421,601
Liabilities:
Refunds payable for excess
contributions 1,480 2,012 -- -- 375 -- 27,665
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net assets available for
plan benefits $ 7,963,299 2,955,826 619,438 2,140,652 3,339,112 3,054,477 116,393,936
========== ========== ========== ========== ========== ========== ==========
See accompanying notes to financial statements.
-3-
THE ETHAN ALLEN
RETIREMENT SAVING PLAN
Statement of Net Assets Available for Plan Benefits,
With Fund Information, Continued
December 31, 1997
American
Twentieth Century
Twentieth Twentieth Century Strategic
Benham Century Select Century Ultra International Restricted Unrestricted Allocation
Preservation Investors Investors Equity Ethan Allen Ethan Allen Conservative
Fund Fund Fund Fund Stock Fund Stock Fund Fund
---------- ---------- ---------- ---------- ---------- ---------- ---------
Assets:
Investments, at fair value $ -- 17,381,534 13,863,693 4,062,359 14,348,181 6,888,680 1,165,492
Investments, at contract value 19,398,451 -- -- -- -- -- --
Participant loans -- -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ---------
Total investments 19,398,451 17,381,534 13,863,693 4,062,359 14,348,181 6,888,680 1,165,492
Employer contributions receivable 344,180 368,054 339,126 103,834 -- 100,920 40,300
Employee contributions receivable 32,672 37,302 37,611 11,892 -- 12,570 4,280
---------- ---------- ---------- ---------- ---------- ---------- ---------
Total assets 19,775,303 17,786,890 14,240,430 4,178,085 14,348,181 7,002,170 1,210,072
Liabilities:
Refunds payable for excess
contributions 24,456 3,520 4,462 -- -- 3 1,941
---------- ---------- ---------- ---------- ---------- ---------- ---------
Net assets available for
plan benefits $ 19,750,847 17,783,370 14,235,968 4,178,085 14,348,181 7,002,167 1,208,131
========== ========== ========== ========== ========== ========== =========
-4-
THE ETHAN ALLEN (Continued)
RETIREMENT SAVING PLAN
Statement of Net Assets Available for Plan Benefits, With Fund Information
December 31, 1997
American American
Century Century Twentieth
Strategic Strategic Charles Schwab Century
Allocation Allocation Personal Vista American
Moderate Aggressive Choice(R) Investors Century Loan
Fund Fund Retirement Fund Fund Value Fund Fund Total
---------- ---------- ---------- --------- ---------- --------- ---------
Assets:
Investments, at fair value $ 6,884,378 2,217,917 409,313 2,485,602 2,886,880 -- 72,594,029
Investments, at contract value -- -- -- -- -- -- 19,398,451
Participant loans -- -- -- -- -- 2,622,164 2,622,164
---------- ---------- ---------- --------- ---------- --------- ---------
Total investments 6,884,378 2,217,917 409,313 2,485,602 2,886,880 2,622,164 94,614,644
Employer contributions receivable 176,424 95,829 -- 93,053 72,132 -- 1,733,852
Employee contributions receivable 18,211 10,846 -- 10,617 8,984 -- 184,985
---------- ---------- ---------- --------- ---------- --------- ---------
Total assets 7,079,013 2,324,592 409,313 2,589,272 2,967,996 2,622,164 96,533,481
Liabilities:
Refunds payable for excess
contributions 2,751 1,834 -- 20 2,564 -- 41,551
---------- ---------- ---------- --------- ---------- --------- ---------
Net assets available for
plan benefits $ 7,076,262 2,322,758 409,313 2,589,252 2,965,432 2,622,164 96,491,930
========== ========== ========== ========= ========== ========= =========
See accompanying notes to financial statements.
-5-
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Statement of Changes in Net Assets Available for Plan Benefits,
With Fund Information, Continued
Year ended December 31, 1998
American
Twentieth Twentieth Twentieth Century
Century Century Century Strategic
Benham Select Ultra International Restricted Unrestricted Allocation
Preservation Investors Investors Equity Ethan Allen Ethan Allen Conservative
Fund Fund Fund Fund Stock Fund Stock Fund Fund
---------- ---------- ---------- --------- ---------- --------- -----------
Additions to net assets:
Net appreciation/(depreciation)
in fair value of investments $ -- 2,185,684 3,246,079 679,555 977,305 260,912 50,786
Interest income 1,097,318 -- -- -- -- -- --
Dividend income -- 4,252,178 1,672,738 81,022 50,793 32,008 87,111
---------- ---------- ---------- --------- ---------- --------- ---------
Net investment income (loss) 1,097,318 6,437,862 4,918,817 760,577 1,028,098 292,920 137,897
---------- ---------- ---------- --------- ---------- --------- ---------
Contributions:
Employer contributions 452,785 551,092 534,599 154,017 -- 246,745 59,470
Employee contributions 1,377,024 1,724,185 1,930,273 593,467 -- 1,024,391 177,713
---------- ---------- ---------- --------- ---------- --------- ---------
1,829,809 2,275,277 2,464,872 747,484 -- 1,271,136 237,183
---------- ---------- ---------- --------- ---------- --------- ---------
Other receipts:
Transfers from other plans 3,633 18,311 17,529 24 73,826 (9,144) 2,280
---------- ---------- ---------- --------- ---------- --------- ---------
Total additions 2,930,760 8,731,450 7,401,218 1,508,085 1,101,924 1,554,912 377,360
---------- ---------- ---------- --------- ---------- --------- ---------
Deductions from net assets:
Distributions to participants (2,596,865) (1,342,255) (847,543) (311,440) (1,302,612) (263,186) (33,211)
Administrative expenses (9,248) (9,599) (7,597) (2,055) -- (1,861) (1,327)
---------- ---------- ---------- --------- ---------- --------- ---------
Total deductions (2,606,113) (1,351,854) (855,140) (313,495) (1,302,612) (265,047) (34,538)
---------- ---------- ---------- --------- ---------- --------- ---------
Net transfers between funds (23,785) 63,390 (481,143) (339,279) -- 1,716,750 1,540
---------- ---------- ---------- --------- ---------- --------- ---------
Net increase (decrease) 300,862 7,442,986 6,064,935 855,311 (200,688) 3,006,615 344,362
Net assets available for plan benefits:
Beginning of year 19,750,847 17,783,370 14,235,968 4,178,085 14,348,181 7,002,167 1,208,131
---------- ---------- ---------- --------- ---------- --------- ---------
End of year $ 20,051,709 25,226,356 20,300,903 5,033,396 14,147,493 10,008,782 1,552,493
========== ========== ========== ========= ========== ========== =========
-6-
THE ETHAN ALLEN (Continued)
RETIREMENT SAVINGS PLAN
Statement of Changes in Net Assets Available for Plan Benefits,
With Fund Information
Year ended December 31, 1998
American
American Century
Century Strategic Charles Schwab
Strategic Allocation Personal Twentieth American
Allocation Aggressive Choice(R) Century Vista Century Value Loan
Moderate Fund Fund Retirement Fund Investors Fund Fund Fund Total
------------- --------- --------------- -------------- ------------- --------- ----------
Additions to net assets:
Net appreciation/(depreciation)
in fair value of investments $ 478,352 222,123 (8,740) (357,665) (402,521) -- 7,331,870
Interest income -- -- -- -- -- 225,267 1,322,585
Dividend income 408,127 98,460 -- 308 546,437 -- 7,229,182
----------- --------- ------- --------- --------- --------- -----------
Net investment income (loss) 886,479 320,583 (8,740) (357,357) 143,916 225,267 15,883,637
----------- --------- ------- --------- --------- --------- -----------
Contributions:
Employer contributions 233,113 152,200 -- 123,270 112,592 -- 2,619,883
Employee contributions 721,843 525,398 -- 438,690 542,661 -- 9,055,645
----------- --------- ------- --------- --------- --------- -----------
954,956 677,598 -- 561,960 655,253 -- 11,675,528
----------- --------- ------- --------- --------- --------- -----------
Other receipts:
Transfers from other plans 29,214 -- -- (2) 40 21,047 156,758
----------- --------- ------- --------- --------- --------- -----------
Total additions 1,870,649 998,181 (8,740) 204,601 799,209 246,314 27,715,923
----------- --------- ------- --------- --------- --------- -----------
Deductions from net assets:
Distributions to participants (443,594) (185,170) -- (103,335) (162,188) (181,679) (7,773,078)
Administrative expenses (4,482) (2,254) -- (1,012) (1,404) -- (40,839)
----------- --------- ------- --------- --------- --------- -----------
Total deductions (448,076) (187,424) -- (104,347) (163,592) (181,679) (7,813,917)
----------- --------- ------- --------- --------- --------- -----------
Net transfers between funds (535,536) (177,689) 218,865 (548,854) (261,937) 367,678 --
----------- --------- ------- --------- --------- --------- -----------
Net increase (decrease) 887,037 633,068 210,125 (448,600) 373,680 432,313 19,902,006
Net assets available for plan benefits:
Beginning of year 7,076,262 2,322,758 409,313 2,589,252 2,965,432 2,622,164 96,491,930
----------- --------- ------- --------- --------- --------- -----------
End of year $ 7,963,299 2,955,826 619,438 2,140,652 3,339,112 3,054,477 116,393,936
----------- --------- ------- --------- --------- --------- -----------
See accompanying notes to financial statements.
-7-
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Statement of Changes in Net Assets Available for Plan Benefits,
With Fund Information, Continued
Year ended December 31, 1997
American
Twentieth Twentieth Twentieth Century
Century Century Century Strategic
Benham Select Ultra International Restricted Unrestricted Allocation
Preservation Investors Investors Equity Ethan Allen Ethan Allen Conservative
Fund Fund Fund Fund Stock Fund Stock Fund Fund
---------- ---------- ---------- --------- ---------- ------------ ------------
Additions to net assets:
Net appreciation/(depreciation)
in fair value of investments $ -- 1,288,843 (407,452) 81,308 7,454,563 3,023,514 26,743
Interest income 1,088,509 -- -- -- -- -- --
Dividend income -- 2,763,075 2,836,100 551,958 38,687 15,069 108,970
---------- ---------- ---------- --------- --------- --------- ---------
Net investment income (loss) 1,088,509 4,051,918 2,428,648 633,266 7,493,250 3,038,583 135,713
---------- ---------- ---------- --------- --------- --------- ---------
Contributions:
Employer contributions 367,722 369,794 340,379 104,227 -- 101,313 41,741
Employee contributions 1,171,197 1,319,309 1,417,994 442,510 -- 382,044 129,973
---------- ---------- ---------- --------- --------- --------- ---------
1,538,919 1,689,103 1,758,373 546,737 -- 483,357 171,714
---------- ---------- ---------- --------- --------- --------- ---------
Other receipts:
Transfers from other plans 598,592 -- -- -- -- -- --
---------- ---------- ---------- --------- --------- --------- ---------
Total additions 3,226,020 5,741,021 4,187,021 1,180,003 7,493,250 3,521,940 307,427
---------- ---------- ---------- --------- --------- --------- ---------
Deductions from net assets:
Distributions to participants (1,708,658) (777,328) (653,229) (126,341) (817,120) (458,337) (165,354)
Administrative expenses (41,846) (6,930) (3,562) (513) -- (531) (1,810)
---------- ---------- ---------- --------- --------- --------- ---------
Total deductions (1,750,504) (784,258) (656,791) (126,854) (817,120) (458,868) (167,164)
---------- ---------- ---------- --------- --------- --------- ---------
Net transfers between funds (2,319,957) 349,283 (71,996) 19,134 -- 1,599,854 24,949
---------- ---------- ---------- --------- --------- --------- ---------
Net increase (decrease) (844,441) 5,306,046 3,458,234 1,072,283 6,676,130 4,662,926 165,212
Net assets available for plan benefits:
Beginning of year 20,595,288 12,477,324 10,777,734 3,105,802 7,672,051 2,339,241 1,042,919
---------- ---------- ---------- --------- --------- --------- ---------
End of year $ 19,750,847 17,783,370 14,235,968 4,178,085 14,348,181 7,002,167 1,208,131
========== ========== ========== ========= ========= ========= =========
-8-
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Statement of Changes in Net Assets Available for Plan Benefits,
With Fund Information
Year ended December 31, 1997
American
American Century
Century Strategic Charles Schwab
Strategic Allocation Personal Twentieth American
Allocation Aggressive Choice(R) Century Vista Century Value Loan
Moderate Fund Fund Retirement Fund Investors Fund Fund Fund Total
------------- ---------- --------------- -------------- ------------- ------- ----------
Additions to net assets:
Net appreciation/(depreciation)
in fair value of investments $ 529,454 189,958 20,176 (352,091) 103,481 -- 11,958,497
Interest income -- -- -- -- -- 192,378 1,280,887
Dividend income 376,431 100,129 -- 143,114 456,991 -- 7,390,524
--------- --------- ------- --------- --------- --------- ----------
Net investment income (loss) 905,885 290,087 20,176 (208,977) 560,472 192,378 20,629,908
--------- --------- ------- --------- --------- --------- ----------
Contributions:
Employer contributions 177,517 95,868 -- 93,367 72,184 -- 1,764,112
Employee contributions 646,773 384,021 -- 389,845 345,652 -- 6,629,318
--------- --------- ------- --------- --------- --------- ----------
824,290 479,889 -- 483,212 417,836 -- 8,393,430
--------- --------- ------- --------- --------- --------- ----------
Other receipts:
Transfers from other plans -- -- -- -- -- -- 598,592
--------- --------- ------- --------- --------- --------- ----------
Total additions 1,730,175 769,976 20,176 274,235 978,308 192,378 29,621,930
--------- --------- ------- --------- --------- --------- ----------
Deductions from net assets:
Distributions to participants (410,691) (89,897) -- (131,327) (177,734) (205,105) (5,721,121)
Administrative expenses (4,547) (3,027) -- (369) (1,276) -- (64,411)
--------- --------- ------- --------- --------- --------- ----------
Total deductions (415,238) (92,924) -- (131,696) (179,010) (205,105) (5,785,532)
--------- --------- ------- --------- --------- --------- ----------
Net transfers between funds (376,284) (116,321) 194,724 (130,297) 293,164 533,747 --
--------- --------- ------- --------- --------- --------- ----------
Net increase (decrease) 938,653 560,731 214,900 12,242 1,092,462 521,020 23,836,398
Net assets available for plan benefits:
Beginning of year 6,137,609 1,762,027 194,413 2,577,010 1,872,970 2,101,144 72,655,532
--------- --------- ------- --------- --------- --------- ----------
End of year $ 7,076,262 2,322,758 409,313 2,589,252 2,965,432 2,622,164 96,491,930
=========== ========= ======= ========= ========= ========= ==========
See accompanying notes to financial statements.
-9-
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 1998 and 1997
(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 substantially all employees of the Company who
have completed 1,000 hours of service during their first year of
employment or subsequent plan year. 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 15% of their compensation (as
defined in the Plan) up to a limit of $10,000 in 1998 (tax-deferred
contribution) to the 401(k) portion of the plan. The Company may, at its
discretion, make a matching contribution on behalf of each participant,
provided the matching contribution does not exceed the lesser of (a) 50%
of the participant's contribution or (b) $1,000 per participant per plan
year ($600 in 1997). Participants may, in addition, contribute amounts in
excess of their tax deferred contribution on an after-tax basis in the
amount of 1% to 15% of their compensation. The participant's tax-deferred
contribution and after-tax contribution, in the aggregate, may not exceed
15% 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 1998 and 1997.
-10- (Continued)
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 1998 and 1997
Participant contributions, employer 401(k) contributions and profit
sharing contributions are 100% vested immediately.
During 1998 and 1997, certain participants contributed $27,665 and
$41,551, respectively, in excess of the allowable qualified contribution.
The excess contribution amounts are reflected as a Plan liability at
December 31, 1998 and 1997. The excess contributions were refunded in the
subsequent year within the penalty free deadline.
Investment of Funds
During 1998 and 1997, the amounts contributed to the Plan were invested
in one of the following commingled funds at the direction of the
participants. A brief description of the funds is as follows:
Benham Preservation Fund - The Benham Preservation Fund, invests
primarily in fully benefit-responsive guaranteed investment
contracts issued by major financial institutions, including
banks and life insurance companies. The fund is managed by SEI
Trust Company, Benham Management Corporation and Dwight Asset
Management Company.
Twentieth 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.
Twentieth Century Ultra Investors Fund - The Ultra Investors
Fund invests in medium to large-sized companies that show
accelerating growth and earnings.
Twentieth 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, 1998 and 1997, the Plan held 517,572 and 558,113
respectively, restricted shares of common stock, and 356,397 and
266,903, respectively, 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 469,889 of
these shares are restricted from being sold by the Plan, other
than to the Company, in accordance with applicable securities
laws. Additionally, the Ethan Allen Restricted Stock Fund
restricts participants from transferring their balances in this
fund to other funds of the Plan. Withdrawing participants have
the option of receiving a distribution from the Ethan Allen
Restricted Stock Fund in shares of Ethan Allen Interiors Inc.
stock or cash. No such restrictions exist on investments in the
Ethan Allen Unrestricted Stock Fund.
-11- (Continued)
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 1998 and 1997
Ethan Allen Interiors Inc. common stock is publicly traded and
had a readily ascertainable market value of $27.33 and $25.71
per share at December 31, 1998 and 1997, respectively. At June
14, 1999, the closing price of Ethan Allen Interiors Inc. common
stock was $30.25 per share.
All share and per share amounts have been adjusted to reflect
a 3 for 2 stock split effected on May 21, 1999.
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.
Twentieth 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.
-12- (Continued)
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 1998 and 1997
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.
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 1998 and
1997 ranged from 7.75% to 8.50% and 8.25% 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 1998 and 1997, 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 normal
retirement age (65), 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 59-1/2 or because of serious financial hardship,
subject to limitations.
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 65; 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 must commence distributions from the Plan within a year of
attaining the age of 71.
-13- (Continued)
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 1998 and 1997
(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.
Contract value equals the principal of investments in the Benham
Preservation Fund plus accrued interest at the contract rate, less
withdrawals, as reported by SEI Trust Company ("SEI"), the manager of the
Benham Preservation Fund. SEI has established procedures to value the
investment contracts of the Benham Preservation Fund in good faith. These
procedures include a review of information provided by investment
managers relating to each investment's contract value relative to its
issuing entity's financial strength, current financial ratings, current
interest rates, and a comparative review of similar investment vehicles.
SEI also provides audited financial statements of the Benham Preservation
Fund that coincide with the Plan's year-end. In these financial
statements, SEI has determined that contract value approximates fair
value. The investment contracts of the Benham Preservation Fund bear
interest rates between 5.60% and 8.54% as of December 31, 1998. In
addition to investment contracts, the Benham Preservation Fund has
approximated 37% of its total net assets invested in the SEI Stable Asset
Fund. The average yield for the Benham Preservation Fund was approximated
5.5% in 1998.
Loans to participants are valued at face value which approximates fair
value.
(3) Certain Significant Risks and Uncertainties
The preparation of financial statements requires the use of plan
administrator estimates. Actual results may differ from those estimates.
(4) 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 net current value of their vested account.
-14- (Continued)
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 1998 and 1997
(5) Investments
The following table presents the Plan's investments at December 31, 1998
and 1997. An asterisk denotes investments which represent 5% or more of
the Plan's net assets at the end of the plan year.
1998 1997
--------------- --------------
Investments at fair value as determined by quoted market price:
Mutual funds:
Twentieth Century Select Investors Fund $ 24,649,934* $ 17,381,534*
Twentieth Century Ultra Investors Fund 19,740,597* 13,863,693*
Twentieth Century International Equity Fund 4,870,262 4,062,359
American Century Strategic Allocation Conservative Fund
1,490,868 1,165,492
American Century Strategic Allocation Moderate Fund 7,720,362* 6,884,378*
American Century Strategic Allocation Aggressive Fund 2,798,257 2,217,917
Twentieth Century Vista Investors Fund 2,010,211 2,485,602
Twentieth Century Value Fund 3,220,052 2,886,880
--------------- ---------------
66,500,543 50,947,855
--------------- ---------------
Common Stock:
Ethan Allen Interiors Inc. - Restricted 14,147,493* 14,348,181*
Ethan Allen Interiors Inc. - Unrestricted 9,746,479* 6,888,680*
--------------- ---------------
23,893,972 21,236,861
--------------- ---------------
Other:
Charles Schwab Personal Choice(R)Retirement Fund 619,438 409,313
--------------- ---------------
91,013,953 72,594,029
--------------- ---------------
Investments at contract value, as determined by issuer:
Investment contracts:
Benham Preservation Fund 19,592,689* 19,398,451*
--------------- ---------------
Investments at face value, which approximates fair value:
Participant loans 3,054,477 2,622,164
--------------- ---------------
Total investments $ 113,661,119 $ 94,614,644
=============== ===============
Net investment income (loss) reported on the Statements of Changes in
Net Assets Available for Plan Benefits comprises interest income for
the Benham Preservation Fund and appreciation or depreciation in the
current redemption value of the investments in the other funds plus
any dividends paid.
-15- (Continued)
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 1998 and 1997
(6) 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 believes that the Plan continues to be administered
in accordance with the applicable sections of the Internal Revenue Code.
(7) 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 $42,590 and $6,996 at December 31, 1998 and 1997,
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 benefits
reported in these financial statements and on the Form 5500:
December 31, 1998 December 31,1997
----------------- ----------------
Net assets available for benefits per the
financial statements $ 116,393,936 96,491,930
Benefits payable to participants (42,590) (6,996)
----------------- ----------------
Net assets available for benefits per the
Form 5500 $ 116,351,346 96,484,934
================= ================
-16- (Continued)
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 1998 and 1997
The following is a reconciliation of benefits paid to participants reported in
these financial statements and on the Form 5500:
Year ended Year ended
December 31, 1998 December 31, 1997
----------------- -----------------
Benefits paid to participants per the
financial statements $ 7,773,078 5,721,121
Add: Benefits payable to participants at
year-end 42,590 6,996
Less: Benefits payable to participants at
previous year-end (6,996) (30,774)
----------------- -----------------
Benefits paid to participants per the
Form 5500 $ 7,808,672 5,697,343
================= =================
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.
-17-
Schedule 1
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Line 27a - Schedule of Assets Held for Investment Purposes
December 31, 1998
Identity of issue, borrower, Description of investment including maturity date,
lessor or similar party rate of interest, collateral, par, of maturity value Cost Current value
----------------------- ---------------------------------------------------- ---- -------------
Benham Preservation Fund Fixed income fund 19,592,689 19,592,689
*Twentieth Century Select Investors Fund Mutual fund 21,569,128 24,649,934
*Twentieth Century Ultra Investors Fund Mutual fund 16,201,954 19,740,597
*Twentieth Century International Equity Fund Mutual fund 4,211,278 4,870,262
*Ethan Allen Interiors, Inc. Restricted Common Stock 2,656,716 14,147,493
*Ethan Allen Interiors, Inc. Unrestricted Common Stock 6,604,709 9,746,479
*American Century Strategic Allocation Conservative Fund Mutual fund 1,414,858 1,490,868
*American Century Strategic Allocation Moderate Fund Mutual fund 6,640,350 7,720,362
*American Century Strategic Allocation Aggressive Fund Mutual fund 2,396,246 2,798,257
*Twentieth Century Vista Investors Fund Mutual fund 2,570,593 2,010,211
*American Century Value Fund Mutual fund 3,552,471 3,220,052
Charles Schwab Personal Choice(R)Retirement Fund assets Common stocks 619,438 619,438
* Participant loans Loans made to Plan participants
at prime plus 1% 3,054,477 3,054,477
------------- ------------
Total investments $ 91,084,907 $113,661,119
============= ============
* Denotes a party-in-interest to the Plan.
See accompanying independent auditors' report.
Schedule 2
THE ETHAN ALLEN
RETIREMENT SAVINGS PLAN
Line 27d - Schedule of Reportable (5%) Transactions
Year Ended December 31, 1998
Current
Expenses value of
Description of asset incurred asset on
(including interest rate and Purchase Selling Lease with Cost of transaction Net gain
Identity of party involved maturity in case of a loan) price price rental transaction asset date or (loss)
- -------------------------- --------------------------- ----- ----- ------ ----------- ----- ----------- ---------
Benham Preservation Fund Fixed Income Fund
Purchases 7,123,077 -- -- -- 7,123,077 --
Sales 6,928,820 -- -- 6,928,820 6,928,820 --
Ethan Allen Interiors Inc. Unrestricted common stock
Purchases 7,708,045 -- -- -- 7,708,045 --
Sales 5,106,742 -- -- 4,398,337 5,106,742 708,404
See accompanying independent auditors' report.
SIGNATURES
The Plan, pursuant to the requirements of the Securities and 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 hereunto duly authorized.
THE ETHAN ALLEN RETIREMENT SAVINGS PLAN
By: Ethan Allen Interiors Inc.
Date: June 30, 1999 By: /s/ Gerardo Burdo
-----------------------
Name: Gerado Burdo
Title: Vice President and
Corporate Controller