UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2008

OR

[   ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________
 
Commission File Number:  1-11692
 
Ethan Allen Interiors Inc.
(Exact name of registrant as specified in its charter)


Delaware
  
06-1275288
(State or other jurisdiction of incorporation or organization)
  
(I.R.S. Employer Identification No.)


Ethan Allen Drive, Danbury, Connecticut
  
06811
(Address of principal executive offices)
  
(Zip Code)

(203) 743-8000
(Registrant's telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
[X] Yes                 [   ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act

Large accelerated filer[X]
Accelerated filer [   ]
Non-accelerated filer[   ] (Do not check if a smaller reporting company)
Smaller reporting company [   ]


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
[   ] Yes                 [X] No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

At March 31, 2008, there were 28,685,859 shares of Class A Common Stock,
par value $.01, outstanding.


 
 
 
 

TABLE OF CONTENTS

Item
 
  
Page
 
Part I – Financial Information
 
  
   
1.
 
Financial Statements as of March 31, 2008 (unaudited) and June 30, 2007
and for the three and nine months ended March 31, 2008 and 2007 (unaudited)
 
  
     
 
Consolidated Balance Sheets
 
2
 
     
 
Consolidated Statements of Operations
 
3
 
     
 
Consolidated Statements of Cash Flows
 
4
 
     
 
Consolidated Statements of Shareholders’ Equity
 
5
 
     
 
Notes to Consolidated Financial Statements
 
6
 
     
2.
 
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
 
23
 
     
3.
 
Quantitative and Qualitative Disclosures About Market Risk
 
34
 
     
4
 
Controls and Procedures
 
34
 
     
 
Part – II Other Information
 
  
     
1.
 
Legal Proceedings
 
35
 
     
1A.
 
Risk Factors
 
35
 
     
2.
 
Unregistered Sales of Equity Securities and Use of Proceeds
 
35
 
     
3.
 
Defaults Upon Senior Securities
 
35
 
     
4.
 
Submission of Matters to a Vote of Security Holders
 
35
 
     
5.
 
Other Information
 
35
 
     
6.
 
Exhibits
 
35
 
     
 
Signatures
 
36
 


 
1
 
 

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share data)
 
   
March 31, 2008
    
June 30, 2007
  
   
(unaudited)
        
ASSETS
            
Current assets:
            
   Cash and cash equivalents
   $ 77,011     $ 147,879  
   Accounts receivable, less allowance for doubtful accounts of $2,537 at
      March 31, 2008 and $2,042 at June 30, 2007
     12,551       14,602  
   Inventories (note 4)
     186,357       181,884  
   Prepaid expenses and other current assets
     39,117       33,104  
   Deferred income taxes
     2,327       4,960  
Total current assets
     317,363       382,429  
                 
Property, plant and equipment, net
     343,160       322,185  
Goodwill and other intangible assets (notes 6 and 7)
     94,045       92,500  
Other assets (note 8)
     4,823       5,484  
Total assets
   $ 759,391     $ 802,598  
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
                
Current liabilities:
                
   Current maturities of long-term debt (note 8)
   $ 41     $ 40  
   Customer deposits
     46,363       52,072  
   Accounts payable
     22,934       26,650  
   Accrued compensation and benefits
     37,192       35,243  
   Accrued expenses and other current liabilities (note 5)
     31,649       33,434  
Total current liabilities
     138,179       147,439  
                 
Long-term debt (note 8)
     202,958       202,868  
Other long-term liabilities (note 3)
     20,515       12,003  
Deferred income taxes
     28,067       30,646  
Total liabilities
     389,719       392,956  
                 
Shareholders’ equity:
                
   Class A common stock, par value $.01, 150,000,000 shares authorized;
      48,251,680 shares issued at March 31, 2008 and 47,454,450 shares
      issued at June 30, 2007
     482       474  
   Class B common stock, par value $.01, 600,000 shares authorized; no
      shares issued and outstanding at March 31, 2008 and June 30, 2007
     -       -  
   Preferred stock, par value $.01, 1,055,000 shares authorized; no shares
      issued and outstanding at March 31, 2008 and June 30, 2007
     -       -  
   Additional paid-in capital
     354,375       330,268  
      354,857       330,742  
   Less: Treasury stock (at cost), 19,565,901 shares at March 31, 2008 and
      16,644,582 shares at June 30, 2007
     (588,783 )     (496,005 )
                 
   Retained earnings
     601,888       573,535  
   Accumulated other comprehensive income (notes 8 and 12)
     1,710       1,370  
Total shareholders’ equity
     369,672       409,642  
Total liabilities and shareholders’ equity
   $ 759,391     $ 802,598  

See accompanying notes to consolidated financial statements.

 
2
 
 


ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
(In thousands, except per share amounts)

   
Three Months Ended
March 31,
    
Nine Months Ended
March 31,
  
   
2008
    
2007
    
2008
    
2007
  
Net sales
   $ 235,901     $ 246,539     $ 744,138     $ 746,781  
Cost of sales
     110,714       118,023       346,041       358,186  
Gross profit
     125,187       128,516       398,097       388,595  
                                 
Operating expenses:
                                
Selling
     56,112       54,880       171,290       164,093  
General and administrative
     49,502       45,729       145,940       132,214  
Restructuring and impairment charge (credit),
                                
net (note 5)
     3,993       (180 )     3,993       13,442  
Total operating expenses
     109,607       100,429       321,223       309,749  
                                 
Operating income
     15,580       28,087       76,874       78,846  
Interest and other miscellaneous income, net
     1,375       2,339       6,478       7,146  
Interest and other related financing costs (note 8)
     2,914       2,927       8,793       8,780  
                                 
Income before income taxes
     14,041       27,499       74,559       77,212  
                                 
Income tax expense
     5,195       10,000       27,587       28,469  
                                 
 Net income
   $ 8,846     $ 17,499     $ 46,972     $ 48,743  
                                 
Per share data (note 11):
                                
Basic earnings per common share:
                                
Net income per basic share
   $ 0.31     $ 0.55     $ 1.59     $ 1.54  
Basic weighted average common shares
     28,909       31,656       29,461       31,736  
Diluted earnings per common share:
                                
Net income per diluted share
   $ 0.30     $ 0.54     $ 1.58     $ 1.50  
Diluted weighted average common shares
     29,049       32,352       29,685       32,495  


See accompanying notes to consolidated financial statements.

 
3
 
 


ETHAN ALLEN INTERIORS INC.
Consolidated Statements of Cash Flows (Unaudited)
(In thousands)


       
   
Nine Months Ended
March 31,
  
   
2008
    
2007
  
Operating activities:
            
  Net income
   $ 46,972     $ 48,743  
  Adjustments to reconcile net income to net cash provided by operating activities:
                
    Depreciation and amortization
     18,077       17,241  
    Compensation expense related to share-based awards
     913       637  
    Provision (benefit) for deferred income taxes
     54       2,781  
    Excess tax benefits from share-based payment arrangements
     (2,093 )     (4,954 )
    Restructuring and impairment charge, net
     2,579       9,439  
    (Gain) loss on disposal of property, plant and equipment
     (280 )     493  
    Other
     175       419  
    Change in assets and liabilities, net of the effects of acquired businesses:
                
        Accounts receivable
     1,644       2,759  
        Inventories
     (1,683 )     13,648  
        Prepaid and other current assets
     (4,443 )     (16,703 )
        Other assets
     395       372  
        Customer deposits
     (6,799 )     (1,899 )
        Accounts payable
     (280 )     (5,432 )
        Accrued expenses and other current liabilities
     3,445       2,467  
        Other  long-term liabilities
     8,584       (97 )
Net cash provided by operating activities
     67,260       69,914  
                 
Investing activities:
                
  Proceeds from the disposal of property, plant & equipment
     6,936       1,673  
  Capital expenditures
     (46,297 )     (47,459 )
  Acquisitions
     (6,762 )     (11,376 )
  Other
     25       86  
Net cash used in investing activities
     (46,098 )     (57,076 )
                 
Financing activities:
                
  Payments on long-term debt
     (30 )     (29 )
  Proceeds from issuance of common stock
     472       249  
  Excess tax benefits from share-based payment arrangements
     2,093       4,954  
  Payment of deferred financing costs
     -       (107 )
  Payment of cash dividends
     (19,164 )     (18,529 )
  Purchases and other retirements of company stock
     (75,577 )     (40,197 )
Net cash used in financing activities
     (92,206 )     (53,659 )
Effect of exchange rate changes on cash
     176       (34 )
Net decrease in cash & cash equivalents
     (70,868 )     (40,855 )
Cash & cash equivalents - beginning of period
     147,879       173,801  
Cash & cash equivalents - end of period
   $ 77,011     $ 132,946  

See accompanying notes to consolidated financial statements.

 
4
 
 


ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders’ Equity
Nine months Ended March 31, 2008
(Unaudited)
(In thousands, except share data)
   
 
Common Stock
    
Additional Paid-In Capital
    
 
Treasury Stock
    
Accumulated Other Comprehensive Income
    
 
Retained Earnings
    
 
 
Total
  
Balance at June 30, 2007
   $ 474     $ 330,268     $ (496,005 )   $ 1,370     $ 573,535     $ 409,642  
                                                 
Issuance of 797,230 shares of common stock  upon exercise of share-based awards
      8        21,101       -        -       -       21,109  
                                                 
Compensation expense associated
   with share-based awards (note 10)
      -        913       -        -       -       913  
                                                 
Tax benefit associated with exercise
   of share-based awards
      -        2,093       -        -       -       2,093  
                                                 
Purchase/retirement of 2,921,319
   shares of common stock
      -        -       (92,778 )      -       -       (92,778 )
                                                 
FIN 48 transition adjustment (note 3)
     -       -       -       -       683       683  
                                                 
Dividends declared on common stock
     -       -       -       -       (19,302 )     (19,302 )
                                                 
Other comprehensive income (notes 8 and 12):
                                                
   Currency translation adjustments
     -       -       -       304       -       304  
   Reclass of loss on cash-flow hedge,
      net-of-tax
      -        -       -        36       -       36  
Net income
     -       -       -       -       46,972       46,972  
   Total comprehensive income
     -        -       -        -       -       47,312  
                                                 
Balance at March 31, 2008
   $ 482     $ 354,375     $ (588,783 )   $ 1,710     $ 601,888     $ 369,672  

See accompanying notes to consolidated financial statements.

 
5
 
 
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)


(1)           Basis of Presentation
 
Ethan Allen Interiors Inc. ("Interiors") is a Delaware corporation incorporated on May 25, 1989. The consolidated financial statements include the accounts of Interiors, its wholly owned subsidiary Ethan Allen Global, Inc. ("Global"), and Global’s subsidiaries (collectively "We", "Us", "Our", "Ethan Allen", or the "Company").  All intercompany accounts and transactions have been eliminated in the consolidated financial statements.  All of Global’s capital stock is owned by Interiors, which has no assets or operating results other than those associated with its investment in Global.
 
(2)           Interim Financial Presentation
 
All intercompany accounts and transactions have been eliminated in the consolidated financial statements.  In our opinion, all adjustments, consisting only of normal recurring adjustments necessary for fair presentation, have been included in the consolidated financial statements. The results of operations for the three and nine months ended March 31, 2008 are not necessarily indicative of results that may be expected for the entire fiscal year. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended June 30, 2007.
 
Certain prior year amounts have been reclassified in order for them to conform to the current year’s presentation.  These changes were made for disclosure purposes only and did not have any impact on previously reported results of operations or shareholders’ equity.
 
(3)           Income Taxes - Adoption of FIN 48
 
Effective July 1, 2007, we adopted Financial Accounting Standards Board ("FASB") Interpretation No. ("FIN") 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109, Accounting for Income Taxes, which provides a comprehensive model for the recognition, measurement, presentation, and disclosure in a company’s financial statements of uncertain tax positions taken, or expected to be taken, on a tax return. Under FIN 48, if an income tax position exceeds a more likely than not (i.e. greater than 50%) probability of success upon tax audit, based solely on the technical merits of the position, the company is to recognize an income tax benefit in its financial statements. The tax benefits recognized are to be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. If it is not more likely than not that the benefit will be sustained on its technical merits, no benefit is to be recorded. Uncertain tax positions that relate only to timing of when an item is included on a tax return are considered to have met the recognition threshold for purposes of applying FIN 48.  Therefore, if it can be established that the only uncertainty is when an item is taken on a tax return, such positions have satisfied the recognition step for purposes of FIN 48 and uncertainty related to timing should be assessed as part of measurement.
 
FIN 48 requires that a liability associated with an unrecognized tax benefit be classified as a long-term liability except for the amount for which a cash payment is expected to be made within one year.  Further, companies are required to accrue interest and related penalties, if applicable, on all tax exposures consistent with the respective jurisdictional tax laws.
 
The adoption of FIN 48 resulted in a non-cash transition (cumulative effect of a change in accounting principle) adjustment of $0.7 million, which was recorded as an increase to beginning retained earnings. The transition adjustment is a result, primarily, of tax positions associated with state income tax exposures where the original
 

 
6
 
 
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)


tax benefit related to periods dating back to 1998.  Our continuing practice is to recognize interest and penalties related to income tax matters as a component of income tax expense.
 
As of July 1, 2007, upon adoption of FIN 48, we had unrecognized income tax benefits totaling $4.8 million and related accrued interest and penalties of $1.4 million (after related tax benefits), all of which was reclassified from current to long-term liabilities upon adoption. If recognized, essentially all of the unrecognized tax benefits and related interest and penalties would be recorded as a benefit to income tax expense.
 
Since adopting FIN 48, our unrecognized tax benefits have decreased by $1.0 million and related interest and penalties have increased by $0.4 million.  These changes resulted from a settlement reached with New York for tax years 1998 through 2003 that reduced the unrecognized tax benefits and related interest by $1.8 million.  The settlements were partially offset by unrecognized tax benefits of $0.8 million in state exposures.  We do not currently anticipate significant changes in such amounts over the next twelve months.
 
As of March 31, 2008, we remained subject to examination in the following major tax jurisdictions for the tax years indicated below:
 
 
Major Tax Jurisdictions
 
Open Audit Years
 
North America – United States:
  
 
    New York
 
2004 through 2007
 
    New Jersey
 
2001 through 2007
 
    Massachusetts
 
2001 through 2007
 
    North Carolina
 
2001 through 2007

(4)           Inventories
 
Inventories at March 31, 2008 and June 30, 2007 are summarized as follows (in thousands):
 
   
March 31,
2008
    
June 30,
2007
  
Finished goods
   $ 150,902     $ 150,994  
Work in process
     7,129       6,172  
Raw materials
     28,326       24,718  
    $ 186,357     $ 181,884  

Inventories are presented net of a related valuation allowance of $2.6 million at March 31, 2008 and $2.9 million at June 30, 2007.
 
(5)           Plant and Retail Consolidations
 
In recent years, we have developed, announced and executed plans to consolidate our operations as part of an overall strategy to maximize production efficiencies and maintain our competitive advantage.
 
On January 10, 2008, we announced a plan to consolidate the operations of certain company owned retail design centers and retail service centers. During the quarter ended March 31, 2008 four design centers were converted to design studios better suited to the markets they serve.  In addition, seven design centers and two retail service centers were closed and, for the most part, were consolidated into other existing operations.  We recorded a pre-tax restructuring and impairment charge of $4.0 million during the quarter ended March 31, 2008, of which $1.3 million was related to employee severance and benefits and other exit costs (including $0.9 million for lease cancellation costs), and $2.6 million, which was non-cash in nature, related to fixed asset impairment charges,  
 
7
 
primarily for real property and leasehold improvements associated with the closure of several retail locations.  The Company expects to incur an additional $3.0 million to $4.0 million pre-tax restructuring and impairment charge during the fourth quarter of fiscal 2008, after which time the consolidation plan should be complete, apart from the sale of owned properties affected by the action, which we anticipate completing within the next twelve months. At March 31, 2008, $1.1 million in accrued liabilities were unpaid, and are included in other current liabilities.  A summary of costs incurred during the current quarter and the reserve balances at March 31, 2008 follows (in thousands):
 
   
Total
Charges
    
Cash
Payments
    
Non-cash
Utilized
    
Balance at
March 31,
2008
  
Employee severance and other
related payroll and benefit costs
   $ 240     $ ( 99 )   $ -     $ 141  
Write-down of long-lived assets
     2,546       -       (2,546 )     -  
Other associated costs
     227       (122 )     (105 )     -  
Lease termination costs
     980       ( 77 )     72       975  
    $ 3,993     $ (298 )   $ (2,579 )   $ 1,116  

On September 6, 2006, we announced a plan to close our Spruce Pine, North Carolina case goods manufacturing facility and convert our Atoka, Oklahoma upholstery manufacturing facility into a regional distribution center.  In connection with this initiative, we permanently ceased production at both locations, allocating production among our remaining domestic manufacturing locations and selected offshore suppliers. The decision impacted approximately 465 employees with the reduction in headcount occurring during the second and third quarters of fiscal 2007.  We recorded a pre-tax restructuring and impairment charge of $14.1 million during the quarter ended September 30, 2006, of which $4.0 million was related to employee severance and benefits and other plant exit costs, and $10.1 million, which was non-cash in nature, was related to fixed asset impairment charges, primarily for real property and machinery and equipment, stemming from the decision to cease production activities.  During the three months ended March 31, 2007 and December 31, 2006, adjustments totaling $0.2 million and $0.3 million, respectively, were recorded to reverse remaining previously established accruals which were no longer deemed necessary.
 
(6)           Business Acquisitions
 
In October 2007, we acquired in a single transaction, two Ethan Allen retail design centers from an independent retailer for consideration of approximately $2.1 million of cash and forgiveness of receivables, assumed customer deposits of $1.1 million and other liabilities of $0.1 million.  As a result of this acquisition, we recorded additional inventory of $1.9 million, other assets of $0.4 million, and goodwill of $1.0 million.
 
In October 2007, Ethan Allen Operations, Inc., a wholly owned subsidiary of Global, acquired a cut and sew upholstery facility from Americraft Leather for total consideration of approximately $4.4 million. The facility, which contains 40,000 square feet of manufacturing space and employs 165 people, is located in Silao, in the state of Guanajuato, Mexico.  As a result of this acquisition, our purchase price allocation resulted in additional property, plant and equipment of $2.7 million, inventory of $1.1 million, and goodwill of $0.6 million.
 
The Consolidated Statements of Cash Flows for the nine months ended March 31, 2008 reflect $0.6 million of consideration paid during the period in connection with the acquisition of a retail design center with an effective (closing) date of June 30, 2007 and for which funding did not occur until July 2, 2007.  During November and December 2006, we acquired, in three separate transactions, five Ethan Allen retail interior design centers (“DCs”) from three independent retailers for total consideration of approximately $3.9 million of cash and forgiveness of receivables.  As a result of these acquisitions, we recorded additional inventory and other
 
8
assets of $2.7 million and $0.8 million, respectively, and assumed customer deposits and other liabilities of $1.3 million and $0.3 million, respectively.  Goodwill associated with these acquisitions totaled $2.0 million.
 
In September 2006, we acquired, in a single transaction, two Ethan Allen retail design centers from an independent retailer for total consideration of approximately $6.3 million of cash and forgiveness of receivables.  As a result of this acquisition, we recorded additional inventory and other assets (primarily real estate) of $0.9 million and $5.5 million, respectively, and assumed customer deposits and other liabilities of $0.4 million and $0.1 million, respectively.  Goodwill associated with this acquisition totaled $0.4 million.
 
All acquisitions are subject to a contractual holdback or reconciliation period, during which the parties to the transaction may agree to certain normal and customary purchase accounting adjustments.
 
Goodwill associated with our acquisitions represents the premium paid to the seller related to the acquired business (i.e. market presence) and other fair value adjustments to the assets acquired and liabilities assumed.  Further discussion of our goodwill and other intangible assets can be found in Note 7.
 
A summary of our allocation of purchase price associated with acquisitions occurring during the three and nine months ended March 31, 2008 and 2007 is provided below (in thousands):
 
   
Three Months Ended
March 31,
    
Nine Months Ended
March 31,
  
   
2008
    
2007
    
2008
    
2007
  
  Nature of acquisition
        
2 DCs
    
2 DCs
    
9 DCs
  
               
1 Plant
        
  Total consideration
   $ (15 )   $ 1,592     $ 6,560     $ 12,136  
  Fair value of assets acquired and
       liabilities assumed:
                                
       Inventory
     (43 )     1,005       2,895       4,751  
       PP&E and other assets
     (51 )     156       3,047       6,369  
       Customer deposits
     43       (540 )     (1,090 )     (2,228 )
       A/P and other liabilities
     74       (34 )     34       (115 )
  Goodwill
   $ (8 )   $ 1,005     $ 1,674     $ 3,359  

(7)           Goodwill and Other Intangible Assets
 
As of March 31, 2008, we had goodwill, including product technology, of $74.3 million and other indefinite-lived intangible assets of $19.7 million. Comparable balances as of June 30, 2007 were $72.8 million and $19.7 million, respectively.
 
Goodwill in the retail and wholesale segments was $46.1 million and $28.2 million, respectively, at March 31, 2008 and $45.3 million and $27.5 million, respectively, at June 30, 2007. The wholesale segment, at both dates, includes additional indefinite-lived intangible assets of $19.7 million which represent Ethan Allen trade names.
 
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible Assets, we do not amortize goodwill or other indefinite-lived intangible assets but, rather, evaluate such assets for impairment on an annual basis and between annual tests whenever events or circumstances indicate that the carrying value of the goodwill or other intangible asset may exceed its fair value. We conduct our required annual impairment test during the fourth quarter of each fiscal year. No impairment losses have been recorded on our goodwill or other indefinite-lived intangible assets as a result of applying the provisions of SFAS No. 142.
 
9
 
(8)           Borrowings
 
Total debt obligations at March 31, 2008 and June 30, 2007 consist of the following (in thousands):
 
   
March 31,
2008
    
June 30,
2007
  
5.375% Senior Notes due 2015
   $ 198,797     $ 198,677  
Industrial revenue bonds
     3,855       3,855  
Other debt
     347       376  
   Total debt
     202,999       202,908  
Less: current maturities
     41       40  
   Total long-term debt
   $ 202,958     $ 202,868  

On September 27, 2005, we completed a private offering of $200.0 million of ten-year senior unsecured notes due 2015 (the "Senior Notes"). The Senior Notes were offered by Global and have an annual coupon rate of 5.375% with interest payable semi-annually in arrears on April 1 and October 1 of each year beginning on April 1, 2006.  Proceeds received in connection with the issuance of the Senior Notes, net of a related discount of $1.6 million, totaled $198.4 million. We intend to use the net proceeds from the offering to expand our retail network, invest in our manufacturing and logistics operations, and for other general corporate purposes.  As of March 31, 2008, outstanding borrowings related to this transaction have been included in the Consolidated Balance Sheets within long-term debt. The discount on the Senior Notes is being amortized to interest expense over the life of the related debt.
 
In connection with the offering, debt issuance costs totaling $2.0 million were incurred related, primarily, to banking, legal, accounting, rating agency, and printing services. As of March 31, 2008, these costs have been included in the Consolidated Balance Sheets as deferred financing costs within other assets and are being amortized to interest expense over the life of the Senior Notes.
 
Also in connection with the issuance of the Senior Notes, Global, in July and August 2005, entered into six separate forward contracts to hedge the risk-free interest rate associated with $108.0 million of the related debt in order to minimize the negative impact of interest rate fluctuations on earnings, cash flows and equity. The forward contracts were entered into with a major banking institution thereby mitigating the risk of credit loss.
 
Upon issuance of the Senior Notes and settlement of the related forward contracts, losses totaling $0.9 million were incurred representing the change in the fair value of the forward contracts since their respective trade dates. In accordance with SFAS No. 133, as amended, it was determined that a portion of the related losses was the result of hedge ineffectiveness and, as such, $0.1 million of the losses was included, within interest and other related financing costs, in the Consolidated Statement of Operations for the fiscal year ended June 30, 2006.  The balance of the losses has been included (on a net-of-tax basis) in the Consolidated Balance Sheets within accumulated other comprehensive income and is being amortized to interest expense over the life of the Senior Notes.  The remaining unamortized balance of these forward contract losses totaled $0.6 million ($0.4 million, net-of-tax) at both March 31, 2008 and June 30, 2007.
 
 (9)          Litigation
 
Environmental Matters
We and our subsidiaries are subject to various environmental laws and regulations. Under these laws, we and/or our subsidiaries are, or may be, required to remove or mitigate the effects on the environment of the disposal or release of certain hazardous materials.
 
10
 
As of March 31, 2008, we and/or our subsidiaries have been named as a potentially responsible party ("PRP") with respect to the remediation of three active sites currently listed, or proposed for inclusion, on the National Priorities List ("NPL") under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"). The sites are located in Southington, Connecticut; High Point, North Carolina; and Atlanta, Georgia.
 
In addition, during the fiscal year ended June 30, 2007, our liability with respect to a fourth site located in Lyndonville, Vermont was resolved.  We had previously received a certificate of construction completion for this location, subject to certain limited conditions which were the obligation of another PRP.  In July 2007, we obtained the final certificate of construction completion advising us that all conditions had been met.
 
We do not anticipate incurring significant costs with respect to the Southington, Connecticut, High Point, North Carolina, or Atlanta, Georgia sites as we believe that we are not a major contributor based on the very small volume of waste generated by us in relation to total volume at those sites.  Specifically, with respect to the Southington site, our volumetric share is less than 1% of over 51 million gallons disposed of at the site and there are more than 1,000 PRPs.  With respect to the High Point site, our volumetric share is less than 1% of over 18 million gallons disposed of at the site and there are more than 2,000 PRPs, including more than 1,000 "de-minimis" parties (of which we are one). With respect to the Atlanta site, a former solvent recycling/reclamation facility, our volumetric share is less than 1% of over 20 million gallons disposed of at the site by more than 1,700 PRPs.  In all three cases, the other PRPs consist of local, regional, national and multi-national companies.
 
Liability under CERCLA may be joint and several. As such, to the extent certain named PRPs are unable, or unwilling, to accept responsibility and pay their apportioned costs, we could be required to pay in excess of our pro rata share of incurred remediation costs. Our understanding of the financial strength of other PRPs has been considered, where appropriate, in the determination of our estimated liability.
 
In addition, in July 2000, we were notified by the State of New York (the "State") that we may be named a PRP in a separate, unrelated matter with respect to a site located in Carroll, New York. To date, no further notice has been received from the State and the State has not yet conducted an initial environmental study at this site.
 
As of March 31, 2008, we believe that established reserves related to these environmental contingencies are adequate to cover probable and reasonably estimable costs associated with the remediation and restoration of these sites.  We believe our currently anticipated capital expenditures for environmental control facility matters are not material.
 
We are subject to other federal, state and local environmental protection laws and regulations and are involved, from time to time, in investigations and proceedings regarding environmental matters.  Such investigations and proceedings typically concern air emissions, water discharges, and/or management of solid and hazardous wastes. We believe that our facilities are in material compliance with all such applicable laws and regulations.
 
Regulations issued under the Clean Air Act Amendments of 1990 required the industry to reformulate certain furniture finishes or institute process changes to reduce emissions of volatile organic compounds. Compliance with many of these requirements has been facilitated through the introduction of high solids coating technology and alternative formulations. In addition, we have instituted a variety of technical and procedural controls, including reformulation of finishing materials to reduce toxicity, implementation of high velocity low pressure spray systems, development of storm water protection plans and controls, and further development of related inspection/audit teams, all of which have served to reduce emissions per unit of production. We remain committed to implementing new waste minimization programs and/or enhancing existing programs with the objective of (i) reducing the total volume of waste, (ii) limiting the liability associated with waste disposal, and (iii) continuously improving environmental and job safety programs on the factory floor which serve to minimize
 
11
 
 
emissions and safety risks for employees. We will continue to evaluate the most appropriate, cost effective control technologies for finishing operations and design production methods to reduce the use of hazardous materials in the manufacturing process.
 
(10)         Share-Based Compensation
 
On October 10, 2007, the Company’s Board of Directors and M. Farooq Kathwari, our President and Chief Executive Officer, agreed to the terms of a new employment agreement expiring on June 30, 2012 (the "Agreement").  Pursuant to the terms of the Agreement, Mr. Kathwari was awarded, on October 10, 2007, options to purchase 150,000 shares of our common stock.  These options were issued at an exercise price of $34.03 (the closing price of a share of our common stock on the New York Stock Exchange as of such date), and vest ratably over a three year period.  The Agreement provides for additional grants of 90,000 and 60,000 shares on July 1, 2008 and July 1, 2009, respectively, with exercise prices equal to the closing price of a share of our common stock on the New York Stock Exchange as of such dates.  The 2008 grant will vest ratably over a two year period and the 2009 grant will vest ratably over a one year period.  All options awarded under the Agreement have a contractual term of 10 years.
 
In connection with the Agreement, Mr. Kathwari received an award of 20,000 restricted shares with vesting based on continuing service and the performance of the Company’s stock price during the 32 month period subsequent to the award date as compared to the Standard and Poor’s 500 index.  Mr. Kathwari will also receive, as per the Agreement, additional restricted share grants of 20,000 shares on each of July 1, 2008 and July 1, 2009.  Each of these awards will also vest based on continuing service and the Company’s stock performance as compared to the Standard and Poor’s 500 index for the three year period subsequent to the relevant award dates.
 
Also in connection with the Agreement, Mr. Kathwari received an award of 15,000 restricted shares.  These shares are service-based with 3,000 shares vesting on June 30 for each of the years 2008 through 2012.
 
(11)           Earnings Per Share
 
Basic and diluted earnings per share are calculated using the following weighted average share data (in thousands):
 
   
Three Months Ended
March 31,
    
Nine Months Ended
March 31,
  
   
2008
    
2007
    
2008
    
2007
  
Weighted average common shares
                        
Outstanding for basic calculation
     28,909       31,656       29,461       31,736  
Effect of dilutive stock options and other
                                
share-based awards
     140       696       224       759  
Weighted average common shares outstanding
                                
adjusted for diluted calculation
     29,049       32,352       29,685       32,495  
 
As of March 31, 2008 and 2007, stock options to purchase 1,706 and 305 common shares, respectively, had exercise prices which exceeded the average market price of our common stock for the corresponding periods. These options have been excluded from the respective diluted earnings per share calculation as their impact is anti-dilutive.
 
12
(12)         Comprehensive Income
 
Total comprehensive income represents the sum of net income and items of "other comprehensive income or loss" that are reported directly in equity.  Such items, which are generally presented on a net-of-tax basis, may include foreign currency translation adjustments, prior service costs and actuarial gains and losses, fair value adjustments (i.e. gains and losses) on certain derivative instruments, and unrealized gains and losses on certain investments in debt and equity securities.  We have reported our total comprehensive income in the Consolidated Statements of Shareholders’ Equity.
 
Our accumulated other comprehensive income, which is comprised of losses on certain derivative instruments and accumulated foreign currency translation adjustments, totaled $1.7 million at March 31, 2008 and $1.4 million at June 30, 2007.  Losses on derivative instruments are the result of cash-flow hedging contracts entered into in connection with the issuance of the Senior Notes (see Note 8).  Foreign currency translation adjustments are the result of changes in foreign currency exchange rates related to our operation of five Ethan Allen-owned retail design centers located in Canada and our cut and sew plant located in Mexico.  Foreign currency translation adjustments exclude income tax expense (benefit) given that the earnings of non-U.S. subsidiaries are deemed to be reinvested for an indefinite period of time.
 
(13)         Segment Information
 
Our operations are classified into two operating segments: wholesale and retail.  These operating segments represent strategic business areas which, although they operate separately and provide their own distinctive services, enable us to more effectively offer our complete line of home furnishings and accessories.
 
The wholesale segment is principally involved in the development of the Ethan Allen brand, which encompasses the design, manufacture, domestic and offshore sourcing, sale and distribution of a full range of home furnishings and accessories to a network of independently owned and Ethan Allen-owned design centers as well as related marketing and brand awareness efforts.  Wholesale revenue is generated upon the wholesale sale and shipment of our product to all retail design centers, including those owned by Ethan Allen.  Wholesale profitability includes (i) the wholesale gross margin, which represents the difference between the wholesale sales price and the cost associated with manufacturing and/or sourcing the related product, and (ii) other operating costs associated with wholesale segment activities.
 
The retail segment sells home furnishings and accessories to consumers through a network of Company-owned design centers.  Retail revenue is generated upon the retail sale and delivery of our product to our customers.  Retail profitability includes (i) the retail gross margin, which represents the difference between the retail sales price and the cost of goods purchased from the wholesale segment, and (ii) other operating costs associated with retail segment activities.
 
Inter-segment eliminations result, primarily, from the wholesale sale of inventory to the retail segment, including the related profit margin.
 
We evaluate performance of the respective segments based upon revenues and operating income. While the manner in which our home furnishings and accessories are marketed and sold is consistent, the nature of the underlying recorded sales (i.e. wholesale versus retail) and the specific services that each operating segment provides (i.e. wholesale manufacturing, sourcing, and distribution versus retail selling) are different.  Within the wholesale segment, we maintain revenue information according to each respective product line (i.e. case goods, upholstery, or home accessories and other).
 
A breakdown of wholesale sales by these product lines for the three and nine months ended March 31, 2008 and 2007 is provided as follows:
13
 
   
Three Months Ended
March 31,
    
Nine Months Ended
March 31,
  
   
2008
    
2007
    
2008
    
2007
  
Case Goods
     41 %     46 %     44 %     45 %
Upholstered Products
     41       36       39       38  
Home Accessories and Other
     18       18       17       17  
      100 %     100 %     100 %     100 %

Revenue information by product line is not as easily determined within the retail segment. However, because wholesale production and sales are matched, for the most part, to incoming orders, we believe that the allocation of retail sales by product line would be similar to that of the wholesale segment.
 
Segment information for the three and nine month periods ended March 31, 2008 and 2007 is set forth as follows:
 
   
Three Months Ended,
March 31
    
Nine Months Ended
March 31,
  
   
2008
    
2007
    
2008
    
2007
  
Net Sales:
                        
Wholesale segment
   $ 156,269     $ 171,906     $ 468,522     $ 493,208  
Retail segment
     172,779       167,724       548,112       511,104  
Elimination of inter-company sales
     (93,147 )     (93,091 )     (272,496 )     (257,531 )
  Consolidated Total
   $ 235,901     $ 246,539     $ 744,138     $ 746,781  

   
Three Months Ended,
March 31
    
Nine Months Ended
March 31,
  
   
2008
    
2007
    
2008
    
2007
  
Operating Income:
                        
Wholesale segment (1)
   $ 26,676     $ 31,862     $ 79,832     $ 73,423  
Retail segment (2)
     (8,544 )     (94 )     (1,294 )     8,540  
Elimination of inter-company profit (3)
     (2,552 )     (3,681 )     (1,664 )     (3,117 )
  Consolidated Total
   $ 15,580     $ 28,087     $ 76,874     $ 78,846  
                                 
Capital Expenditures:
                                
Wholesale segment
   $ 1,098     $ 1,992     $ 5,458     $ 6,915  
Retail segment
     14,886       10,520       40,839       40,544  
Acquisitions (4) (5)
     15        1,807       6,153       11,376  
  Consolidated Total
   $ 15,999     $ 14,319     $ 52,450     $ 58,835  
 
   
March 31,
2008
    
 June 30,
2007
  
Total Assets:    
            
Wholesale segment
   $ 353,957     $ 416,237  
Retail segment
     446,375       425,382  
Inventory profit elimination (6)
     (40,941 )     (39,021 )
  Consolidated Total
   $ 759,391     $ 802,598  
 
(1)  
Operating income for the wholesale segment for 2007 includes a pre-tax restructuring and impairment net recovery of $0.2 million for the March quarter and a charge of $13.4 million year to date.
(2)  
Operating income for the retail segment for 2008 includes pre-tax restructuring and impairment charge of $4.0 million for the March quarter and year to date.
 
  
 
 
 
14
 
 
 
(3)  
Represents the change in the inventory profit elimination necessary to adjust for the embedded wholesale profit contained in Ethan Allen-owned design center inventory existing at the end of the period.
(4)  
Amount reflected as acquisitions for 2007 excludes the purchase (for consideration totaling $0.6 million) of a retail design center with an effective (closing) date of June 30, 2007 and for which funding did not occur until July 2, 2007.
(5)  
Amount reflected as acquisitions for the three and nine months ended March 31, 2008 includes the purchase of two retail design centers and the purchase of a cut and sew plant in Mexico.  The amount reflected as acquisitions for the three months ended March 31, 2007 includes the purchase of two retail design centers.  The amount reflected as acquisitions for the nine months ended March 31, 2007 includes the purchase of nine retail design centers.
(6)  
Represents the embedded wholesale profit contained in Ethan Allen-owned design center inventory that has not yet been realized. These profits are realized when the related inventory is sold.

There were 40 independent retail design centers located outside the United States at March 31, 2008. Approximately 2% to 3% of our net sales are derived from sales to these retail design centers.
 
(14)         Subsequent Events
 
Business Acquisitions
On May 2, 2008, we acquired, in a single transaction, three Ethan Allen retail design centers from an independent retailer for consideration of approximately $2.0 million of cash and forgiveness of receivables and assumed customer deposits of $3.2 million.
 
(15)         Recent Accounting Pronouncements
 
In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS No. 141(R)), which replaces SFAS No. 141. SFAS No. 141(R) establishes principles and requirements for how an acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any controlling interest; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) is to be applied prospectively to business combinations for which the acquisition date is on or after an entity's fiscal year that begins after December 15, 2008 (July 1, 2009 for the Company). As such, we are currently in the process of evaluating the impact of this authoritative guidance on our consolidated financial statements.
 
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, which allows the Company to choose to measure selected financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings.  SFAS No. 159 is effective for fiscal years beginning after November 15, 2007 (July 1, 2008 for the Company). As such, we are currently in the process of evaluating the impact of this authoritative guidance on our consolidated financial statements. 
 
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, which provides a single definition of fair value, and requires additional disclosure about the use of fair value to measure assets and liabilities. SFAS No. 157 emphasizes that fair value is a market-based measurement defined as the price that would be received to sell an asset or liability in an orderly transaction between market participants at the measurement date.  Thus, SFAS No. 157 adheres to a definition of fair value based upon exit-price as opposed to entry-price (i.e. the price paid to acquire an asset or liability). This authoritative guidance is effective for fiscal years beginning after
 
 
 
15
 
 
November 15, 2007 (July 1, 2008 for the Company).  As such, we are currently in the process of evaluating the impact of this authoritative guidance on our consolidated financial statements.
 
(16)        Financial Information About the Parent, the Issuer and the Guarantors
 
On September 27, 2005, Global (the "Issuer") issued $200 million aggregate principal amount of Senior Notes which have been guaranteed on a senior basis by Interiors (the "Parent"), and other wholly-owned subsidiaries of the Issuer and the Parent, including Ethan Allen Retail, Inc., Ethan Allen Operations, Inc., Ethan Allen Realty, LLC, Lake Avenue Associates, Inc. and Manor House, Inc. The subsidiary guarantors (other than the Parent) are collectively called the "Guarantors".  The guarantees of the Guarantors are unsecured.  All of the guarantees are full, unconditional and joint and several and the Issuer and each of the Guarantors are 100% owned by the Parent. Ethan Allen (UK) Ltd., KEA International Inc. (which was legally dissolved in January 2007), Northeast Consolidated, Inc. (which was legally dissolved in June 2007), Riverside Water Works, Inc. (which was legally dissolved in June 2007), and our other subsidiaries which are not guarantors are called the "Non-Guarantors".
 
The following tables set forth the condensed consolidating balance sheets as of March 31, 2008 and June 30, 2007, the condensed consolidating statements of operations for the three and nine months ended March 31, 2008 and 2007, and the condensed consolidating statements of cash flows for the nine months ended March 31, 2008 and 2007 of the Parent, the Issuer, the Guarantors and the Non-Guarantors.
 


 
16
 
 
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)

Condensed Consolidating Balance Sheet
 (in thousands)
March 31, 2008
   
Parent
    
Issuer
    
Guarantors
    
Non-Guarantors
    
Eliminations
    
Consolidated
  
Assets
                                    
Current assets:
                                    
  Cash and cash equivalents
   $ -     $ 72,862     $ 4,149     $ -     $ -     $ 77,011  
  Accounts receivable, net
     -       11,784       767       -       -       12,551  
  Inventories
     -       -       227,298       -       (40,941 )     186,357  
  Prepaid expenses and other current assets
     -       19,810       21,634       -       -       41,444  
  Intercompany
     -       735,894       201,026       -       (936,920 )     -  
     Total current assets
     -       840,350       454,874       -       (977,861 )     317,363  
                                                 
Property, plant and equipment, net
     -       12,625       330,535       -       -       343,160  
Goodwill and other intangible assets
     -       37,905       56,140       -       -       94,045  
Other assets
     -       3,764       1,059       -       -       4,823  
Investment in affiliated companies
     651,238       125,986       -       -       (777,224 )     -  
     Total assets
   $ 651,238     $ 1,020,630     $ 842,608     $ -     $ (1,755,085 )   $ 759,391  
                                                 
Liabilities and Shareholders’ Equity
                                                
Current liabilities:
                                                
  Current maturities of long-term debt
   $ -     $ -     $ 41     $ -     $ -     $ 41  
  Customer deposits
     -       -       46,363       -       -       46,363  
  Accounts payable
     -       7,569       15,365       -       -       22,934  
  Accrued expenses and other current liabilities
     6,462       43,550       18,829       -       -       68,841  
  Intercompany
     276,814       43,443       616,611       52       (936,920 )     -  
     Total current liabilities
     283,276       94,562       697,209       52       (936,920 )     138,179  
                                                 
Long-term debt
     -       198,797       4,161       -       -       202,958  
Other long-term liabilities
     -       7,386       13,129       -       -       20,515  
Deferred income taxes
     -       28,067       -       -       -       28,067  
     Total liabilities
     283,276       328,812       714,499       52       (936,920 )     389,719  
                                                 
Shareholders’ equity
     367,962       691,818       128,109       (52 )     (818,165 )     369,672  
Total liabilities and shareholders’ equity
   $ 651,238     $ 1,020,630     $ 842,608     $ -     $ (1,755,085 )   $ 759,391  


 
17
 
 
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)


CONDENSED CONSOLIDATING BALANCE SHEET
(in thousands)
June 30, 2007

   
Parent
    
Issuer
    
Guarantors
    
Non-Guarantors
    
Eliminations
    
Consolidated
  
Assets
                                    
Current assets:
                                    
  Cash and cash equivalents
   $ -     $ 142,253     $ 5,626     $ -     $ -     $ 147,879  
  Accounts receivable, net
     -       14,118       471       13       -       14,602  
  Inventories
     -       -       210,146       10,759       (39,021 )     181,884  
  Prepaid expenses and other current assets
     -       15,743       21,969       352       -       38,064  
  Intercompany
      -       591,102       195,444       -       (786,546 )     -  
     Total current assets
     -       763,216       433,656       11,124       (825,567 )     382,429  
                                                 
Property, plant and equipment, net
     -       11,104       311,081       -       -       322,185  
Goodwill and other intangible assets
     -       37,905       54,595       -       -       92,500  
Other assets
     -       4,299       1,185       -       -       5,484  
Investment in affiliated companies
     600,453       149,524       -       -       (749,977 )     -  
     Total assets
   $ 600,453     $ 966,048     $ 800,517     $ 11,124     $ (1,575,544 )   $ 802,598  
                                                 
Liabilities and Shareholders’ Equity
                                                
Current liabilities:
                                                
  Current maturities of long-term debt
   $ -     $ -     $ 40     $ -     $ -     $ 40  
  Customer deposits
     -       -       52,072       -       -       52,072  
  Accounts payable
     3,436       6,509       12,732       3,973       -       26,650  
  Accrued expenses and other current liabilities
     6,286       47,471       14,920       -       -       68,677  
  Intercompany
     182,458       43,443       553,479       7,166       (786,546 )     -  
     Total current liabilities
     192,180       97,423       633,243       11,139       (786,546 )     147,439  
                                                 
Long-term debt
     -       198,676       4,192       -       -       202,868  
Other long-term liabilities
     -       227       11,776       -       -       12,003  
Deferred income taxes
     -       30,646       -       -       -       30,646  
     Total liabilities
     192,180       326,972       649,211       11,139       (786,546 )     392,956  
                                                 
Shareholders’ equity
     408,273       639,076       151,306       (15 )     (788,998 )     409,642  
     Total liabilities and shareholders’ 
       equity
   $ 600,453     $ 966,048     $ 800,517     $ 11,124     $ (1,575,544 )   $ 802,598  

 
18
 
 
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)


CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(in thousands)
Three Months Ended March 31, 2008

   
Parent
    
Issuer
    
Guarantors
    
Non-Guarantors
    
Eliminations
    
Consolidated
  
                                     
Net sales
   $ -     $ 157,138     $ 246,116     $ -     $ (167,353 )   $ 235,901  
Cost of sales
     -       110,602       164,587       -       (164,475 )     110,714  
   Gross profit
     -       46,536       81,529       -       (2,878 )     125,187  
                                                 
Selling, general and administrative expenses
     42       12,893       92,679       -       -       105,614  
Restructuring and impairment charge, net
     -       -       3,993       -       -       3,993  
   Total operating expenses
     42       12,893       96,672       -       -       109,607  
      Operating income (loss)
     (42 )     33,643       (15,143 )     -       (2,878 )     15,580  
                                                 
Interest and other miscellaneous income, net
     8,888       (12,906 )     52       -       5,341       1,375  
Interest and other related financing costs
     -       2,838       76       -       -       2,914  
   Income before income tax expense
     8,846       17,899       (15,167 )     -       2,463       14,041  
Income tax expense
     -       5,195       -       -       -       5,195  
                                                 
   Net income (loss)
   $ 8,846     $ 12,704     $ (15,167 )   $ -     $ 2,463     $ 8,846  
                                                 
Three Months Ended March 31, 2007
  
   
Parent
    
Issuer
    
Guarantors
    
Non-Guarantors
    
Eliminations
    
Consolidated
  
                                                 
Net sales
   $ -     $ 172,477     $ 235,230     $ -     $ (161,168 )   $ 246,539  
Cost of sales
     -       120,586       154,633       1