Exhibit 99.1

 

 

 

ETHAN ALLEN REPORTS RESULTS FOR SECOND QUARTER ENDED DECEMBER 31, 2015

 

DANBURY, CT – January 26, 2016 – Ethan Allen Interiors Inc. ("Ethan Allen" or the "Company") (NYSE: ETH) today reported operating results for the fiscal 2016 second quarter ended December 31, 2015. Please refer to the accompanying financial statements and reconciliation to non-GAAP measures discussed below.

 

Second Quarter Highlights

 

Sales of $207.5 million increased 5.3% from previous year $197.1 million.

 

Retail total written orders increased by 15.3% and comparable written orders increased by 14.6% over prior year.

 

Gross margin of 55.9% up from 53.8% in prior year.

 

GAAP operating income increased 50.1% to $26.5 million, 12.8% of sales, compared to previous year GAAP operating income $17.7 million, 9.0% of sales.

 

Adjusted operating income increased 35.1% to $25.3 million, 12.2% of sales, compared to previous year adjusted operating income $18.7 million, 9.5% of sales

 

GAAP EPS of $0.58 improved 70.6% over previous year GAAP EPS of $0.34; adjusted EPS of $0.55 improved 48.6% over prior year adjusted EPS of $0.37.

 

EBITDA $31.3 million, 15.1% of sales, compared to previous year EBITDA $22.3 million, 11.3% of sales; adjusted EBITDA $30.1 million, 14.5% of sales compared to previous year adjusted EBITDA of $23.4 million, 11.9% of sales.

 

Paid dividends of $4.0 million, an increase of 14.7% over the prior year.

 

Repurchased 0.4 million shares for $12.2 million.

 

 

First Half Highlights

 

Sales of $397.9 million increased 2.6% from previous year $387.8 million.

 

Retail Total Written Orders increased by 1.8% and comparable written orders increased by 1.2% over prior year.

 

Gross margin of 55.5% up from 54.4% in prior year.

 

GAAP operating income increased 24.3% to $47.4 million, 11.9% of sales, compared to previous year GAAP operating income $38.1 million, 9.8% of sales.

 

Adjusted operating income increased 13.8% to $46.2 million, 11.6% of sales, compared to previous year adjusted operating income $40.6 million, 10.5% of sales.

 

GAAP EPS of $1.04, adjusted EPS $1.01. Previous year GAAP EPS of $0.75, adjusted EPS $0.80.

 

 
 

 

 

“We are pleased that our many initiatives and the operating leverage of our vertically integrated enterprise have resulted in increased sales and a substantial increase in profitability.” said Chairman and CEO, Farooq Kathwari. “During the quarter, our focus was on using our various marketing mediums, especially digital platforms, to drive qualified clients to our network of 200 Design Centers in North America. Once there, these clients interacted with some of our 1,500 interior design associates, and that resulted in strong written orders.”

 

Mr. Kathwari further stated, “After a year of working with Disney Consumer Products, we were particularly pleased to announce yesterday that we will be developing a new Disney-inspired product line for the home with a focus on children and younger consumers.”

 

Mr. Kathwari concluded, “We are continuing to implement many new initiatives, from adding two new upholstery manufacturing plants in North America to introducing Phase 4 of our new offerings – which will launch during the spring and summer of 2016 – to expanding our reach through print, television and digital mediums. We remain cautiously optimistic.”

 

Fiscal 2016 Second Quarter Financial Results:

Consolidated net sales for the quarter ended December 31, 2015 increased 5.3% over the prior year to $207.5 million. The Company’s retail segment net sales increased 7.5% to $164.7 million including a comparable design center net sales increase of 7.3%. The Company’s wholesale segment net sales increased 8.8%.

 

Comparable written orders for the Retail Division increased 14.6% for the second quarter of fiscal 2016 compared to the prior year second quarter and total written orders for the Retail Division increased 15.3% over the same prior year period.

 

Gross margin for the quarter ended December 31, 2015 was 55.9% compared to 53.8% in the prior year. Operating expenses were $89.6 million compared to $88.4 in the prior year quarter. Net income for the quarter ended December 31, 2015 was $16.5 million or $0.58 per diluted share compared with $10.0 million or $0.34 per diluted share in the prior year quarter. Excluding special items, adjusted net income was $15.8 million or $0.55 per diluted share in the current year and $10.8 million or $0.37 per diluted share in the prior year.

 

Total debt of $58.2 million decreased $18.1 million from June 30, 2015 due to both scheduled repayments as well as an additional payment of $16.5 million, and working capital decreased $2.0 million, or 1.5% from June 30, 2015. Capital expenditures were $7.4 million fiscal year to date at December 31, 2015 compared to $13.1 million prior year and inventories of $157.5 million increased $5.6 million from June 30, 2015.

 

Fiscal 2016 Year-to-Date Financial Results:

Year to date net sales were $397.9 million, up 2.6% from $387.8 million the prior year. Gross margin, operating profit margin and adjusted operating profit margin were 55.5%, 11.9% and 11.6% respectively in Fiscal 2016 and 54.4%, 9.8% and 10.5% in Fiscal 2015. Net income for the six months ended December 31, 2015 was $29.7 million or $1.04 per diluted share compared with $21.9 million or $0.75 per diluted share in the prior year comparable period. Adjusted net income year to date of $28.9 million increased 22.7% compared with $23.5 million the prior year period and our adjusted earnings per diluted share increased 26.3% for the six months to date at $1.01 compared with $0.80 the prior year to date period.

 

Analyst Conference Call

 

Ethan Allen will conduct a conference call at 5:00 PM (Eastern) on Tuesday, January 26th to discuss the financial results and its business initiatives. The live webcast and replay are accessible via the Company’s website at http://ethanallen.com/investors. To participate on the call, dial 866-818-1223 (or 703-639-1376 for international callers) and provide conference ID# 1667904.

 

 
 

 

 

About Ethan Allen

Ethan Allen Interiors Inc. (NYSE: ETH) is a leading interior design company and manufacturer and retailer of quality home furnishings. The company offers complimentary interior design service to its clients and sells a full range of furniture products and decorative accessories through ethanallen.com and a network of approximately 300 Design Centers in the United States and abroad. Ethan Allen owns and operates nine manufacturing facilities including six manufacturing plants and one sawmill in the United States plus one plant each in Mexico and Honduras. Approximately seventy percent of its products are made in its North American plants. For more information on Ethan Allen's products and services, visit ethanallen.com.

 

Non-GAAP Financial Information

This press release is intended to supplement, rather than to supersede, the Company's condensed consolidated financial statements. It contains references to the Company's (i) consolidated operating income/operating margin, (ii) wholesale operating income/operating margin, (iii) retail operating income/operating margin, (iv) net income, (v) earnings per share, and (vi) earnings before interest, taxes, depreciation and amortization ("EBITDA"), all excluding the effects of restructuring charges as a result of the Company’s previous decision to consolidate facilities, and also excluding certain transition costs and non-operating income adjustments in both fiscal 2016 and fiscal 2015. A reconciliation of these financial measures to the most directly comparable financial measure reported in accordance with generally accepted accounting principles (“GAAP”) is also provided at the end of this press release.

 

Management believes that excluding items which are deemed to be non-recurring in nature from financial measures such as operating income, operating margin, net income, and earnings per share, allows investors to more easily compare and evaluate the Company's financial performance relative to prior periods and industry comparables. These adjusted measures also aid investors in understanding the operating results of the Company absent such non-recurring or unusual events. Management considers EBITDA an important indicator of the operational strength and performance of its business, including the ability of the Company to pay interest, service debt and fund capital expenditures. Given the nature of the Company's operations, including the tangible assets necessary to carry out its production and distribution activities, depreciation and amortization represent Ethan Allen's largest non-cash charges. As these non-cash charges do not affect the Company's ability to service debt or make capital expenditures, it is important to consider EBITDA in addition to, but not as a substitute for, operating income, net income and other measures of financial performance reported in accordance with GAAP, including cash flow measures such as operating cash flow.

 

This press release and any related webcasts, conference calls and other related discussions should also be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended June 30, 2015 (the “2015 Form 10-K”) and other reports filed with the Securities and Exchange Commission. This press release and related discussions contain forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include statements about such matters as: our capital structure; future or targeted operational and financial performance; liquidity, capital and debt levels; strategic plans; stock repurchase and dividend plans; our inability to secure debt or other forms of financing; demand for our products; our position in markets we serve; regional and global economic and industry market conditions and changes therein. Such forward-looking statements reflect management’s current expectations concerning future events and results of the Company, and are subject to various assumptions, risks and uncertainties including specifically, and without limitation, those set forth in Part I, Item 1A “Risk Factors” of the 2015 Form 10-K. Accordingly, actual future events or results could differ materially from those contemplated by the forward-looking statements. The Company assumes no obligation to update or provide revision to any forward-looking statement at any time for any reason.

 

#######

 

 
 

 

 

Ethan Allen Interiors Inc.

Selected Financial Information

Unaudited

(in millions)

 

 

 

Selected Consolidated Financial Data:

 

 

   

Three Months Ended

   

Six Months Ended

 
   

12/31/15

   

12/31/14

   

12/31/15

   

12/31/14

 
                                 

Net sales

  $ 207.5     $ 197.1     $ 397.9     $ 387.8  

Gross margin

    55.9 %     53.8 %     55.5 %     54.4 %

Operating margin

    12.8 %     9.0 %     11.9 %     9.8 %

Operating margin (excluding special items*)

    12.2 %     9.5 %     11.6 %     10.5 %

Net income

  $ 16.5     $ 10.0     $ 29.7     $ 21.9  

Net income (excluding special items* and unusual income tax effects)

  $ 15.8     $ 10.8     $ 28.9     $ 23.5  

Operating cash flow

  $ 5.0     $ 3.7     $ 21.0     $ 10.5  

Capital expenditures

  $ 4.2     $ 7.7     $ 7.4     $ 13.1  

Acquisitions

  $ 0.0     $ 0.0     $ 0.0     $ 2.0  

Company stock repurchases (trade date)

  $ 12.2     $ 0.0     $ 12.2     $ 0.0  
                                 

EBITDA

  $ 31.3     $ 22.3     $ 57.0     $ 47.5  

EBITDA as % of net sales

    15.1 %     11.3 %     14.3 %     12.3 %
                                 

EBITDA (excluding special items*)

  $ 30.1     $ 23.4     $ 55.8     $ 50.0  

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

    14.5 %     11.9 %     14.0 %     12.9 %

 

 

 

 

 

Selected Financial Data by Business Segment:

 

   

Three Months Ended

   

Six Months Ended

 
   

12/31/15

   

12/31/14

   

12/31/15

   

12/31/14

 

Retail

                               

Net sales

  $ 164.7     $ 153.2     $ 310.7     $ 298.3  

Operating margin

    4.1 %     1.9 %     2.7 %     1.6 %

Operating margin (excluding special items*)

    3.3 %     2.0 %     2.3 %     1.9 %
                                 
                                 

Wholesale

                               

Net sales

  $ 126.4     $ 116.2     $ 246.9     $ 240.8  

Operating margin

    15.6 %     11.3 %     16.3 %     14.4 %

Operating margin (excluding special items*)

    15.6 %     12.1 %     16.3 %     15.0 %

 

* Special items consist of restructuring, impairment, transition charges and other certain items.

Related tax effects are calculated using a normalized income tax rate.

 

 
 

 

 

Ethan Allen Interiors Inc.

Condensed Consolidated Statements of Comprehensive Income

Unaudited

(in thousands)

 

 

 

   

Three Months Ended

   

Six Months Ended

 
   

12/31/15

   

12/31/14

   

12/31/15

   

12/31/14

 
                                 

Net sales

  $ 207,535     $ 197,067     $ 397,926     $ 387,773  

Cost of sales

    91,477       90,993       177,195       176,896  

Gross profit

    116,058       106,074       220,731       210,877  

Selling, general and administrative expenses

    89,551       88,414       173,324       172,747  

Operating income

    26,507       17,660       47,407       38,130  

Interest and other income

    49       89       175       232  

Interest expense

    431       1,882       887       3,771  

Income before income taxes

    26,125       15,867       46,695       34,591  

Income tax expense

    9,591       5,829       17,014       12,674  

Net income

  $ 16,534     $ 10,038     $ 29,681     $ 21,917  
                                 

Basic earnings per common share:

                               

Net income per basic share

  $ 0.58     $ 0.35     $ 1.05     $ 0.76  

Basic weighted average shares outstanding

    28,304       28,930       28,357       28,929  
                                 

Diluted earnings per common share:

                               

Net income per diluted share

  $ 0.58     $ 0.34     $ 1.04     $ 0.75  

Diluted weighted average shares outstanding

    28,537       29,295       28,605       29,272  
                                 

Comprehensive income:

                               

Net income

  $ 16,534     $ 10,038     $ 29,681     $ 21,917  

Other comprehensive income

                               

Currency translation adjustment

    (411 )     (1,231 )     (1,395 )     (2,086 )

Other

    8       22       14       38  

Other comprehensive income (loss) net of tax

    (403 )     (1,209 )     (1,381 )     (2,048 )

Comprehensive income

  $ 16,131     $ 8,829     $ 28,300     $ 19,869  

 

 
 

 

 

Ethan Allen Interiors Inc.

Condensed Consolidated Balance Sheets

Unaudited

(in thousands)

 

 

 

   

December 31,

   

June 30,

 
   

2015

   

2015

 

Assets

               

Current assets:

               

Cash and cash equivalents

  $ 57,031     $ 76,182  

Marketable securities

    -       2,198  

Accounts receivable, net

    10,059       12,547  

Inventories

    157,498       151,916  

Prepaid expenses & other current assets

    24,346       27,831  

Total current assets

    248,934       270,674  
                 

Property, plant and equipment, net

    273,477       277,035  

Intangible assets, net

    45,128       45,128  

Restricted cash and investments

    7,806       8,010  

Other assets

    3,465       5,130  
                 

Total Assets

  $ 578,810     $ 605,977  
                 

Liabilities and Shareholders' Equity

               

Current liabilities:

               

Current maturities of long-term debt

    3,053       3,034  

Customer deposits

    59,392       67,970  

Accounts payable

    16,995       18,946  

Accrued expenses & other current liabilities

    41,452       50,712  

Total current liabilities

    120,892       140,662  
                 

Long-term debt

    55,113       73,203  

Other long-term liabilities

    22,403       21,577  

Total liabilities

    198,408       235,442  
                 

Shareholders' equity:

               

Common stock

    489       489  

Additional paid-in-capital

    372,638       370,914  

Less: Treasury stock

    (617,789 )     (605,586 )

Retained earnings

    628,831       607,079  

Accumulated other comprehensive income

    (4,033 )     (2,638 )

Total Ethan Allen Interiors Inc. shareholders' equity

    380,136       370,258  

Noncontrolling interests

    266       277  

Total shareholders' equity

    380,402       370,535  
                 

Total Liabilities and Shareholders' Equity

  $ 578,810     $ 605,977  

 

 
 

 

 

Ethan Allen Interiors Inc.

GAAP Reconciliation

Three and Six Months Ended December 31, 2015 and 2014

Unaudited

(in thousands, except per share amounts)

 

   

Three Months Ended

   

Six Months Ended

 
   

December 31,

   

December 31,

 
   

2015

   

2014

   

2015

   

2014

 

Net Income / Earnings Per Share

                               

Net income

  $ 16,534     $ 10,038     $ 29,681     $ 21,917  

Special items net of related tax effects *

    (763 )     681       (754 )     1,578  

Unusual income tax effects

    56       37       (30 )     48  

Net income (excluding special items* and unusual income tax effects)

  $ 15,827     $ 10,756     $ 28,897     $ 23,543  

Diluted weighted average shares outstanding

    28,537       29,295       28,605       29,272  

Earnings per diluted share

  $ 0.58     $ 0.34     $ 1.04     $ 0.75  

Earnings per diluted share (excluding special items* and unusual income tax effects)

  $ 0.55     $ 0.37     $ 1.01     $ 0.80  
                                 

Consolidated Operating Income / Operating Margin

                               

Operating income

  $ 26,507     $ 17,660     $ 47,407     $ 38,130  

Add: special items *

    (1,201 )     1,072       (1,188 )     2,485  

Operating income (excluding special items*)

  $ 25,306     $ 18,732     $ 46,219     $ 40,615  

Net sales

  $ 207,535     $ 197,067     $ 397,926     $ 387,773  

Operating margin

    12.8 %     9.0 %     11.9 %     9.8 %

Operating margin (excluding special items*)

    12.2 %     9.5 %     11.6 %     10.5 %
                                 

Wholesale Operating Income / Operating Margin

                               

Wholesale operating income

  $ 19,690     $ 13,155     $ 40,277     $ 34,697  

Add: special items

    -       925       -       1,419  

Wholesale operating income (excluding special items*)

  $ 19,690     $ 14,080     $ 40,277     $ 36,116  

Wholesale net sales

  $ 126,413     $ 116,210     $ 246,868     $ 240,810  

Wholesale operating margin

    15.6 %     11.3 %     16.3 %     14.4 %

Wholesale operating margin (excluding special items*)

    15.6 %     12.1 %     16.3 %     15.0 %
                                 

Retail Operating Income / Operating Margin

                               

Retail operating income

  $ 6,689     $ 2,953     $ 8,329     $ 4,715  

Add: special items

    (1,201 )     147       (1,188 )     1,066  

Retail operating income (excluding special items*)

  $ 5,488     $ 3,100     $ 7,141     $ 5,781  

Retail net sales

  $ 164,703     $ 153,207     $ 310,743     $ 298,250  

Retail operating margin

    4.1 %     1.9 %     2.7 %     1.6 %

Retail operating margin (excluding special items*)

    3.3 %     2.0 %     2.3 %     1.9 %

 

* Special items consist of restructuring, transition charges and certain other items.

Related tax effects are calculated using a normalized income tax rate.

 

 
 

 

 

Ethan Allen Interiors Inc.

GAAP Reconciliation

Three and Six Months Ended December 31, 2015 and 2014

Unaudited

(in thousands, except per share amounts)

 

 

Three Months Ended

   

Six Months Ended

 
 

December 31,

   

December 31,

 
 

2015

   

2014

   

2015

   

2014

 
                               

EBITDA

                             

Net income

$ 16,534     $ 10,038     $ 29,681     $ 21,917  

Add:      

Interest expense, net   322       1,761       676       3,519  

 

Income tax expense   9,591       5,829       17,014       12,674  

 

Depreciation and amortization   4,806       4,675       9,589       9,394  

EBITDA

$ 31,253     $ 22,303     $ 56,960     $ 47,504  

Net sales

$ 207,535     $ 197,067     $ 397,926     $ 387,773  

EBITDA as % of net sales

  15.1 %     11.3 %     14.3 %     12.3 %

EBITDA

$ 31,253     $ 22,303     $ 56,960     $ 47,504  

Add: special items*

  (1,201 )     1,072       (1,188 )     2,485  

EBITDA (excluding special items)

$ 30,052     $ 23,375     $ 55,772     $ 49,989  

Net sales

$ 207,535     $ 197,067     $ 397,926     $ 387,773  

EBITDA as % of net sales (excluding special items)

  14.5 %     11.9 %     14.0 %     12.9 %

 

* Special items consist of restructuring, transition charges and certain other items.

Related tax effects are calculated using a normalized income tax rate.