Exhibit 99.1

 

ETHAN ALLEN REPORTS FISCAL 2019 FIRST QUARTER RESULTS

 

 

 

DANBURY, CT – October 24, 2018 – Ethan Allen Interiors Inc. ("Ethan Allen" or the "Company") (NYSE: ETH) today reported operating results for its fiscal 2019 first quarter ended September 30, 2018. Please refer to the accompanying financial statements and reconciliation to non-GAAP measures discussed below.

 

 

Fiscal 2019 first quarter compared to fiscal 2018 first quarter:

 

 

Consolidated net sales of $187.8 million increased 3.6%

 

 

GAAP diluted earnings per share of $0.33 compared to $0.27 and adjusted diluted earnings per share of $0.33 compared to $0.28, an increase of 17.9%

 

 

Wholesale net sales of $118.1 increased 5.8%; Retail net sales of $145.2 increased 2.6%

 

 

GAAP Operating margin of 6.3% compared to 6.4% and adjusted operating margin of 6.3% compared to 6.8%

 

 

Paid $5.1 million in dividends

 

“We are pleased with our results, and most importantly with the company's current position for growth,” said Farooq Kathwari, Ethan Allen's Chairman, President, and CEO. “Our focus on positioning ourselves as a leading interior design company differentiates us in a rapidly changing retail environment. Our approximately 1,500 in-house interior designers provide complimentary design service to clients around the world through our roughly 300 Design Centers, 200 of which are in North America. We have also made significant product improvements, repositioning about 70% of our line in the last three years and strengthened our North American-based manufacturing and logistics divisions as about 75% of our products are made in our own workshops.”

 

Mr. Kathwari continued, “During the first quarter, we increased our advertising spend by 12.8% as we introduced a new assortment of artisan-inspired furnishings. In September, we mailed a 116-page magazine and supported it with aggressive advertising in digital, print, and other mediums. We will continue our strong marketing initiatives throughout Fiscal 2019.”

 

 

FISCAL 2019 FIRST QUARTER FINANCIAL RESULTS:

 

Consolidated

 

Net sales were $187.8 million for the three months ended September 30, 2018 compared to $181.3 million for the same period in the prior year, an increase of 3.6%.

 

Gross profit was $101.5 million for the three months ended September 30, 2018 compared to $100.3 million in the comparable prior year period. Consolidated gross margin for the quarter was 54.0% compared to 55.3%. Our consolidated gross margin decreased due to a reduction in the percentage of retail sales to total sales and increased raw materials costs. Retail sales as a percent of total consolidated sales was 77.3% for the quarter compared to 78.1% in the prior year quarter.

 

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Operating expenses for the three months ended September 30, 2018 were $89.7 million or 47.7% of sales compared to $88.8 million or 49.0% of sales in the comparable prior year period. The 1.0% increase in operating expenses was primarily due to an increase in variable costs on increased sales, and higher advertising costs, which increased 12.8%, partly offset by prior year organizational changes and other exit costs that did not recur this year.

 

Operating income for the three months ended September 30, 2018 was $11.8 million or 6.3% of sales compared to $11.5 million or 6.4% of sales in the comparable prior year period. Adjusted operating income for the three months ended September 30, 2018 was $11.8 million or 6.3% of sales compared to $12.4 million or 6.8% of sales in the comparable prior year period. The primary causes for the 2.2% increase in operating income were the increased sales, and prior year organizational changes that did not recur, partly offset by increased variable costs due to increased sales, and raw material costs. (See Exhibit 1 for a reconciliation of GAAP to non-GAAP presentation)

 

Income taxes were $2.9 million for the three months ended September 30, 2018 and $4.0 million in the comparable prior year period. The effective rate this quarter was 24.9% compared to 35.1%. The effective tax rate for the quarter was lower due to the 2017 tax act.

 

Net income was $8.8 million or $0.33 per diluted share for the three months ended September 30, 2018 and $7.4 million or $0.27 per diluted share in the prior year comparable period. Adjusted net income was $8.8 million or $0.33 per diluted share for the three months ended September 30, 2018 and $7.8 million or $0.28 per diluted share in the prior year comparable period. (See Exhibit 1 for a reconciliation of GAAP to non-GAAP presentation)

 

Retail Segment

 

Net sales for the three months ended September 30, 2018 were $145.2 million compared to $141.6 million in the prior year comparable period, an increase of 2.6% compared to the prior year. Comparative net sales were $141.0 million compared to $139.9 million in the prior year period. Increased domestic sales were partly offset by decreased sales in Canada.

 

Total written orders for the retail division for the first quarter of fiscal 2019 were down 0.2% compared to the same prior year period, and comparable Design Center written orders were down 2.1% over the same period. Decreases were driven by decreased orders in Canada.

 

Operating income was a loss of $1.6 million for the three months ended September 30, 2018, an improvement of $1.2 million from a loss of $2.8 million over the same prior year period, driven by increased sales in the current year period.

 

Wholesale Segment

 

Net sales of $118.1 million compared to $111.6 million in the prior year quarter, an increase of 5.8%. The increase in sales is primarily due to increased contract sales, primarily the GSA, partly offset by reductions to international independent retailers.

 

Operating income of $14.3 million compared to $13.5 million in the prior year quarter. The increase was largely due to the increase in current period income, partly offset by increased raw material costs.

 

Balance Sheet and Cash Flow

 

Total debt of $1.5 million decreased $0.2 million from June 30, 2018.

 

Total cash and cash equivalents of $39.6 million increased $17.2 million from June 30, 2018, paying out $5.1 million in dividends.

 

Inventories of $165.7 million increased by $2.7 million from June 30, 2018.

 

Capital expenditures were $2.8 million fiscal year to date at September 30, 2018 compared to $2.7 million for the same prior year period. Expenditures were primarily at retail design centers.

 

 

 

 

Dividends During the year to date period ended September 30, 2018, we paid $5.1 million of dividends, maintaining our $0.19 quarterly dividend rate with the prior fiscal year.

 

Analyst Conference Call

 

Ethan Allen will conduct an analyst conference call at 5:00 PM (Eastern) on Wednesday, October 24 to discuss its financial results and business initiatives. The live webcast is accessible via the Company’s website at http://ethanallen.com/investors. To participate in the call, dial 844-822-0103 (or 614-999-9166 for international callers) and provide conference ID# 50728596. An archived recording of the call will be made available for at least 60-days on the Company’s website.

 

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 75% of its products are made in its North American plants. For more information on Ethan Allen's products and services, visit ethanallen.com.

 


Investor Relations Contact
Corey Whitely
Executive Vice President, Administration
Chief Financial Officer and Treasurer
IR@ethanallen.com

 

Non-GAAP Financial Information

 

This press release is intended to supplement, rather than to supersede, the Company's condensed consolidated financial statements, which are prepared and presented in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). In this press release we have included financial measures that are not prepared in accordance with GAAP. The Company uses the following non-GAAP financial measures: “adjusted operating expenses”, “adjusted operating income”, “adjusted operating margin”, “adjusted net income”, “adjusted earnings per share”, and earnings before interest, taxes, depreciation and amortization ("EBITDA") (collectively “non-GAAP financial measures”). We compute these non-GAAP financial measures by adjusting the GAAP measures to remove the impact of certain recurring and non-recurring charges and gains and the tax effect of these adjustments. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The Company uses these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. The Company believes that they provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. The non-GAAP financial measures used by the Company in this press release may be different from the non-GAAP financial measures, including similarly titled measures, used by other companies. A reconciliation of these financial measures to the most directly comparable financial measure reported in accordance with GAAP is also provided at the end of this press release.

 

 

 

 

Forward-Looking Information

 

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, 2018 and other reports filed with the Securities and Exchange Commission.

 

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which represent our management's beliefs and assumptions concerning future events based on information currently available to us relating to our future results. Such forward-looking statements are identified in this press release and any related webcasts, conference calls and other related discussions or documents incorporated herein by reference by use of forward-looking words such as "anticipate", "believe", "plan", "estimate", "expect", "intend", "will", "may", "continue", "project", "target", "outlook", "forecast", "guidance", and similar expressions and the negatives of such forward-looking words. These forward-looking statements are subject to management decisions and various assumptions about future events, and are not guarantees of future performance. Actual results could differ materially from those anticipated in the forward-looking statements due to a number of risks and uncertainties including, but not limited to: competition from overseas manufacturers and domestic retailers; our anticipating or responding to changes in consumer tastes and trends in a timely manner; our ability to maintain and enhance our brand, marketing and advertising efforts and pricing strategies; changes in global and local economic conditions that may adversely affect consumer demand and spending, our manufacturing operations or sources of merchandise and international operations; changes in U.S. policy related to imported merchandise; an economic downturn; potentially negative or unexpected tax consequences of changes to fiscal and tax policies; our limited number of manufacturing and logistics sites; fluctuations in the price, availability and quality of raw materials; environmental, health and safety requirements; product safety concerns; disruptions to our technology infrastructure (including cyber-attacks); increasing labor costs, competitive labor markets and our continued ability to retain high-quality personnel and risks of work stoppages; loss of key personnel; our ability to obtain sufficient external funding to finance our operations and growth; access to consumer credit; the effect of operating losses on our ability to pay cash dividends; additional impairment charges that could reduce our profitability; our ability to locate new design center sites and/or negotiate favorable lease terms for additional design centers or for the expansion of existing design centers; results of operations for any quarter are not necessarily indicative of our results of operations for a full year; possible failure to protect our intellectual property; and those matters discussed in "Item 1A - Risk Factors" of our Annual Report on Form 10-K for the year ended June 30, 2018, and elsewhere in this press release and our SEC filings. Accordingly, actual circumstances and results could differ materially from those contemplated by the forward-looking statements.

 

Given the risks and uncertainties surrounding forward-looking statements, you should not place undue reliance on these statements. Many of these factors are beyond our ability to control or predict. Our forward-looking statements speak only as of the date of this press release. Other than as required by law, we undertake no obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise.

 

 

 

 

Ethan Allen Interiors Inc.

Selected Financial Information

Unaudited

(in millions)

Selected Consolidated Financial Data:

   

Three Months Ended

 
   

09/30/18

   

09/30/17

 

Net sales

  $ 187.8     $ 181.3  

Gross margin

    54.0 %     55.3 %

Operating margin

    6.3 %     6.4 %

Adjusted operating margin *

    6.3 %     6.8 %

Net income

  $ 8.8     $ 7.4  

Adjusted net income *

  $ 8.8     $ 7.8  

Operating cash flow

  $ 24.4     $ 17.6  

Capital expenditures

  $ 2.8     $ 2.7  

Company stock repurchases (trade date)

  $ 0.0     $ 0.0  
                 

EBITDA

  $ 16.8     $ 16.5  

EBITDA as % of net sales

    8.9 %     9.1 %
                 

Adjusted EBITDA *

  $ 16.8     $ 17.4  

Adjusted EBITDA as % of net sales *

    8.9 %     9.6 %

 

Selected Financial Data by Business

Segment:

 
   

Three Months Ended

 

Retail

 

09/30/18

   

09/30/17

 

Net sales

  $ 145.2     $ 141.6  

Operating margin

    -1.1 %     -2.0 %

Adjusted operating margin *

    -1.1 %     -2.0 %
                 

Wholesale

               

Net sales

  $ 118.1     $ 111.6  

Operating margin

    12.1 %     12.1 %

Adjusted operating margin *

    12.1 %     12.8 %

 

 

 

 

Ethan Allen Interiors Inc.

Condensed Consolidated Statements of Comprehensive Income

Unaudited

(in thousands)

   

Three Months Ended

 
   

09/30/18

   

09/30/17

 

Net sales

  $ 187,785     $ 181,302  

Cost of sales

    86,335       80,979  

Gross profit

    101,450       100,323  

Selling, general and administrative expenses

    89,651       88,774  

Operating income

    11,799       11,549  

Interest and other income

    26       56  

Interest expense

    53       185  

Income before income taxes

    11,772       11,420  

Income tax expense

    2,932       4,005  

Net income

  $ 8,840     $ 7,415  
                 

Basic earnings per common share:

               

Net income per basic share

  $ 0.33     $ 0.27  

Basic weighted average shares outstanding

    26,539       27,459  
                 

Diluted earnings per common share:

               

Net income per diluted share

  $ 0.33     $ 0.27  

Diluted weighted average shares outstanding

    26,940       27,756  
                 

Comprehensive income:

               

Net income

  $ 8,840     $ 7,415  

Other comprehensive income

               

Currency translation adjustment

    1,247       (130 )

Other

    (26 )     (14 )

Other comprehensive income (loss) net of tax

    1,221       (144 )

Comprehensive income

  $ 10,061     $ 7,271  

 

 

 

 

Ethan Allen Interiors Inc.

Condensed Consolidated Balance Sheets

Unaudited

(in thousands)

   

September 30,

   

June 30,

 

 

 

2018

   

2018

 
Assets            

Current assets:

               

Cash and cash equivalents

  $ 39,590     $ 22,363  

Accounts receivable, net

    12,772       12,364  

Inventories

    165,719       163,012  

Prepaid expenses & other current assets

    18,211       16,686  

Total current assets

    236,292       214,425  
                 

Property, plant and equipment, net

    266,650       267,903  

Intangible assets, net

    45,128       45,128  

Other assets

    2,884       2,977  

Total Assets

  $ 550,954     $ 530,433  

Liabilities and Shareholders' Equity

               

Current liabilities:

               

Current maturities of long-term debt

    552       584  

Customer deposits

    67,576       61,248  

Accounts payable

    18,807       18,768  

Accrued expenses & other current liabilities

    49,190       40,660  

Total current liabilities

    136,125       121,260  
                 

Long-term debt

    927       1,096  

Other long-term liabilities

    23,915       24,207  

Total liabilities

    160,967       146,563  

Shareholders' equity:

               

Common stock

    490       490  

Additional paid-in-capital

    378,078       376,950  

Less: Treasury stock

    -656,551       -656,551  

Retained earnings

    672,781       669,013  

Accumulated other comprehensive income

    -4,924       -6,171  

Total Ethan Allen Interiors Inc. shareholders' equity

    389,874       383,731  

Noncontrolling interests

    113       139  

Total shareholders' equity

    389,987       383,870  

Total Liabilities and Shareholders' Equity

  $ 550,954     $ 530,433  

 

 

 

 

Ethan Allen Interiors Inc.

Design Center Activity

First Quarter Fiscal 2019

Unaudited

           

Company

         
   

Independent

   

Owned

   

Total

 

Balance at beginning of period

    148       148       296  

Additions (includes Relocations) (1)

    6       0       6  

Closings (includes Relocations) (1)

    (1 )     (1 )     (2 )

Transfers

    0       0       0  

Balance at end of period

    153       147       300  
                         

United States

    43       141       184  

International

    110       6       116  
                         

(1) Relocations in additions & closing

    0       0       0  

 

 

 

 

Ethan Allen Interiors Inc.

GAAP Reconciliation

Three Months Ended September 30, 2018 and 2017

Unaudited

(in thousands, except per share amounts)

   

Three Months Ended

 
   

September 30,

 
   

2018

   

2017

 

Net Income / Earnings Per Share

               

Net income

  $ 8,840     $ 7,415  

Adjustments net of related tax effects *

    0       580  

Normalized income tax effects *

    0       -163  

Adjusted net income

  $ 8,840     $ 7,832  

Diluted weighted average shares outstanding

    26,940       27,756  

Earnings per diluted share

  $ 0.33     $ 0.27  

Adjusted earnings per diluted share

  $ 0.33     $ 0.28  
                 

Consolidated Operating Income / Operating Margin

               

Operating income

  $ 11,799     $ 11,549  

Add: adjustments *

    0       847  

Adjusted operating income *

  $ 11,799     $ 12,396  
                 

Net sales

  $ 187,785     $ 181,302  

Operating margin

    6.3 %     6.4 %

Adjusted operating margin *

    6.3 %     6.8 %
                 

Wholesale Operating Income / Operating Margin

               

Wholesale operating income

  $ 14,315     $ 13,462  

Add: adjustments *

    0       847  

Adjusted wholesale operating income *

  $ 14,315     $ 14,309  

Wholesale net sales

  $ 118,072     $ 111,587  

Wholesale operating margin

    12.1 %     12.1 %

Adjusted wholesale operating margin *

    12.1 %     12.8 %

Retail Operating Income / Operating Margin

               

Retail operating income

  $ -1,559     $ -2,773  

Add: adjustments *

    0       0  

Adjusted retail operating income *

  $ -1,559     $ -2,773  

Retail net sales

  $ 145,214     $ 141,575  

Retail operating margin

    -1.1 %     -2.0 %

Adjusted retail operating margin *

    -1.1 %     -2.0 %

 

 

 

 

Ethan Allen Interiors Inc.

GAAP Reconciliation

Three Months Ended September 30, 2018 and 2017

Unaudited

(in thousands, except per share amounts)

   

Three Months Ended

 
   

September 30,

 
   

2018

   

2017

 

EBITDA

               

Net income

  $ 8,840     $ 7,415  

Add: interest expense, net

    -18       26  

income tax expense

    2,932       4,005  

depreciation and amortization

    5,000       5,086  

EBITDA

  $ 16,754     $ 16,532  

Net sales

  $ 187,785     $ 181,302  

EBITDA as % of net sales

    8.9 %     9.1 %
                 

EBITDA

  $ 16,754     $ 16,532  

Add: adjustments *

    0       914  

Adjusted EBITDA

  $ 16,754     $ 17,446  

Net sales

  $ 187,785     $ 181,302  

Adjusted EBITDA as % of net sales

    8.9 %     9.6 %

 

 

 

 

* Adjustments consist of the following:

   

 

   

Three Months Ended

 
   

September 30,

 
   

2018

   

2017

 

Adjustments net of related income tax effects:

               

Real estate losses

  $ 0     $ 0  

Organizational changes and other exit costs

    0       847  

Adjustments to operating income

    0       847  

Early debt extinguishment

    0       67  

Adjustments to EBITDA

    0       914  

Related tax effects

    0       -334  

Adjustments net of related income tax effects

  $ 0     $ 580  

 

Related tax effects are calculated using a normalized tax rate of 24.5% in the current fiscal year and 36.5% in the prior fiscal year