Annual report pursuant to Section 13 and 15(d)

Note 15 - Segment Information

v3.5.0.2
Note 15 - Segment Information
 12 Months Ended
Jun. 30, 2016
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]
(15)     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 accents.
 
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 accents to a network of independently operated and Ethan Allen operated 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 operated 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 accents to consumers through a network of Company operated 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 accents 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 each segment, we maintain revenue information according to each respective product line (i.e. case goods, upholstery, or home accents and other). A breakdown of wholesale sales by product line for each of the last three fiscal years ended June 30 is provided below:
 
   
Fiscal Year Ended June 30,
  
   
2016
    
2015
    
2014
  
Case Goods
     32 %     34 %     36 %
Upholstered Products
     51 %     48 %     48 %
Home Accessories and Other
     17 %     18 %     16 %
      100 %     100 %     100 %
 
 
 
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
 
A breakdown of retail sales by product line for each of the last three fiscal years ended June 30 is provided below:
 
   
Fiscal Year Ended June 30,
  
   
2016
    
2015
    
2014
  
Case Goods
     30 %     32 %     33 %
Upholstered Products
     48 %     45 %     45 %
Home Accents and Other
     22 %     23 %     22 %
      100 %     100 %     100 %

Information for each of the last three fiscal years ended June 30 is provided below (in thousands):
 
   
2016
    
2015
    
2014
  
Net sales:
                        
Wholesale segment
   $ 491,467     $ 469,384     $ 453,607  
Retail segment
     626,511       579,713       580,739  
Elimination of inter-company sales
     (323,776 )     (294,497 )     (287,687 )
Consolidated Total
   $ 794,202     $ 754,600     $ 746,659  
                         
Operating income (loss):
                        
Wholesale segment
   $ 74,412     $ 66,988     $ 57,816  
Retail segment
    16,450       1,726       10,515  
Adjustment of inter-company profit (1)
     (1,683 )     (2,780 )     1,305  
Consolidated Total
   $ 89,179     $ 65,934     $ 69,636  
                         
Depreciation & Amortization:
                        
Wholesale segment
   $ 7,587     $ 8,044     $ 7,887  
Retail segment
     11,766       11,098       10,043  
Consolidated Total
   $ 19,353     $ 19,142     $ 17,930  
                         
Capital expenditures:
                        
Wholesale segment
   $ 12,446     $ 9,427     $ 11,013  
Retail segment
     10,521       10,360       8,292  
Acquisitions
     165       1,991       -  
Consolidated Total
   $ 23,132     $ 21,778     $ 19,305  
 
 
 
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
 
   
June 30
    
June 30
    
June 30
  
   
2016
    
2015
    
2014
  
Total Assets:
                        
Wholesale segment
   $ 271,116     $ 295,949     $ 339,271  
Retail segment
     339,942       341,886       344,025  
Inventory profit elimination (2)
     (33,649 )     (31,858 )     (28,862 )
Consolidated Total
   $ 577,409     $ 605,977     $ 654,434  
 
  (1)  Represents the change in wholesale profit contained in Ethan Allen design center inventory at the end of the period.
     
 
(2)
The wholesale profit contained in the retail segment inventory that has not yet been realized. These profits are realized when the related inventory is sold.
 
Our international net sales are comprised of our wholesale segment sales to independent retailers and our retail segment sales to consumers through the Company operated design centers. The number of international design centers, and the related net sales as a percent of our consolidated net sales is shown in the following table.
 
   
Fiscal Year Ended June 30,
  
   
2016
    
2015
    
2014
  
Independent design centers
     103       97       91  
Company operated design centers
     6       7       8  
Total international design centers
     109       104       99  
                         
Percentage of consolidated net sales
     9.2 %     11.6 %     10.6 %