Annual report pursuant to Section 13 and 15(d)

Note 15 - Segment Information

v2.4.0.8
Note 15 - Segment Information
 12 Months Ended
Jun. 30, 2014
Segment Reporting [Abstract]  
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 the wholesale segment, we maintain revenue information according to each respective product line (i.e. case goods, upholstery, or home accents and other). The allocation of retail sales by product line generally follows that of the wholesale segment (see the product line table below). 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,

 
   

2014

   

2013

   

2012

 

Case Goods

    36 %     37 %     38 %

Upholstered Products

    48 %     48 %     44 %

Home Accessories and Other

    16 %     15 %     18 %
      100 %     100 %     100 %

Information for each of the last three fiscal years ended June 30 is provided below (in thousands):


   

2014

   

2013

   

2012

 

Net sales:

                       

Wholesale segment

  $ 453,607     $ 434,439     $ 456,915  

Retail segment

    580,739       578,284       559,417  

Elimination of inter-company sales

    (287,687 )     (283,640 )     (286,959 )

Consolidated Total

  $ 746,659     $ 729,083     $ 729,373  
                         

Operating income (loss):

                       

Wholesale segment

  $ 57,816     $ 50,843     $ 64,436  

Retail segment

    10,515       8,016       (11,522 )

Adjustment of inter-company profit (1)

    1,305       1,578       (3,217 )

Consolidated Total

  $ 69,636     $ 60,437     $ 49,697  
                         

Depreciation & Amortization:

                       

Wholesale segment

  $ 7,887     $ 8,166     $ 7,525  

Retail segment

    10,043       9,842       11,056  

Consolidated Total

  $ 17,930     $ 18,008     $ 18,581  
                         

Capital expenditures:

                       

Wholesale segment

  $ 11,013     $ 7,024     $ 12,168  

Retail segment

    8,292       11,981       10,716  

Acquisitions

    -       770       520  

Consolidated Total

  $ 19,305     $ 19,775     $ 23,404  

   

June 30

2014

   

June 30

2013

   

June 30

2012

 

Total Assets:

                       

Wholesale segment

  $ 339,271     $ 291,942     $ 309,573  

Retail segment

    344,025       355,233       366,594  

Inventory profit elimination (2)

    (28,862 )     (29,890 )     (31,379 )

Consolidated Total

  $ 654,434     $ 617,285     $ 644,788  

 

(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,

 
   

2014

   

2013

     

2012

 

Independent design centers

    91       86         87  

Company operated design centers

    8       8         5  

Total international design centers

    99       94  

 

    92  
                           

Percentage of consolidated net sales

    10.6 %     8.9 %       10.2 %