Annual report pursuant to Section 13 and 15(d)

Note 15 - Segment Information

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Note 15 - Segment Information
12 Months Ended
Jun. 30, 2015
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 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,
 
   
2015
   
2014
   
2013
 
Case Goods
    34 %     36 %     37 %
Upholstered Products
    48 %     48 %     48 %
Home Accessories and Other
    18 %     16 %     15 %
      100 %     100 %     100 %
 
Information for each of the last three fiscal years ended June 30 is provided below (in thousands):
 
   
2015
   
2014
   
2013
 
Net sales:
                       
Wholesale segment
  $ 469,384     $ 453,607     $ 434,439  
Retail segment
    579,713       580,739       578,284  
Elimination of inter-company sales
    (294,497 )     (287,687 )     (283,640 )
Consolidated Total
  $ 754,600     $ 746,659     $ 729,083  
                         
Operating income (loss):
                       
Wholesale segment
  $ 66,988     $ 57,816     $ 50,843  
Retail segment
    1,726       10,515       8,016  
Adjustment of inter-company profit (1)
    (2,780 )     1,305       1,578  
Consolidated Total
  $ 65,934     $ 69,636     $ 60,437  
                         
Depreciation & Amortization:
                       
Wholesale segment
  $ 8,044     $ 7,887     $ 8,166  
Retail segment
    11,098       10,043       9,842  
Consolidated Total
  $ 19,142     $ 17,930     $ 18,008  
                         
Capital expenditures:
                       
Wholesale segment
  $ 9,427     $ 11,013     $ 7,024  
Retail segment
    10,360       8,292       11,981  
Acquisitions
    1,991       -       770  
Consolidated Total
  $ 21,778     $ 19,305     $ 19,775  
 
 
   
June 30
   
June 30
   
June 30
 
   
2015
   
2014
   
2013
 
Total Assets:
                       
Wholesale segment
  $ 297,280     $ 339,271     $ 291,942  
Retail segment
    341,886       344,025       355,233  
Inventory profit elimination (2)
    (31,858 )     (28,862 )     (29,890 )
Consolidated Total
  $ 607,308     $ 654,434     $ 617,285  
(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,
 
   
2015
   
2014
   
2013
 
Independent design centers
    97       91       86  
Company operated design centers
    7       8       8  
Total international design centers
    104       99       94  
                         
Percentage of consolidated net sales
    11.6 %     10.6 %     8.9 %