Quarterly report pursuant to Section 13 or 15(d)

Note 13 - Segment Information

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Note 13 - Segment Information
 6 Months Ended
Dec. 31, 2012
Segment Reporting Disclosure [Text Block]
(13) 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 accessories.

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 accessories 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 accessories 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 accessories 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 accessories and other). The allocation of retail sales by product line is reasonably similar to that of the wholesale segment. A breakdown of wholesale sales by these product lines for the three and six months ended December 31, 2012 and 2011 is provided as follows:

   
Three months ended
December 31,
   
Six months ended
December 31,
 
   
2012
   
2011
   
2012
   
2011
 
Case Goods
    37 %     39 %     38 %     39 %
Upholstered Products
    48 %     44 %     47 %     45 %
Home Accessories and Other
    15 %     17 %     15 %     16 %
      100 %     100 %     100 %     100 %

Segment information for the three and six months ended December 31, 2012 and 2011 is provided below (in thousands):

   
Three months ended
December 31,
   
Six months ended
December 31,
 
   
2012
   
2011
   
2012
   
2011
 
Net sales:
                       
Wholesale segment
  $ 108,172     $ 106,631     $ 219,589     $ 223,025  
Retail segment
    151,827       143,104       300,906       284,285  
Elimination of inter-company sales
    (68,748 )     (66,460 )     (141,807 )     (139,114 )
Consolidated Total
  $ 191,251     $ 183,275     $ 378,688     $ 368,196  
                                 
Operating income (loss):
                               
Wholesale segment
  $ 8,892     $ 15,702     $ 24,897     $ 31,393  
Retail segment
    6,017       (2,532 )     7,065       (4,029 )
Adjustment of inter-company profit (1)
    2,448       768       3,349       212  
Consolidated Total
  $ 17,357     $ 13,938     $ 35,311     $ 27,576  
                                 
Depreciation & Amortization:
                               
Wholesale segment
  $ 1,954     $ 1,780     $ 3,981     $ 3,984  
Retail segment
    2,406       2,813       4,985       5,598  
Consolidated Total
  $ 4,360     $ 4,593     $ 8,966     $ 9,582  
                                 
Capital expenditures:
                               
Wholesale segment
  $ 1,989     $ 6,598     $ 4,643     $ 8,403  
Retail segment
    3,258       1,419       8,922       2,989  
Acquisitions
    -       -       598       -  
Consolidated Total
  $ 5,247     $ 8,017     $ 14,163     $ 11,392  

   
December 31,
2012
   
June 30,
2012
 
Total Assets:
           
Wholesale segment
  $ 291,648     $ 309,573  
Retail segment
    351,400       366,594  
Inventory profit elimination (2)
    (27,672 )     (31,379 )
Consolidated Total
  $ 615,376     $ 644,788  

(1)
Represents the change in wholesale profit contained in the retail segment inventory at the end of the period.
(2)
Represents 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.

At December 31, 2012, there were 91 independent retail design centers located outside the United States compared with 84 at December 31, 2011, with the increase occurring in China. Approximately 5.9% of our net sales during the current six months were derived from sales to international retail design centers compared with 6.1% in the prior year.