Quarterly report pursuant to Section 13 or 15(d)

Note 13 - Segment Information

v2.4.0.8
Note 13 - Segment Information
 6 Months Ended
Dec. 31, 2013
Segment Reporting [Abstract]  
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 of our vertically integrated business which, although they operate separately and provide their own distinctive services, enable us to more efficiently control the quality and cost of 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, 2013 and 2012 is provided as follows:


   

Three months ended

   

Six months ended

 
   

December 31,

   

December 31,

 
   

2013

   

2012

   

2013

   

2012

 

Case Goods

    33 %     37 %     34 %     38 %

Upholstered Products

    51 %     48 %     49 %     47 %

Home Accessories and Other

    16 %     15 %     17 %     15 %
      100 %     100 %     100 %     100 %

Segment information for the three and six months ended December 31, 2013 and 2012 is provided below (in thousands):


   

Three months ended

   

Six months ended

 
   

December 31,

   

December 31,

 
   

2013

   

2012

   

2013

   

2012

 

Net sales:

                               

Wholesale segment

  $ 113,133     $ 108,172     $ 226,331     $ 219,589  

Retail segment

    151,496       151,827       293,323       300,906  

Elimination of inter-company sales

    (71,525 )     (68,748 )     (144,891 )     (141,807 )

Consolidated Total

  $ 193,104     $ 191,251     $ 374,763     $ 378,688  
                                 

Operating income:

                               

Wholesale segment

  $ 14,366     $ 8,892     $ 30,498     $ 24,897  

Retail segment

    4,206       6,017       4,002       7,065  

Adjustment of inter-company profit (1)

    1,278       2,448       1,294       3,349  

Consolidated Total

  $ 19,850     $ 17,357     $ 35,794     $ 35,311  
                                 

Depreciation & Amortization:

                               

Wholesale segment

  $ 1,915     $ 1,954     $ 3,806     $ 3,981  

Retail segment

    2,495       2,406       4,893       4,985  

Consolidated Total

  $ 4,410     $ 4,360     $ 8,699     $ 8,966  
                                 

Capital expenditures:

                               

Wholesale segment

  $ 3,018     $ 1,989     $ 4,492     $ 4,643  

Retail segment

    2,235       3,258       4,066       8,922  

Acquisitions

    -       -       -       598  

Consolidated Total

  $ 5,253     $ 5,247     $ 8,558     $ 14,163  

   

December 31,

   

June 30,

 
   

2013

   

2013

 

Total Assets:

               

Wholesale segment

  $ 310,272     $ 291,942  

Retail segment

    343,542       355,233  

Inventory profit elimination (2)

    (28,533 )     (29,890 )

Consolidated Total

  $ 625,281     $ 617,285  

(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.


Our international net sales are comprised of our wholesale segment sales to independent retailers and our retail segment sales to consumers through our 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. 


   

Six months ended December 31,

 
   

2013

   

2012

 

Independent design centers

    87       91  

Company operated design centers

    8       7  

Total international design centers

    95       98  

Percentage of consolidated net sales

    9.8 %     9.9 %