Quarterly report pursuant to Section 13 or 15(d)

Note 15 - Segment Information

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Note 15 - Segment Information
 9 Months Ended
Mar. 31, 2012
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 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 nine months ended March 31, 2012 and 2011 is provided as follows:

   
Three months ended
   
Nine months ended
 
   
March 31,
   
March 31,
 
   
2012
   
2011
   
2012
   
2011
 
Case Goods
    39 %     43 %     39 %     40 %
Upholstered Products
    43 %     41 %     44 %     45 %
Home Accessories and Other
    18 %     16 %     17 %     15 %
      100 %     100 %     100 %     100 %

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

   
Three months ended
   
Nine months ended
 
   
March 31,
   
March 31,
 
   
2012
   
2011
   
2012
   
2011
 
Net sales:
                       
Wholesale segment
  $ 121,044     $ 104,119     $ 344,069     $ 312,467  
Retail segment
    131,402       117,029       415,687       369,066  
Elimination of inter-company sales
    (76,585 )     (58,326 )     (215,699 )     (180,525 )
Consolidated Total
  $ 175,861     $ 162,822     $ 544,057     $ 501,008  
                                 
Operating income (loss):
                               
Wholesale segment
  $ 18,191     $ 13,253     $ 49,584     $ 35,076  
Retail segment (1)(2)
    (6,549 )     (7,271 )     (10,578 )     (12,767 )
Adjustment of inter-company profit (3)
    (3,855 )     (1,225 )     (3,643 )     (1,691 )
Consolidated Total
  $ 7,787     $ 4,757     $ 35,363     $ 20,618  
                                 
Depreciation & Amortization:
                               
Wholesale segment
  $ 1,733     $ 2,350     $ 5,717     $ 7,313  
Retail segment
    2,777       2,841       8,375       8,807  
Consolidated Total
  $ 4,510     $ 5,191     $ 14,092     $ 16,120  
                                 
Capital expenditures:
                               
Wholesale segment
  $ 1,366     $ 1,450     $ 9,769     $ 4,136  
Retail segment
    7,078       309       10,067       1,595  
Acquisitions
    520       426       520       611  
Consolidated Total
  $ 8,964     $ 2,185     $ 20,356     $ 6,342  

   
March 31,
   
June 30,
 
   
2012
   
2011
 
Total Assets:
           
Wholesale segment
  $ 298,460     $ 309,081  
Retail segment
    366,418       347,044  
Inventory profit elimination (4)
    (31,447 )     (27,800 )
Consolidated Total
  $ 633,431     $ 628,325  

(1)
Operating income (loss) for the retail segment for the three months ended March 31, 2011 includes pre-tax restructuring and impairment charges of $0.1 million.
(2)
Operating income (loss) for the retail segment for the nine months ended March 31, 2011 includes pre-tax restructuring and impairment charges of  $0.4 million.
(3)
Represents the change in wholesale profit contained in the retail segment inventory at the end of the period.
(4)
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 March 31, 2012, there were 86 independent retail design centers located outside the United States compared with 64 at March 31, 2011, with the increase occurring in China. Approximately 6.5% of our net sales during the current nine months were derived from sales to international retail design centers compared with 7.2% in the prior year.