Ethan Allen Interiors Inc. (“Ethan Allen” or the “Company”) (NYSE:
ETH) reported financial results for its first quarter ended
September 30, 2019.
FIRST QUARTER FISCAL 2020 COMPARED TO
FIRST QUARTER FISCAL 2019*
- Diluted earnings per share (“EPS”) of $0.53. Adjusted diluted
EPS increased 6.1% to $0.35 compared with $0.33.
- Consolidated operating margin of 10.7% compared with 6.3%.
Adjusted operating margin increased to 7.0%.
- Consolidated net sales of $173.9 million; Retail net sales of
$137.3 million; Wholesale net sales of $101.3 million.
- Consolidated gross margin of 53.9% compared with 54.0%.
Adjusted gross margin of 56.3%.
- Cash of $45.9 million increased 120% from June 30, 2019.
- Received $12.3 million on sale of Passaic, New Jersey
facility.
- Paid regular cash dividend of $5.1 million and increased
quarterly cash dividend by 10.5% to $0.21 per share,
highlighting continued commitment to returning value to
shareholders and the strength of its balance sheet.
* See reconciliation of U.S. GAAP to adjusted
key financial measures in the back of this press release
Farooq Kathwari, Ethan Allen’s Chairman,
President and CEO commented, “While we have continued to have
strong earnings and cash generation, we believe we have a major
opportunity to further increase our profitability by increasing our
sales and leveraging our more efficient vertically integrated
structure. We continue to strengthen our talent, marketing, retail
network, products, manufacturing, logistics and technology, while
also maintaining our focus on good governance and social
responsibility.”
Mr. Kathwari continued, “During October, we
launched a major initiative — the Ethan Allen Member Program. Those
who enroll receive special members-only pricing, complimentary
interior design service, free shipping and white glove in-home
delivery, and in our U.S. design centers, access to special
financing options. The membership program will benefit our clients,
enable our team of about 1,500 North American interior designers
and our vertically integrated operations to operate more
efficiently with the opportunity to improve our operating margins.
About 75% of our products are made in our North American workshops.
The membership program was launched in October with a strong
advertising campaign utilizing direct mail, television and digital
mediums. We plan to continue with enhanced marketing as we move
through our fiscal 2020 year under our new ‘We Make the American
Home’ campaign designed to further amplify our design heritage and
quintessential American brand identity.”
Mr. Kathwari further commented, “Today we also
start our annual convention with interior designers and retail
management from all over the world. They will get a first look at
our upcoming introductions for spring 2020 including an upholstery
brand aimed at younger customers and a modern take on farmhouse
styles.”
“While our wholesale orders from China declined
38% mainly due to the imposition of tariffs by China, total
wholesale orders excluding our China business increased 1%.
Including the impact of decreased China orders, our total wholesale
orders decreased 1.5% in the first quarter of fiscal 2020 compared
with the same quarter last fiscal year. As expected, our contract
business, driven by the GSA contract, had another strong quarter.
We believe our new format of reporting wholesale orders booked
through all channels provides a more holistic view of our business
than our previous reporting approach focusing on the change in only
the Company’s retail division written orders,” Mr. Kathwari
concluded.
KEY FINANCIAL MEASURES*
(Condensed and Unaudited) |
|
|
|
|
|
|
(In thousands, except per share
data) |
Three Months Ended |
|
|
|
|
September 30, |
|
|
|
|
|
2019 |
|
|
2018 |
|
|
% Change |
|
|
Net sales |
$ |
173,921 |
|
$ |
187,785 |
|
|
(7.4 |
%) |
|
|
|
|
|
|
|
|
|
GAAP gross profit |
$ |
93,794 |
|
$ |
101,450 |
|
|
(7.5 |
%) |
|
|
Adjusted gross profit * |
$ |
97,934 |
|
$ |
101,450 |
|
|
(3.5 |
%) |
|
|
GAAP gross margin |
|
53.9 |
% |
|
54.0 |
% |
|
|
|
|
Adjusted gross margin * |
|
56.3 |
% |
|
54.0 |
% |
|
|
|
|
|
|
|
|
|
|
GAAP operating income |
$ |
18,641 |
|
$ |
11,799 |
|
|
58.0 |
% |
|
|
Adjusted operating income * |
$ |
12,213 |
|
$ |
11,799 |
|
|
3.5 |
% |
|
|
GAAP operating margin |
|
10.7 |
% |
|
6.3 |
% |
|
|
|
|
Adjusted operating margin * |
|
7.0 |
% |
|
6.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
GAAP Diluted EPS |
$ |
0.53 |
|
$ |
0.33 |
|
|
60.6 |
% |
|
|
Adjusted Diluted EPS * |
$ |
0.35 |
|
$ |
0.33 |
|
|
6.1 |
% |
|
|
|
|
|
|
|
|
|
Cash flows from operating
activities |
$ |
23,396 |
|
$ |
24,440 |
|
|
(4.3 |
%) |
|
|
* See reconciliation of U.S. GAAP to adjusted
key financial measures in the back of this press release
FISCAL 2020 FIRST QUARTER FINANCIAL
RESULTS
Consolidated
Net sales were $173.9 million
compared with $187.8 million for the same prior year period, a
decrease of 7.4%. Net sales during the just completed first quarter
were negatively impacted by a $4.7 million decrease in consolidated
international net sales from our combined retail and wholesale
segments, which was primarily related to lower sales to China and
in Canada due to the economic uncertainty surrounding international
trade disputes and a challenging global economy. Net sales to China
were 49.4% lower in the first quarter of fiscal 2020 compared with
the same quarter last fiscal year.
Gross profit was $93.8 million
compared with $101.5 million for the prior year period due to a
decline in profit within the Company’s wholesale segment partially
offset by slight growth within the retail segment. Wholesale gross
profit in fiscal 2020 was negatively impacted by lower sales
volume, partially offset by a change in product mix. Consolidated
gross margin for the quarter was 53.9% compared with 54.0% for the
prior year period. Retail sales, as a percentage of total
consolidated net sales, was 78.9% compared with 77.3% in the prior
year first quarter, which favorably impacted consolidated gross
margin. Adjusted gross margin, which excludes restructuring
activities from the previously announced plans to further optimize
the Company’s manufacturing and logistics operations, was 56.3%.
Restructuring charges totaling $4.1 million, which included the
write off of inventory, unfavorable manufacturing variances and
incremental freight and relocation costs, negatively impacted the
Company’s fiscal 2020 gross margin by 240 basis points.
Operating expenses were $75.2
million or 43.2% of net sales compared with $89.7 million or 47.7%
of net sales in the same prior year period. The decrease was
primarily due to a gain of $11.5 million from the sale of the
Passaic property during the first quarter of fiscal 2020. The gain
on the sale was reported in the wholesale segment within
restructuring charges. In addition to the gain on the sale,
operating expenses were lower in the first quarter of fiscal 2020
due to lower retail depreciation expense and lower wholesale
distribution costs from a lower volume of shipments.
Operating income was $18.6
million or 10.7% of net sales compared with operating income of
$11.8 million or 6.3% of net sales in the prior year period.
Adjusted operating income was $12.2 million or 3.5% higher than
last year due to lower depreciation expense and a decrease in
wholesale distribution costs partially offset by lower net
sales.
Income tax expense was $4.6
million in the current year first quarter compared with $2.9
million a year ago. The effective rate in the current first quarter
was 24.4% compared with 24.9% last year.
Diluted EPS was $0.53 per
diluted share compared with $0.33 per diluted share in the prior
year comparable period. The gain on the sale of the Passaic
property partially offset with other fiscal 2020 restructuring
activities and corporate actions increased diluted EPS by $0.18.
Adjusted diluted EPS of $0.35 in the current year first quarter
represents 6.1% of growth over the prior year first quarter and was
driven by improved gross margin and cost containment efforts.
Wholesale Segment
Net sales of $101.3 million
compared with $118.1 million in the prior year quarter, a decrease
of 14.2%. The lower net sales were primarily due to a decline in
sales to China and the Company’s North American retail network.
Partially offsetting these declines was growth in contract sales,
which grew $4.5 million year over year.
Wholesale orders booked, which
represents orders booked through all of the Company’s channels, was
down 1.5% compared with the same quarter last fiscal year.
Wholesale orders from China declined 37.6% from a year ago mainly
due to the imposition of tariffs by China and the economic
uncertainty surrounding the international trade disputes. Excluding
orders from China, total wholesale orders increased 0.7%, which was
driven by continued growth in the Company’s contract business,
including the GSA contract.
Operating income increased
18.3% to $16.9 million compared with $14.3 million for the prior
year period due to the gain on the sale of the Passaic property
partially offset by restructuring actions. Adjusted wholesale
operating income decreased 27.7% largely due to lower sales
volume.
Retail Segment
Net sales were $137.3 million
compared with $145.2 million in the prior year comparable period, a
decrease of 5.5%. There was a 5.3% decrease in net sales in the
U.S., while net sales from the Canadian design centers decreased
10.8% due to softer order trends as consumers have been cautious
with discretionary spending. There were 145 Company operated design
centers at the end of the first quarter of fiscal 2020, two less
than the 147 in the prior year period.
Operating income was $1.6
million, or 1.1% of net sales in the first quarter of fiscal 2020
compared with a loss of $1.6 million for the prior year period.
Growth in operating income was driven by an improvement in gross
margin in the current quarter partially offset by lower sales. The
main factor contributing to the overall margin increase stems from
improved retail price and promotion optimization.
Balance Sheet and Cash Flow
Total cash and cash equivalents
of $45.9 million increased $25.1 million from June 30, 2019. Cash
provided by operations totaled $23.4 million and $11.6 million in
proceeds from the sale of the Company’s Passaic, New Jersey
property were partially offset by the payment of $5.1 million in
cash dividends and capital expenditures of $3.4 million.
Inventories of $151.4 million
decreased $11.0 million from the balance of $162.4 million at June
30, 2019. During the first quarter of fiscal 2020 the Company
recorded a non-cash charge of $3.1 million related to the
write-down and disposal of certain slow moving and discontinued
inventory items. The non-cash inventory write-down was recorded in
the consolidated statement of comprehensive income within the
wholesale segment in the line item Cost of Sales.
Capital expenditures were $3.4
million, an increase of $0.6 million compared to the $2.8 million
spent a year ago. In fiscal 2020, approximately 66% of the
Company’s capital expenditures related to retail design center
improvements with the remaining 34% for new machinery and computer
equipment.
Cash Dividends paid totaled
$5.1 million, consistent with the year ago first quarter.
OPTIMIZATION OF MANUFACTURING AND
LOGISTICS
During the first quarter of fiscal 2020, the
Company continued with its previously announced optimization
project as it converted the Old Fort, North Carolina facility into
a distribution center and expanded its existing Maiden, North
Carolina manufacturing campus while finalizing severance and other
exit costs associated with its case goods operations. In connection
with the foregoing first quarter fiscal 2020 initiatives, the
Company recorded pre-tax restructuring and other exit charges
totaling $1.7 million, consisting of $1.1 million in manufacturing
variances associated with the closing of the Passaic property and
the repurposing of the Old Fort case goods manufacturing
operations, $0.4 million in employee severance and other payroll
and benefit costs, and $0.2 million of other exit costs. The
manufacturing overhead variances of $1.1 million were recorded
within Cost of Sales with the remaining $0.6 million recorded
within the line item Restructuring and impairment charges (gains)
in the consolidated statements of comprehensive income.
As part of the optimization plans, the Company
completed the sale of its Passaic property in September 2019 to an
independent third party. As a result of the sale, the Company’s
wholesale segment recognized a pre-tax gain of $11.5 million in the
first quarter of fiscal 2020, which was recorded within the line
item Restructuring and impairment charges (gains) in the
consolidated statements of comprehensive income.
DIVIDEND INCREASE
On July 25, 2019, the Company announced that its
Board of Directors had declared a regular quarterly cash dividend
of $0.21 per share, which was payable to shareholders of
record as of October 10, 2019, and was paid on Friday,
October 25, 2019. The $0.21 per share dividend, a 10.5% increase,
reflects the continued strengthening of the Company’s balance
sheet.
LEASES
In February 2016, the FASB issued accounting
standards update (“ASU”) 2016-02, Leases (Topic 842), an
update related to accounting for leases. The main difference
between ASU 2016-02 and previous U.S. GAAP is the recognition of
lease assets and lease liabilities by lessees on the balance sheet
for those leases classified as operating leases under previous U.S.
GAAP. As a result, the Company recognized a liability representing
its lease payments and a right-of-use asset representing its right
to use the underlying asset for the lease term on the balance
sheet.
The Company adopted ASU 2016-02 as of July 1,
2019 using the modified retrospective method and have not restated
comparative periods. Upon adoption the Company recognized operating
lease assets of $129.7 million and operating lease
liabilities of $149.7 million on its consolidated balance
sheet. In addition, $20.0 million of deferred rent and various
lease incentives, which were reflected as other long-term
liabilities as of June 30, 2019, were reclassified as a component
of the right-of-use assets upon adoption. The Company also
recognized a cumulative adjustment as of July 1, 2019, which
decreased opening retained earnings by $1.6 million due
to the impairment of certain right-of-use assets. The adoption of
the new standard did not have a material impact on the consolidated
statements of operations or cash flows for the three months ended
September 30, 2019.
CONFERENCE CALL
Ethan Allen will host an analyst conference call
today, November 4, 2019 at 5:00 PM (Eastern Time) to discuss its
financial results. The analyst conference call will be webcast live
from the “Events and Presentations” page at
http://www.ethanallen.com/investors. The following information is
provided for those who would like to participate:
- U.S. Participants:
844-822-0103
- International Participants: 614-999-9166
- Conference
passcode:
9079098
An archived recording of the call will be made
available for at least 60 days on the Company’s website referenced
above.
ABOUT ETHAN ALLEN
Ethan Allen Interiors Inc. (NYSE: ETH) is a
leading interior design company and manufacturer and retailer of
quality home furnishings. The Company offers complimentary interior
design service to its clients and sells a full range of furniture
products and decorative accessories through ethanallen.com and a
network of approximately 300 design centers in the U.S. and abroad.
Ethan Allen owns and operates nine manufacturing facilities
including six manufacturing plants in the U.S. plus two plants in
Mexico and one in Honduras. Approximately 75% of its products are
made in its North American plants. For more information on Ethan
Allen's products and services, visit www.ethanallen.com.
Investor / Media Contact: Corey Whitely Executive Vice
President, Administration, Chief Financial Officer and Treasurer
IR@ethanallen.com
ABOUT NON-GAAP FINANCIAL
MEASURES
This press release is intended to supplement,
rather than to supersede, the Company's consolidated financial
statements, which are prepared and presented in accordance with
U.S. generally accepted accounting principles (“GAAP”). In this
press release the Company has included financial measures that are
not prepared in accordance with GAAP. The Company uses non-GAAP
financial measures including adjusted gross profit and margin,
adjusted operating income and margin, adjusted net income, and
adjusted diluted EPS (collectively “non-GAAP financial measures”).
The Company computes these non-GAAP financial measures by adjusting
the comparable GAAP measure to remove the impact of certain charges
and gains and the related tax effect of these adjustments. The
presentation of these non-GAAP financial measures is not intended
to be considered in isolation or as a substitute for, or superior
to, the financial measures presented in accordance with GAAP. The
Company uses these non-GAAP financial measures for financial and
operational decision making and to evaluate period-to-period
comparisons. The Company believes that they provide useful
information about operating results, enhance the overall
understanding of past financial performance and prospects, and
allow for greater transparency with respect to key metrics used by
management in its financial and operational decision making. A
reconciliation of the non-GAAP financial measures to the most
directly comparable financial measure reported in accordance with
GAAP is provided at the end of this press release.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995, Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), which represent management's beliefs
and assumptions concerning future events based on information
currently available to the Company relating to its future results.
Such forward-looking statements are identified in this press
release and the related webcasts, conference calls and other
related discussions or documents incorporated herein by
reference by use of forward-looking words such as “anticipate,”
“believe,” “plan,” “estimate,” “expect,” “intend,” “will,” “may,”
“continue,” “project,” “target,” “outlook," "forecast," “guidance,"
and similar expressions and the negatives of such forward-looking
words. These forward-looking statements are subject to management
decisions and various assumptions about future events and are not
guarantees of future performance. Actual results could differ
materially from those anticipated in the forward-looking statements
due to a number of risks and uncertainties including, but not
limited to the following: a volatile retail environment and
changing economic conditions may further adversely affect consumer
demand and spending; global and local economic uncertainty may
materially adversely affect manufacturing operations or sources of
merchandise and international operations; disruptions of supply
chain; changes in U.S. trade and tax policy; competition from
overseas manufacturers and domestic retailers; failure to
successfully anticipate or respond to changes in consumer tastes
and trends in a timely manner; ability to maintain and enhance the
Ethan Allen brand; the number of manufacturing and logistics sites
may increase exposure to business disruptions and could result in
higher transportation costs; fluctuations in the price,
availability and quality of raw materials could result in increased
costs or cause production delays; current and former manufacturing
and retail operations and products are subject to increasingly
stringent environment, health and safety requirements; the use of
emerging technologies as well as unanticipated changes in the
pricing and other practices of competitors; reliance on information
technology systems to process transactions, summarize results, and
manage its business and that of certain independent retailers;
disruptions in both primary and back-up systems; product recalls or
product safety concerns; successful cyber-attacks and the ability
to maintain adequate cyber-security systems and procedures; loss,
corruption and misappropriation of data and information relating to
customers; loss of key personnel; additional asset impairment
charges that could reduce profitability; access to consumer credit
could be interrupted as a result of conditions outside of the
Company’s control; its ability to locate new design center sites
and/or negotiate favorable lease terms for additional design
centers or for the expansion of existing design centers; changes to
fiscal and tax policies; its operations present hazards and risks
which may not be fully covered by insurance; and possible failure
to protect its intellectual property.
Given the risks and uncertainties surrounding
forward-looking statements, you should not place undue reliance on
these statements. Many of these factors are beyond the Company’s
ability to control or predict. These forward-looking statements
speak only as of the date of this press release. Other than as
required by law, the Company undertakes no obligation to update or
revise its forward-looking statements, whether because of new
information, future events, or otherwise. Accordingly, actual
circumstances and results could differ materially from those
contemplated by the forward-looking statements.
Ethan Allen
Interiors Inc. |
|
|
|
|
Selected
Financial Data |
|
|
|
|
(Unaudited) |
|
|
|
|
($ in millions,
except per share data) |
|
|
|
|
|
|
|
Selected Consolidated Financial
Data |
|
|
|
Three Months EndedSeptember 30, |
|
|
|
2019 |
|
|
2018 |
|
|
|
Net sales |
$ |
173.9 |
|
$ |
187.8 |
|
|
|
Gross margin |
|
53.9 |
% |
|
54.0 |
% |
|
|
Adjusted gross margin |
|
56.3 |
% |
|
54.0 |
% |
|
|
Operating income |
$ |
18.6 |
|
$ |
11.8 |
|
|
|
Adjusted operating income * |
$ |
12.2 |
|
$ |
11.8 |
|
|
|
Operating margin |
|
10.7 |
% |
|
6.3 |
% |
|
|
Adjusted operating margin * |
|
7.0 |
% |
|
6.3 |
% |
|
|
Net income |
$ |
14.1 |
|
$ |
8.8 |
|
|
|
Adjusted net income * |
$ |
9.3 |
|
$ |
8.8 |
|
|
|
Effective tax rate |
|
24.4 |
% |
|
24.9 |
% |
|
|
Diluted EPS |
$ |
0.53 |
|
$ |
0.33 |
|
|
|
Adjusted diluted EPS * |
$ |
0.35 |
|
$ |
0.33 |
|
|
|
Cash flows from operating
activities |
$ |
23.4 |
|
$ |
24.4 |
|
|
|
Capital expenditures |
$ |
3.4 |
|
$ |
2.8 |
|
|
|
Cash dividends paid |
$ |
5.1 |
|
$ |
5.1 |
|
|
|
|
|
|
|
|
Selected Financial
Data by Segment |
|
|
|
|
|
Three Months EndedSeptember 30, |
|
Retail |
|
2019 |
|
|
2018 |
|
|
|
Net sales |
$ |
137.3 |
|
$ |
145.2 |
|
|
|
Gross margin |
|
46.8 |
% |
|
44.2 |
% |
|
|
Operating margin |
|
1.1 |
% |
|
(1.1 |
%) |
|
|
Adjusted operating margin * |
|
1.2 |
% |
|
(1.1 |
%) |
|
|
|
|
|
|
|
Wholesale |
|
|
|
|
Net sales |
$ |
101.3 |
|
$ |
118.1 |
|
|
|
Gross margin |
|
29.0 |
% |
|
32.4 |
% |
|
|
Adjusted gross margin * |
|
33.1 |
% |
|
32.4 |
% |
|
|
Operating margin |
|
16.7 |
% |
|
12.1 |
% |
|
|
Adjusted operating margin * |
|
10.2 |
% |
|
12.1 |
% |
|
|
|
|
|
|
|
* See reconciliation of U.S. GAAP to adjusted key financial
measures in the back of this press release
Ethan Allen Interiors Inc. |
|
|
Consolidated Statements of Comprehensive
Income |
|
|
(Unaudited) |
|
|
|
|
(In thousands, except per share data) |
|
|
|
|
|
Three Months Ended September 30, |
|
|
|
2019 |
|
|
2018 |
|
|
|
Net sales |
$ |
173,921 |
|
$ |
187,785 |
|
|
|
Cost of sales |
|
80,127 |
|
|
86,335 |
|
|
|
Gross profit |
|
93,794 |
|
|
101,450 |
|
|
|
Selling, general and administrative expenses |
86,010 |
|
|
89,651 |
|
|
|
Restructuring and impairment charges (gains) |
|
(10,857 |
) |
|
0 |
|
|
|
Operating income |
|
18,641 |
|
|
11,799 |
|
|
|
Interest income, net of interest (expense) |
|
19 |
|
|
(27 |
) |
|
|
Income before income taxes |
|
18,660 |
|
|
11,772 |
|
|
|
Income tax expense |
|
4,554 |
|
|
2,932 |
|
|
|
Net income |
$ |
14,106 |
|
$ |
8,840 |
|
|
|
|
|
|
|
|
Per share data |
|
|
|
|
Basic earnings per common share: |
|
|
|
|
Net income per basic share |
$ |
0.53 |
|
$ |
0.33 |
|
|
|
Basic weighted average common shares |
26,713 |
|
|
26,539 |
|
|
|
|
|
|
|
|
Diluted earnings per common share: |
|
|
|
|
Net income per diluted share |
$ |
0.53 |
|
$ |
0.33 |
|
|
|
Diluted weighted average common shares |
26,750 |
|
|
26,940 |
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
Net income |
$ |
14,106 |
|
$ |
8,840 |
|
|
|
Other comprehensive income (loss), net of tax |
|
|
|
|
Foreign currency translation adjustments |
(499 |
) |
|
1,247 |
|
|
|
Other |
|
(7 |
) |
|
(26 |
) |
|
|
Other comprehensive income (loss), net of tax |
|
(506 |
) |
|
(1,221 |
) |
|
|
Comprehensive income |
$ |
13,600 |
|
$ |
10,061 |
|
|
|
Ethan Allen Interiors
Inc. |
|
|
Condensed Consolidated
Balance Sheets |
|
|
(Unaudited) |
|
|
(In thousands) |
|
|
|
September 30, |
June 30, |
ASSETS |
|
2019 |
|
2019 |
Current assets: |
|
|
Cash and cash
equivalents |
$ |
45,876 |
$ |
20,824 |
Accounts receivable,
net |
|
12,345 |
|
14,247 |
Inventories, net |
|
151,421 |
|
162,389 |
Prepaid expenses and other
current assets |
|
23,189 |
|
18,830 |
Total current assets |
|
232,831 |
|
216,290 |
|
|
|
Property, plant and equipment,
net |
|
244,574 |
|
245,246 |
Goodwill |
|
25,388 |
|
25,388 |
Intangible assets |
|
19,740 |
|
19,740 |
Operating lease right-of-use
assets |
|
127,837 |
|
0 |
Deferred income taxes |
|
2,060 |
|
2,108 |
Other assets |
|
1,469 |
|
1,579 |
Total ASSETS |
$ |
653,899 |
$ |
510,351 |
|
|
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
Current liabilities: |
|
|
Accounts payable and
accrued expenses |
$ |
29,020 |
$ |
35,485 |
Customer deposits |
|
65,195 |
|
56,714 |
Accrued compensation and
benefits |
|
22,508 |
|
21,327 |
Short-term debt |
|
0 |
|
550 |
Current operating lease
liabilities |
|
30,662 |
|
0 |
Other current
liabilities |
|
12,514 |
|
8,750 |
Total current
liabilities |
|
159,899 |
|
122,826 |
|
|
|
Long-term debt |
|
0 |
|
516 |
Operating lease liabilities,
long-term |
|
119,235 |
|
0 |
Deferred income taxes |
|
1,037 |
|
1,069 |
Other long-term liabilities |
|
3,225 |
|
22,011 |
Total LIABILITIES |
$ |
283,396 |
$ |
146,422 |
|
|
|
Shareholders' equity: |
|
|
Ethan Allen Interiors Inc. shareholders' equity |
$ |
370,447 |
$ |
363,866 |
Noncontrolling interests |
|
56 |
|
63 |
Total shareholders' equity |
$ |
370,503 |
$ |
363,929 |
Total LIABILITIES AND
SHAREHOLDERS’ EQUITY |
$ |
653,899 |
$ |
510,351 |
Ethan Allen Interiors
Inc. |
|
|
|
Design Center
Activity |
|
|
|
(Unaudited) |
|
|
|
|
|
Company |
|
Retail Design Center location
activity |
Independent |
Owned |
Total |
Balance at June 30, 2019 |
|
158 |
|
144 |
|
302 |
New locations |
|
3 |
|
4 |
|
7 |
Closures |
|
(4) |
|
(4) |
|
(8) |
Transfers |
|
(1) |
|
1 |
|
0 |
Balance at September 30,
2019 |
|
156 |
|
145 |
|
301 |
Relocations (included within new
and closures) |
|
0 |
|
3 |
|
3 |
|
|
|
|
U.S. |
|
38 |
|
139 |
|
177 |
International |
|
118 |
|
6 |
|
124 |
Reconciliation of U.S. GAAP Results to Adjusted
Financial Measures
To supplement the financial measures prepared in
accordance with generally accepted accounting principles in the
U.S., or U.S. GAAP, the Company uses non-GAAP financial measures
including adjusted gross profit and margin, adjusted operating
income, adjusted retail operating income and margin, adjusted
wholesale operating income and margin, adjusted net income and
adjusted diluted earnings per share. The reconciliations of these
non-GAAP financial measures to the most directly comparable
financial measures calculated and presented in accordance with GAAP
are shown in tables below.
These non-GAAP measures are derived from the
consolidated financial statements but are not presented in
accordance with U.S. GAAP. The Company believes these non-GAAP
measures provide a meaningful comparison of its results to others
in its industry and prior year results. Investors should
consider these non-GAAP financial measures in addition to, and not
as a substitute for, its financial performance measures prepared in
accordance with U.S. GAAP. Moreover, these non-GAAP financial
measures have limitations in that they do not reflect all the items
associated with the operations of the business as determined in
accordance with U.S. GAAP. Other companies may calculate similarly
titled non-GAAP financial measures differently than the Company
does, limiting the usefulness of those measures for comparative
purposes.
Despite the limitations of these non-GAAP
financial measures, the Company believes these adjusted financial
measures and the information they provide are useful in viewing its
performance using the same tools that management uses to assess
progress in achieving its goals. Adjusted measures may also
facilitate comparisons to our historical performance.
The following tables below show a reconciliation
of non-GAAP financial measures used in this press release to the
most directly comparable GAAP financial measures.
(Unaudited) |
|
|
|
|
(In thousands, except per share
data) |
Three Months
Ended |
|
|
September
30, |
|
|
|
2019 |
|
|
2018 |
|
% Change |
|
Consolidated Adjusted
Gross Profit / Gross Margin |
|
|
|
GAAP Gross profit |
$ |
93,794 |
|
$ |
101,450 |
|
(7.5 |
%) |
|
Adjustments (pre-tax) * |
|
4,140 |
|
|
0 |
|
|
|
Adjusted gross profit * |
$ |
97,934 |
|
$ |
101,450 |
|
(3.5 |
%) |
|
Adjusted gross margin * |
|
56.3 |
% |
|
54.0 |
% |
|
|
|
|
|
|
Consolidated Adjusted
Operating Income / Operating Margin |
|
|
|
GAAP Operating income |
$ |
18,641 |
|
$ |
11,799 |
|
58.0 |
% |
|
Adjustments (pre-tax) * |
|
(6,428 |
) |
|
0 |
|
|
|
Adjusted operating income * |
$ |
12,213 |
|
$ |
11,799 |
|
3.5 |
% |
|
|
|
|
|
|
Consolidated Net sales |
$ |
173,921 |
|
$ |
187,785 |
|
(7.4 |
%) |
|
GAAP Operating margin |
|
10.7 |
% |
|
6.3 |
% |
|
|
Adjusted operating margin * |
|
7.0 |
% |
|
6.3 |
% |
|
|
|
|
|
|
|
Consolidated Adjusted Net Income
/ Diluted EPS |
|
|
|
|
GAAP Net income |
$ |
14,106 |
|
$ |
8,840 |
|
59.6 |
% |
|
Adjustments, net of tax * |
|
(4,853 |
) |
|
0 |
|
|
|
Adjusted net income |
$ |
9,253 |
|
$ |
8,840 |
|
4.7 |
% |
|
Diluted weighted average common
shares |
|
26,750 |
|
|
26,940 |
|
|
|
GAAP Diluted EPS |
$ |
0.53 |
|
$ |
0.33 |
|
60.6 |
% |
|
Adjusted diluted EPS * |
$ |
0.35 |
|
$ |
0.33 |
|
6.1 |
% |
|
|
|
|
|
Wholesale Adjusted
Operating Income / Operating Margin |
|
|
|
Wholesale GAAP operating
income |
$ |
16,928 |
|
$ |
14,315 |
|
18.3 |
% |
|
Adjustments (pre-tax) * |
|
(6,576 |
) |
|
0 |
|
|
|
Adjusted wholesale operating income * |
$ |
10,352 |
|
$ |
14,315 |
|
(27.7 |
%) |
|
|
|
|
|
|
Wholesale net sales |
$ |
101,329 |
|
$ |
118,072 |
|
(14.2 |
%) |
|
Wholesale GAAP operating
margin |
|
16.7 |
% |
|
12.1 |
% |
|
|
Adjusted wholesale operating margin * |
|
10.2 |
% |
|
12.1 |
% |
|
|
|
|
|
|
Retail Adjusted
Operating Income / Operating Margin |
|
|
|
Retail GAAP operating income |
$ |
1,564 |
|
$ |
(1,559 |
) |
200.3 |
% |
|
Adjustments (pre-tax) * |
|
148 |
|
|
0 |
|
|
|
Adjusted retail operating income * |
$ |
1,712 |
|
$ |
(1,559 |
) |
209.8 |
% |
|
|
|
|
|
|
Retail net sales |
$ |
137,266 |
|
$ |
145,214 |
|
(5.5 |
%) |
|
Retail GAAP operating margin |
|
1.1 |
% |
|
(1.1 |
%) |
|
|
Adjusted retail operating margin * |
|
1.2 |
% |
|
(1.1 |
%) |
|
|
* Adjustments to
reported U.S. GAAP financial measures including gross profit and
margin, operating income and margin, net income, and diluted EPS
have been adjusted by the following: |
|
|
|
|
|
(Unaudited) |
Three Months Ended |
|
(In thousands) |
September 30, |
|
|
|
2019 |
|
|
2018 |
|
|
Inventory write-downs and
manufacturing overhead costs |
$ |
4,140 |
|
$ |
0 |
|
|
Adjustments to gross profit |
$ |
4,140 |
|
$ |
0 |
|
|
|
|
|
|
|
Restructuring
charges, including inventory write-downs (wholesale) |
$ |
4,771 |
|
$ |
0 |
|
|
Gain on sale of Passaic, New
Jersey property (wholesale) |
|
(11,497 |
) |
|
0 |
|
|
Other professional fees
incurred (wholesale) |
|
150 |
|
|
0 |
|
|
Retail acquisition
costs and other restructuring charges (retail) |
148 |
|
|
0 |
|
|
Adjustments to operating income |
$ |
(6,428 |
) |
$ |
0 |
|
|
Adjustments to income before income taxes |
$ |
(6,428 |
) |
$ |
0 |
|
|
Related income tax effects
(1) |
|
1,575 |
|
|
0 |
|
|
Adjustments to net income |
$ |
4,853 |
|
$ |
0 |
|
|
(1) Calculated using a tax rate of 24.4% in fiscal
2020 and 24.5% in fiscal 2019.
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