Ethan Allen Interiors Inc. (“Ethan Allen” or the “Company”) (NYSE:
ETH) today reported its business and financial results for the
fiscal 2021 second quarter ended December 31, 2020.
Farooq Kathwari, Ethan Allen’s Chairman,
President and CEO commented, “we performed very well during the
second quarter despite the unsettled business environment from the
ongoing COVID-19 pandemic. The increased consumer focus on the
home has continued to generate a heightened level of demand for our
product offerings and design services. Our fundamentals continue to
be strong, with written orders and backlogs from both operating
segments reporting double-digit growth. We ended the quarter
with a strong balance sheet, including cash on hand of $80 million
and no outstanding debt, and a major increase in earnings per share
through disciplined cost and expense controls. We are also pleased
that our January retail written orders continue the upward
trend.”
FISCAL 2021 SECOND QUARTER
HIGHLIGHTS*
- Diluted earnings per share (“EPS”) of $0.67; adjusted EPS of
$0.69 increased 155.6%
- Consolidated operating margin of 12.6% compared with 5.3%;
adjusted operating margin of 13.1% compared with 5.4%
- Retail segment written order growth of 44.9%
- Wholesale segment written orders increased 28.1%; excluding GSA
and other government orders, wholesale segment orders grew
39.7%
- Consolidated net sales increased 2.4% to $178.8 million
- Consolidated gross margin of 56.7%; adjusted gross margin
expanded 80 basis points to 56.9%
- Strong cash flow helped end the quarter with cash on hand of
$80.0 million, up 182.7% from a year ago, and no debt
- Paid regular quarterly cash dividend of $5.3 million during the
quarter
* See reconciliation of U.S. GAAP to adjusted
key financial measures in the back of this press release.
Comparisons are to the second quarter of fiscal 2020.
Mr. Kathwari continued, “with our well-known and
desired Ethan Allen brand strongly resonating with consumers during
these uncertain times, we were able to accelerate the pace of
written orders, produce double-digit consolidated operating margin
and generate cash. We continued to focus on prudent expense
management as we navigate the challenging COVID-19 landscape and
remain focused on providing a safe environment for employees and
customers. In this stronger-than-expected demand environment, our
supply chain team is demonstrating agility and flexibility to
increase production capacity and receipt of inventory. Due to the
impact of COVID-19 and its effects on production capacity and our
supply chain, we believe it will take the March and June quarters
to catch up to the increase in customer demand.”
“We believe we have an opportunity to continue
our growth in sales and profitability due to our strong retail
network, the personal service of our interior design
professionals, our unique vertical integration whereby 75% of
products are made in our North American manufacturing workshops,
and our national distribution and home delivery centers delivering
product with white glove service to our customer’s home. As we head
into the 2021 calendar year, we will remain focused on employee
safety, continue investing in digital design and interactive
communication technologies, growing our business and generating
strong cash flow, refining and repositioning our product offerings
to reach a larger client base, and leveraging our vertical
integration,” Mr. Kathwari concluded.
KEY FINANCIAL MEASURES*
| (Unaudited) |
|
(In thousands, except per share data) |
| |
Three months ended |
|
Six months ended |
|
| |
December 31, |
|
December 31, |
|
| |
|
2020 |
|
|
2019 |
|
% Change |
|
2020 |
|
|
2019 |
|
% Change |
| Net sales |
$ |
178,826 |
|
$ |
174,574 |
|
2.4 |
% |
$ |
329,884 |
|
$ |
348,495 |
|
(5.3 |
%) |
| |
|
|
|
|
|
|
| GAAP gross profit |
$ |
101,332 |
|
$ |
97,521 |
|
3.9 |
% |
$ |
187,102 |
|
$ |
191,315 |
|
(2.2 |
%) |
|
Adjusted gross profit* |
$ |
101,721 |
|
$ |
97,910 |
|
3.9 |
% |
$ |
187,491 |
|
$ |
195,844 |
|
(4.3 |
%) |
| GAAP gross margin |
|
56.7 |
% |
|
55.9 |
% |
|
|
56.7 |
% |
|
54.9 |
% |
|
|
Adjusted gross margin* |
|
56.9 |
% |
|
56.1 |
% |
|
|
56.8 |
% |
|
56.2 |
% |
|
| |
|
|
|
|
|
| GAAP operating income |
$ |
22,555 |
|
$ |
9,204 |
|
145.1 |
% |
$ |
34,236 |
|
$ |
27,845 |
|
23.0 |
% |
|
Adjusted operating income* |
$ |
23,367 |
|
$ |
9,488 |
|
146.3 |
% |
$ |
35,671 |
|
$ |
21,701 |
|
64.4 |
% |
| GAAP operating margin |
|
12.6 |
% |
|
5.3 |
% |
|
|
10.4 |
% |
|
8.0 |
% |
|
|
Adjusted operating margin* |
|
13.1 |
% |
|
5.4 |
% |
|
|
10.8 |
% |
|
6.2 |
% |
|
| |
|
|
|
|
|
|
| GAAP diluted EPS |
$ |
0.67 |
|
$ |
0.27 |
|
148.1 |
% |
$ |
1.04 |
|
$ |
0.79 |
|
31.6 |
% |
|
Adjusted diluted EPS* |
$ |
0.69 |
|
$ |
0.27 |
|
155.6 |
% |
$ |
1.05 |
|
$ |
0.62 |
|
69.4 |
% |
| |
|
|
|
|
|
|
| Cash flows from operating
activities |
$ |
23,728 |
|
$ |
(8 |
) |
nm |
$ |
65,918 |
|
$ |
23,388 |
|
181.8 |
% |
* See reconciliation of U.S. GAAP to adjusted
key financial measures in the back of this press release
FISCAL 2021 SECOND QUARTER FINANCIAL
RESULTS
Consolidated
Net sales were $178.8 million,
an increase of 2.4% compared to the same prior year period. The
Company experienced a strong pace of written orders during the
quarter and its manufacturing facilities continued to make good
progress ramping up production to meet this demand and work through
existing backlog after the temporary plant closures in the fourth
quarter of fiscal 2020. However, given the production cycle from
written order to delivery, net sales grew only 2.4% compared with
44.9% growth in retail written orders and 28.1% growth in wholesale
written orders.
Gross profit increased 3.9% to
$101.3 million compared with the prior year period due to stronger
net sales within both the wholesale and retail segments combined
with an improved wholesale gross margin. Wholesale gross profit
increased year over year primarily due a 10.5% increase in net
sales and improved operating efficiencies, which led to gross
margin expansion despite plant shutdowns and restrictions related
to the ongoing COVID-19 pandemic. Retail gross profit increased due
to a 4.1% increase in net shipments.
Gross margin was 56.7% compared
with 55.9% a year ago. On an adjusted basis, the current year
consolidated gross margin was 56.9% compared to a prior year gross
margin of 56.1%. The increase in consolidated gross margin was due
to higher productivity in wholesale manufacturing and a change in
the sales mix. Retail sales, as a percentage of total consolidated
sales, were 81.0% compared with 79.7% a year ago, which positively
impacted consolidated gross margin. The wholesale gross margin
expanded due to benefits being realized from the prior year
optimization project and increased productivity.
Operating expenses decreased to
$78.8 million, or 44.1% of net sales, compared with $88.3 million,
or 50.6% of net sales last year. The 10.8% decrease in operating
expenses was primarily due to lower selling costs and a reduction
in general and administrative expenses from less headcount. Retail
selling expenses were lower due to less designer selling expenses
and lower compensation due to headcount reductions. Wholesale
selling costs were down due to a reduction in advertising spending
and lower compensation costs due to headcount reductions. General
and administrative expenses decreased due to lower compensation
costs, reduced travel expenses, occupancy cost savings and lower
regional management expenses.
Operating income was $22.6
million compared with $9.2 million in the prior year period. Higher
consolidated net sales of $4.3 million or 2.4% coupled with
disciplined cost and expense controls, including strong cost
containment measures and expense management, drove operating income
growth. The Company’s ability to operate the business with
headcount down 19.2% year over year helped improve consolidated
operating income and margin.
Income tax expense was $5.3
million, an increase of $3.1 million from a year ago due to the
$12.9 million increase in income before income taxes. The Company’s
effective rate was 23.9% compared with 23.5% last year.
Diluted EPS was $0.67, up
148.1%, compared with $0.27 in the prior year comparable period.
Adjusted diluted EPS was $0.69, up 155.6%, and driven by improved
net sales, gross margin and cost containment measures.
Wholesale Segment
Net sales increased 10.5% to
$101.6 million primarily due to a 19.7% increase in sales to its
Company-operated design centers combined with 33.3% growth in sales
to its North American retail network. These increases were
partially offset by a 33.4% decline in contract business sales,
including the GSA contract and a 15.4% decrease in sales to its
international retail network primarily as a result of COVID-19
related economic disruptions.
Operating income was $12.7
million or 12.5% of net sales, an increase compared with $5.7
million or 6.2% of net sales last year largely due to an increase
in net sales of $9.7 million or 10.5% and 7.7% less operating
expenses. The Company was able to reduce operating expenses
primarily due to lower headcount, less marketing costs and actions
taken to control and minimize expenditures.
Retail Segment
Net sales from Company-operated
design centers increased 4.1% to $144.8 million. There was a 3.7%
increase in net sales in the United States, while net sales from
Canadian design centers increased 15.4%. Since all design centers
have re-opened, whether in-person, by appointment only, or
virtually, the Company has continued to experience strong order
trends with written orders up 44.9%, driven by increased demand for
products in the home furnishings category. In addition, the
Company’s e-commerce business was a strong contributor to retail
net sales, growing by 115% year over year, as online traffic
continues to increase. There were 144 Company-operated design
centers as of December 31, 2020, the same as at the end of the
prior year period.
Operating income was $9.9
million, or 6.8% of sales, compared with a loss of $0.1 million, or
0.1% of sales, for the prior year period. The retail operating
margin increased 690 basis points primarily due to the 4.1%
increase in net sales and an 11.9% decrease in operating expenses
from lower selling, administrative, occupancy and regional
management costs. The decreases within retail operating expenses
were due to strong cost control measures implemented, including a
42.2% reduction in retail headcount from a year ago.
FISCAL 2021 YEAR-TO-DATE FINANCIAL RESULTS
Consolidated
Net sales were $329.9 million,
a decrease of 5.3% compared to the same prior year period. While
written orders accelerated with retail segment orders up 25.1% and
wholesale segment orders up 10.7% during the first six months of
fiscal 2021 compared to the prior year period, net sales were down
5.3% primarily due to the continued impact of COVID-19, which
caused temporary design center closures in the fourth quarter of
fiscal 2020, temporary closures of its manufacturing facilities,
and a negative impact on the Company’s ability to deliver product
to customers. Customer demand continues to outpace product
availability even as manufacturing capacity increases. The
Company resumed production in its North American manufacturing
plants during the first quarter of fiscal 2021 and have ramped up
to near pre-COVID-19 production levels, which is expected to reduce
the high undelivered order backlogs and delivery lead-times in the
second half of fiscal 2021.
Gross profit decreased 2.2% to
$187.1 million compared with the prior year period due to lower
retail net sales of $13.5 million partially offset by an increase
in wholesale net sales of $5.7 million.
Operating expenses decreased to
$152.9 million, or 46.3% of net sales, compared with $163.5
million, or 46.9% of net sales last year. Included in prior year
period operating expenses was a gain of $11.5 million from the sale
of the Company’s Passaic, New Jersey property. Operating expenses
decreased during fiscal 2021 due to lower selling costs and a
reduction in general and administrative expenses. Retail selling
expenses were lower due to less warehouse and delivery expenses
from a reduced volume of shipments, less designer selling expenses
and lower compensation due to headcount reductions. Wholesale
selling costs were down due to a reduction in advertising spend and
lower compensation costs. General and administrative expenses
decreased due to lower compensation costs coupled with lower
occupancy costs, reduced travel expenses and lower regional
management expenses.
Operating income totaled $34.2
million compared with $27.8 million a year ago. Adjusted operating
income was $35.7 million, or 10.8% of net sales compared with $21.7
million, or 6.2% of net sales last year. Strong cost containment
measures, including improved expense management and reduced
headcount, drove operating income growth. These benefits to
operating income were partially offset by the 5.3% decline in
consolidated net sales.
Income tax expense was $7.2
million compared with $6.7 million a year ago. Income tax expense
was higher due to the $5.5 million increase in income before income
taxes partially offset by a $0.9 million reduction to the Company’s
valuation allowance on retail segment deferred tax assets. The
Company’s effective rate was 21.5% in the current year first half
compared with 24.1% last year due to the discrete tax benefit
related to a reduction in its valuation allowance on retail
deferred tax assets.
Diluted EPS was $1.04 compared
with $0.79 in the prior year comparable period. Adjusted diluted
EPS was $1.05, up 69.4% compared with $0.62 in the prior year
period. Restructuring and impairment charges, net of the valuation
allowance tax benefit, negatively impacted diluted EPS by $0.01
during fiscal 2021. The gain on the sale of the Company’s Passaic,
New Jersey property partially offset with other restructuring
activities and corporate actions increased diluted EPS by $0.17 in
the prior year period.
Balance Sheet and Cash Flow
Total cash and cash equivalents
was $80.0 million at December 31, 2020 compared with $72.3 million
at June 30, 2020 and $28.3 million a year ago. Cash and cash
equivalents aggregated to 12.6% of total assets at December 31,
2020, compared with 4.6% a year ago and 11.6% at June 30, 2020.
Cash and cash equivalents increased $7.7 million during fiscal 2021
due to net cash provided by operating activities of $65.9 million,
partially offset by the Company’s September 2020 repayment of 100%
or $50.0 million of outstanding borrowings under the Company’s
existing credit facility and capital expenditures of $5.9
million.
Inventories, net of $126.7
million increased $0.6 million compared with $126.1 million at June
30, 2020 as the Company continues to minimize inventory carrying
costs.
Debt outstanding was zero at
December 31, 2020 as the Company paid down the remaining $50.0
million of its borrowing in September 2020 using available cash on
hand.
Capital expenditures in the
first six months of fiscal 2021 were $5.9 million compared with
$8.0 million in the prior year period. As part of the Company’s
initial response to the COVID-19 health crisis, the Company took
immediate action and made adjustments to its business operations,
including delaying investments and capital expenditures, which led
to a reduction in capital spending. The decrease related primarily
to lower spending of $2.9 million on retail design center openings,
relocations and improvements, as well as the prior year conversion
of the Company’s Old Fort, North Carolina facility into a
distribution center, partially offset by expansion of its existing
Maiden, North Carolina manufacturing campus.
Cash dividends
paid were $5.3 million during the first half of
fiscal 2021, a decrease of $5.4 million over a year ago, due to the
Board’s decision to temporarily suspend the quarterly dividend as a
result of impacts from the COVID-19 pandemic. The Company had
suspended its regular quarterly cash dividend as of April 28, 2020.
On August 4, 2020, the Company announced that its Board of
Directors reinstated and declared a regular quarterly cash dividend
of $0.21 per share, payable to shareholders of record as
of October 8, 2020 and was paid on October 22, 2020.
DIVIDEND DECLARED
On January 25, 2021, the Company announced that
its Board of Directors had declared a regular quarterly cash
dividend of $0.25 per share, payable on April 22, 2021 to
shareholders of record at the close of business on April 8,
2021.
ANALYST CONFERENCE CALL
Ethan Allen will host an analyst conference call
today, January 28, 2021 at 5:00 PM (Eastern Time) to discuss its
results. The analyst conference call will be webcast live from the
Company’s Investor Relations website at https://ir.ethanallen.com.
The following information is provided for those who would like to
participate:
- U.S. Participants:
877-705-2976
- International Participants: 201-689-8798
- Meeting Number:
13714570
For those unable to listen live, an archived
recording of the call will be made available on the Company’s
website referenced above for at least 60 days.
ABOUT ETHAN ALLEN
Ethan Allen Interiors Inc. (NYSE: ETH) is a
leading interior design company, manufacturer and retailer in the
home furnishings marketplace. The Company provides complimentary
interior design service to its clients and sells a full range of
furniture products and decorative home accents through a retail
network of approximately 300 design centers in the United States
and abroad as well as online at ethanallen.com. Ethan Allen owns
and operates nine manufacturing facilities, including six
manufacturing plants in the United States, two manufacturing plants
in Mexico and one manufacturing plant in Honduras. Approximately
75% of its products are manufactured or assembled in these North
American facilities.
For more information on Ethan Allen's products
and services, visit www.ethanallen.com.
Investor / Media Contact: Matt McNulty Vice President,
Finance 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 news 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, 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 news release and incorporated
herein by reference by use of certain forward-looking words such as
“anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,”
“believe,” “continue,” “may,” “will,” “short-term,” “target,”
“outlook,” “forecast,” “future,” “strategy,” “opportunity,”
“would,” “guidance,” “non-recurring,” “one-time,” “unusual,”
“should,” “likely,” “COVID-19 impact,” 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, including projections about future
financial growth and trends with respect to the Company’s business
and results of operations, 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: the ongoing global COVID-19 pandemic may continue to
materially adversely affect the Company’s business, its results of
operations and overall financial performance; additional funding
from external sources may not be available at the levels required,
or may cost more than expected; declines in certain economic
conditions, which impact consumer confidence and consumer spending;
a decline in the health of the economy and consumer spending may
affect consumer purchases of discretionary items; financial or
operational difficulties due to competition in the residential
furniture industry; a significant shift in consumer preference
toward purchasing products online; ability to maintain and enhance
the Ethan Allen brand; failure to successfully anticipate or
respond to changes in consumer tastes and trends; global and local
economic uncertainty may materially adversely affect manufacturing
operations or sources of merchandise and international operations;
competition from overseas manufacturers and domestic retailers;
disruptions in the supply chain; 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 environmental, health and safety
requirements; product recalls or product safety concerns; 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; 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;
changes in United States trade and tax policy; reliance on certain
key personnel; loss of key personnel or inability to hire
additional qualified personnel; additional asset impairment charges
that could reduce profitability; access to consumer credit could be
interrupted; inability to maintain current design center locations
at current costs; failure to successfully select and secure
design center locations; changes to tax policies; hazards and risks
which may not be fully covered by insurance; possible failure to
protect the Company’s intellectual property; and other factors
disclosed in Part I, Item 1A. Risk Factors, in the Company’s 2020
Annual Report on Form 10-K.
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 news 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 endedDecember 31, |
Six months endedDecember 31, |
| |
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
| Net sales |
$ |
178.8 |
|
$ |
174.6 |
|
$ |
329.9 |
|
$ |
348.5 |
|
| Gross margin |
|
56.7 |
% |
|
55.9 |
% |
|
56.7 |
% |
|
54.9 |
% |
| Adjusted gross margin* |
|
56.9 |
% |
|
56.1 |
% |
|
56.8 |
% |
|
56.2 |
% |
| Operating income |
$ |
22.6 |
|
$ |
9.2 |
|
$ |
34.2 |
|
$ |
27.8 |
|
| Adjusted operating income* |
$ |
23.4 |
|
$ |
9.5 |
|
$ |
35.7 |
|
$ |
21.7 |
|
| Operating margin |
|
12.6 |
% |
|
5.3 |
% |
|
10.4 |
% |
|
8.0 |
% |
| Adjusted operating margin* |
|
13.1 |
% |
|
5.4 |
% |
|
10.8 |
% |
|
6.2 |
% |
| Net income |
$ |
16.9 |
|
$ |
7.1 |
|
$ |
26.2 |
|
$ |
21.2 |
|
| Adjusted net income* |
$ |
17.5 |
|
$ |
7.3 |
|
$ |
26.5 |
|
$ |
16.6 |
|
| Effective tax rate |
|
23.9 |
% |
|
23.5 |
% |
|
21.5 |
% |
|
24.1 |
% |
| Diluted EPS |
$ |
0.67 |
|
$ |
0.27 |
|
$ |
1.04 |
|
$ |
0.79 |
|
| Adjusted diluted EPS* |
$ |
0.69 |
|
$ |
0.27 |
|
$ |
1.05 |
|
$ |
0.62 |
|
| Cash flows from operating
activities |
$ |
23.7 |
|
$ |
(0.0 |
) |
$ |
65.9 |
|
$ |
23.4 |
|
| Capital expenditures |
$ |
3.4 |
|
$ |
4.6 |
|
$ |
5.9 |
|
$ |
8.0 |
|
| Cash dividends paid |
$ |
5.3 |
|
$ |
5.6 |
|
$ |
5.3 |
|
$ |
10.7 |
|
| Repurchases of common stock |
$ |
0.0 |
|
$ |
10.2 |
|
$ |
0.0 |
|
$ |
10.2 |
|
| |
|
|
|
|
| Selected Financial Data by
Segment |
|
|
|
|
| |
Three months endedDecember 31, |
Six months endedDecember 31, |
| Retail |
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
| Net sales |
$ |
144.8 |
|
$ |
139.1 |
|
$ |
262.9 |
|
$ |
276.4 |
|
| Operating margin |
|
6.8 |
% |
|
(0.1 |
%) |
|
4.5 |
% |
|
0.5 |
% |
| Adjusted operating margin* |
|
7.1 |
% |
|
(0.1 |
%) |
|
4.9 |
% |
|
0.6 |
% |
| |
|
|
|
|
| Wholesale |
|
|
|
|
| Net sales |
$ |
101.6 |
|
$ |
91.9 |
|
$ |
198.9 |
|
$ |
193.2 |
|
| Operating margin |
|
12.5 |
% |
|
6.2 |
% |
|
13.0 |
% |
|
11.7 |
% |
| Adjusted operating margin* |
|
12.9 |
% |
|
6.5 |
% |
|
13.2 |
% |
|
8.5 |
% |
| |
|
|
|
|
* 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 December
31, |
Six months
ended December
31, |
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
Net sales |
$ |
178,826 |
|
$ |
174,574 |
|
$ |
329,884 |
|
$ |
348,495 |
|
|
Cost of sales |
|
77,494 |
|
|
77,053 |
|
|
142,782 |
|
|
157,180 |
|
|
Gross profit |
|
101,332 |
|
|
97,521 |
|
|
187,102 |
|
|
191,315 |
|
|
Selling, general and administrative expenses |
|
78,354 |
|
|
88,495 |
|
|
151,820 |
|
|
174,505 |
|
|
Restructuring and other impairment charges, net of gains |
|
423 |
|
|
(178 |
) |
|
1,046 |
|
|
(11,035 |
) |
|
Operating income |
|
22,555 |
|
|
9,204 |
|
|
34,236 |
|
|
27,845 |
|
|
Other expenses |
|
|
|
|
|
Interest and other financing costs |
|
47 |
|
|
51 |
|
|
382 |
|
|
99 |
|
|
Other income (expense), net |
|
(330 |
) |
|
114 |
|
|
(435 |
) |
|
181 |
|
|
Income before income taxes |
|
22,178 |
|
|
9,267 |
|
|
33,419 |
|
|
27,927 |
|
|
Income tax expense |
|
5,295 |
|
|
2,181 |
|
|
7,183 |
|
|
6,735 |
|
|
Net income |
$ |
16,883 |
|
$ |
7,086 |
|
$ |
26,236 |
|
$ |
21,192 |
|
|
|
|
|
|
|
|
Per share data |
|
|
|
|
|
Diluted earnings per common share: |
|
|
|
|
|
Net income per diluted share |
$ |
0.67 |
|
$ |
0.27 |
|
$ |
1.04 |
|
$ |
0.79 |
|
|
Diluted weighted average common shares |
|
25,309 |
|
|
26,612 |
|
|
25,257 |
|
|
26,681 |
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
Net income |
$ |
16,883 |
|
$ |
7,086 |
|
$ |
26,236 |
|
$ |
21,192 |
|
|
Other comprehensive income (loss), net of tax |
|
|
|
|
|
Foreign currency translation adjustments |
|
1,990 |
|
|
773 |
|
|
2,546 |
|
|
274 |
|
|
Other |
|
(5 |
) |
|
(19 |
) |
|
(14 |
) |
|
(26 |
) |
|
Other comprehensive income, net of tax |
|
1,985 |
|
|
754 |
|
|
2,532 |
|
|
248 |
|
|
Comprehensive income |
$ |
18,868 |
|
$ |
7,840 |
|
$ |
28,768 |
|
$ |
21,440 |
|
| Ethan Allen Interiors
Inc. |
|
|
| Condensed Consolidated
Balance Sheets |
|
|
| (Unaudited) |
|
|
| (In thousands) |
|
|
| |
December 31, |
June 30, |
| ASSETS |
|
2020 |
|
|
2020 |
|
| Current assets: |
|
|
| Cash and cash
equivalents |
$ |
80,035 |
|
$ |
72,276 |
|
| Accounts receivable,
net |
|
8,985 |
|
|
8,092 |
|
| Inventories, net |
|
126,748 |
|
|
126,101 |
|
| Prepaid expenses and other
current assets |
|
30,160 |
|
|
23,483 |
|
| Total
current assets |
|
245,928 |
|
|
229,952 |
|
| |
|
|
| Property, plant and equipment,
net |
|
234,425 |
|
|
236,678 |
|
| Goodwill |
|
25,388 |
|
|
25,388 |
|
| Intangible assets |
|
19,740 |
|
|
19,740 |
|
| Operating lease right-of-use
assets |
|
108,470 |
|
|
109,342 |
|
| Deferred income taxes |
|
641 |
|
|
137 |
|
| Other assets |
|
1,627 |
|
|
1,552 |
|
|
Total ASSETS |
$ |
636,219 |
|
$ |
622,789 |
|
| |
|
|
| LIABILITIES AND SHAREHOLDERS’
EQUITY |
|
|
| Current liabilities: |
|
|
| Accounts payable and
accrued expenses |
$ |
33,989 |
|
$ |
25,595 |
|
| Customer deposits and
deferred revenue |
|
90,063 |
|
|
64,031 |
|
| Accrued compensation and
benefits |
|
21,149 |
|
|
18,278 |
|
| Current operating lease
liabilities |
|
31,838 |
|
|
27,366 |
|
| Other current
liabilities |
|
10,439 |
|
|
3,708 |
|
| Total
current liabilities |
|
187,478 |
|
|
138,978 |
|
| |
|
|
| Long-term debt |
|
- |
|
|
50,000 |
|
| Operating lease liabilities,
long-term |
|
95,703 |
|
|
102,111 |
|
| Deferred income taxes |
|
872 |
|
|
1,074 |
|
| Other long-term liabilities |
|
4,602 |
|
|
2,562 |
|
| Total
LIABILITIES |
$ |
288,655 |
|
$ |
294,725 |
|
| |
|
|
| Shareholders’ equity: |
|
|
|
Ethan Allen Interiors Inc. shareholders’ equity |
$ |
347,579 |
|
$ |
328,065 |
|
|
Noncontrolling interests |
|
(15 |
) |
|
(1 |
) |
| Total shareholders’ equity |
$ |
347,564 |
|
$ |
328,064 |
|
|
Total LIABILITIES AND
SHAREHOLDERS’ EQUITY |
$ |
636,219 |
|
$ |
622,789 |
|
| Ethan Allen Interiors
Inc. |
|
|
|
| Design Center
Activity |
|
|
|
| (Unaudited) |
|
|
|
| |
Independent |
Company- |
|
| Design Center activity |
Retailers |
Operated |
Total |
| Balance at June 30, 2020 |
160 |
144 |
304 |
|
New locations |
8 |
- |
8 |
|
Closures |
(10) |
- |
(10) |
|
Transfers |
- |
- |
- |
| Balance at December 31, 2020 |
158 |
144 |
302 |
| Relocations (in new and
closures) |
- |
- |
- |
| |
|
|
|
| U.S. |
34 |
138 |
172 |
| International |
124 |
6 |
130 |
Reconciliation of Non-GAAP Financial
Measures
To supplement the financial measures prepared in
accordance with 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 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 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 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 historical performance.
The following tables below show a reconciliation
of non-GAAP financial measures used in this newsrelease to the most
directly comparable GAAP financial measures.
| (Unaudited) |
| (In thousands,
except per share data) |
| |
Three months ended |
|
|
Six months ended |
|
| |
December 31, |
|
|
December 31, |
|
| |
|
2020 |
|
|
2019 |
|
% Change |
|
|
2020 |
|
|
2019 |
% Change |
| Consolidated
Adjusted Gross Profit / Gross Margin |
| GAAP Gross profit |
$ |
101,332 |
|
$ |
97,521 |
|
3.9 |
% |
|
$ |
187,102 |
|
$ |
191,315 |
|
(2.2 |
%) |
| Adjustments (pre-tax) * |
|
389 |
|
|
389 |
|
|
|
|
389 |
|
|
4,529 |
|
|
|
Adjusted gross profit * |
$ |
101,721 |
|
$ |
97,910 |
|
3.9 |
% |
|
$ |
187,491 |
|
$ |
195,844 |
|
(4.3 |
%) |
|
Adjusted gross margin * |
|
56.9 |
% |
|
56.1 |
% |
|
|
|
56.8 |
% |
|
56.2 |
% |
|
|
|
| Consolidated
Adjusted Operating Income / Operating Margin |
| GAAP Operating income |
$ |
22,555 |
|
$ |
9,204 |
|
145.1 |
% |
|
$ |
34,236 |
|
$ |
27,845 |
|
23.0 |
% |
| Adjustments (pre-tax) * |
|
812 |
|
|
284 |
|
|
|
|
1,435 |
|
|
(6,144 |
) |
|
|
Adjusted
operating income * |
$ |
23,367 |
|
$ |
9,488 |
|
146.3 |
% |
|
$ |
35,671 |
|
$ |
21,701 |
|
64.4 |
% |
| |
| Consolidated Net sales |
$ |
178,826 |
|
$ |
174,574 |
|
2.4 |
% |
|
$ |
329,884 |
|
$ |
348,495 |
|
(5.3 |
%) |
| GAAP Operating margin |
|
12.6 |
% |
|
5.3 |
% |
|
|
|
10.4 |
% |
|
8.0 |
% |
|
|
Adjusted operating margin * |
|
13.1 |
% |
|
5.4 |
% |
|
|
|
10.8 |
% |
|
6.2 |
% |
|
| |
| Consolidated
Adjusted Net Income / Adjusted Diluted EPS |
| GAAP Net income |
$ |
16,883 |
|
$ |
7,086 |
|
138.3 |
% |
|
$ |
26,236 |
|
$ |
21,192 |
|
23.8 |
% |
| Adjustments, net of tax * |
|
613 |
|
|
214 |
|
|
|
|
215 |
|
|
(4,639 |
) |
|
|
Adjusted net income |
$ |
17,496 |
|
$ |
7,300 |
|
139.7 |
% |
|
$ |
26,451 |
|
$ |
16,553 |
|
59.8 |
% |
| Diluted weighted average common
shares |
|
25,309 |
|
|
26,612 |
|
|
|
|
25,257 |
|
|
26,681 |
|
|
| GAAP Diluted EPS |
$ |
0.67 |
|
$ |
0.27 |
|
148.1 |
% |
|
$ |
1.04 |
|
$ |
0.79 |
|
31.6 |
% |
|
Adjusted diluted EPS * |
$ |
0.69 |
|
$ |
0.27 |
|
155.6 |
% |
|
$ |
1.05 |
|
$ |
0.62 |
|
69.4 |
% |
|
|
|
|
|
|
|
|
|
| Wholesale Adjusted
Operating Income / Adjusted Operating Margin |
| Wholesale GAAP operating
income |
$ |
12,720 |
|
$ |
5,730 |
|
122.0 |
% |
|
$ |
25,858 |
|
$ |
22,658 |
|
14.1 |
% |
| Adjustments (pre-tax) * |
|
389 |
|
|
284 |
|
|
|
|
389 |
|
|
(6,292 |
) |
|
|
Adjusted wholesale operating income * |
$ |
13,109 |
|
$ |
6,014 |
|
118.0 |
% |
|
$ |
26,247 |
|
$ |
16,366 |
|
60.4 |
% |
| |
|
|
|
|
|
|
|
| Wholesale net sales |
$ |
101,550 |
|
$ |
91,889 |
|
10.5 |
% |
|
$ |
198,884 |
|
$ |
193,218 |
|
2.9 |
% |
| Wholesale GAAP operating
margin |
|
12.5 |
% |
|
6.2 |
% |
|
|
|
13.0 |
% |
|
11.7 |
% |
|
|
Adjusted wholesale operating margin * |
|
12.9 |
% |
|
6.5 |
% |
|
|
|
13.2 |
% |
|
8.5 |
% |
|
| |
| Retail Adjusted
Operating Income / Adjusted Operating Margin |
| Retail GAAP operating income |
$ |
9,909 |
|
$ |
(135 |
) |
nm |
|
$ |
11,892 |
|
$ |
1,429 |
|
732.2 |
% |
| Adjustments (pre-tax) * |
|
423 |
|
|
- |
|
|
|
|
1,046 |
|
|
148 |
|
|
|
Adjusted retail operating income * |
$ |
10,332 |
|
$ |
(135 |
) |
nm |
|
$ |
12,938 |
|
$ |
1,577 |
|
720.4 |
% |
| |
| Retail net sales |
$ |
144,818 |
|
$ |
139,101 |
|
4.1 |
% |
|
$ |
262,899 |
|
$ |
276,367 |
|
(4.9 |
%) |
| Retail GAAP operating margin |
|
6.8 |
% |
|
(0.1 |
%) |
|
|
|
4.5 |
% |
|
0.5 |
% |
|
|
Adjusted retail operating margin * |
|
7.1 |
% |
|
(0.1 |
%) |
|
|
|
4.9 |
% |
|
0.6 |
% |
|
| * Adjustments to
reported 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 |
Six months ended |
| (In thousands) |
December 31, |
December 31, |
| |
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
| Inventory reserves and
write-downs (wholesale) |
$ |
389 |
|
$ |
119 |
|
$ |
389 |
|
$ |
3,209 |
|
| Manufacturing overhead costs
and other (wholesale) |
|
- |
|
|
270 |
|
|
- |
|
|
1,320 |
|
|
Adjustments to gross profit |
$ |
389 |
|
$ |
389 |
|
$ |
389 |
|
$ |
4,529 |
|
| |
|
|
|
|
| Inventory reserves and
write-downs (wholesale) |
$ |
389 |
|
$ |
119 |
|
$ |
389 |
|
$ |
3,209 |
|
| Optimization of manufacturing
and logistics (wholesale) |
|
- |
|
|
92 |
|
|
- |
|
|
1,785 |
|
| Gain on sale of Passaic, New
Jersey property (wholesale) |
|
- |
|
|
- |
|
|
- |
|
|
(11,497 |
) |
| Severance and other
professional fees (wholesale) |
|
- |
|
|
73 |
|
|
- |
|
|
211 |
|
| Loss on sale of property,
plant and equipment (retail) |
|
273 |
|
|
- |
|
|
273 |
|
|
- |
|
| Retail acquisition costs,
severance and other charges (retail) |
|
150 |
|
|
- |
|
|
150 |
|
|
148 |
|
| Impairment of long-lived
assets (retail) |
|
- |
|
|
- |
|
|
623 |
|
|
- |
|
|
Adjustments to operating income |
|
812 |
|
|
284 |
|
|
1,435 |
|
|
(6,144 |
) |
|
Adjustments to income before income taxes |
|
812 |
|
|
284 |
|
|
1,435 |
|
|
(6,144 |
) |
| Related income tax effects on
non-recurring items (1) |
|
(199 |
) |
|
(70 |
) |
|
(352 |
) |
|
1,505 |
|
| Income tax benefit from
valuation allowance adjustment |
|
- |
|
|
- |
|
|
(868 |
) |
|
- |
|
|
Adjustments to net income |
$ |
(613 |
) |
$ |
(214 |
) |
$ |
215 |
|
$ |
(4,639 |
) |
(1) Calculated using a tax rate of 24.5% in
all periods presented.
Grayscale Ethere (NYSE:ETH)
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