DANBURY, CT -
April 29, 2019 - Ethan Allen Interiors Inc. ("Ethan Allen" or
the "Company") (NYSE: ETH) today reported financial results for its
fiscal 2019 third quarter ended March 31, 2019.
HIGHLIGHTS -
THIRD QUARTER FISCAL 2019 COMPARED TO THIRD QUARTER FISCAL
2018*
-
Diluted earnings per share ("EPS") increased
233.3% to $0.30 compared with $0.09. Adjusted diluted EPS increased
181.8% to $0.31 compared with $0.11.
-
Consolidated gross margin of 55.3% compared with
53.3%.
-
Operating income increased 175.5% to $10.7
million compared with $3.9 million. Adjusted operating income
increased 150.6% to $11.0 million compared with $4.4
million.
-
Consolidated net sales of $177.8 million
compared with $181.4 million. Retail net sales grew 1.5% to $138.9
million while wholesale net sales decreased to $108.4 million
compared with $118.9 million in the prior year third
quarter.
-
Total written orders for the Company's retail
segment increased 1.4%.
-
Cash dividends totaling $31.8 million, including
a special dividend of $1.00 per share, were paid during the current
fiscal year third quarter, a 130% increase compared with $13.8
million paid in the prior year third quarter.
* See
reconciliation of U.S. GAAP to adjusted key financial measures in
the back of this press release
"We continue to strengthen the
enterprise with many initiatives, including investing in talent,
introducing relevant product offerings, and repositioning our
retail network and other elements of our vertically integrated
structure, including manufacturing and logistics," said Farooq
Kathwari, Ethan Allen's Chairman, President and CEO. "We also
continue to enhance our marketing programs and leverage the talents
of our 1,500 in-house interior designers. In June 2019, we plan to
introduce stylish new products supported by a very strong consumer
finance program."
FISCAL 2019 THIRD
QUARTER FINANCIAL RESULTS
Consolidated
Net sales
were $177.8 million compared with $181.4 million for the same prior
year period, a decrease of 2.0%. Net sales during the just
completed quarter were negatively impacted by a 30.2% decrease in
consolidated international net sales, primarily due to lower sales
in China.
Gross profit
was $98.4 million compared with $96.7 million for the prior year
period. Consolidated gross margin for the quarter was 55.3%
compared with 53.3% for the prior year period. Retail sales, as a
percent of total consolidated net sales, was 78.1% for the third
quarter of fiscal 2019 compared with 75.5% in the prior year third
quarter, which contributed to increasing consolidated gross
margin.
Operating
expenses were $87.7 million or 49.3% of net sales compared with
$92.8 million or 51.2% of net sales in the same prior year period.
The 5.5% decrease was primarily due a $6.4 million reduction in
national television advertising costs. The prior year quarter also
reflected a reduction in expenses due to the reversal of $1.5
million in accrued incentive compensation.
Operating
income was $10.7 million or 6.0% of net sales compared with
$3.9 million or 2.1% of net sales in the prior year period.
Adjusted operating income was $11.0 million or 6.2% of net sales
compared with $4.4 million or 2.4% of net sales for the same prior
year period. Significant growth in operating income was primarily
due to a reduction in national television advertising costs and the
benefit of higher gross profit. The prior year quarter also
reflected a reduction in expenses due to the reversal of accrued
incentive compensation.
Income tax
expense was $2.6 million and $1.2 million for the same prior
year period. The effective rate in the current third quarter was
24.8% compared with 31.2% last year. The lower effective tax rate
in fiscal 2019 is a result of the tax rate changes from the Tax
Cuts and Jobs Act of 2017.
Net income
was $8.0 million or $0.30 per diluted share compared with $2.6
million or $0.09 per diluted share in the prior year comparable
period. Adjusted net income was $8.2 million or $0.31 per diluted
share for the third quarter of fiscal 2019 and $3.0 million or
$0.11 per diluted share a year ago.
Retail
Segment
Net sales
were $138.9 million compared with $136.9 million in the prior year
comparable period, an increase of 1.5%. Comparative net sales were
$135.2 million versus $134.5 million a year ago. There was a 1.9%
increase in net sales in the U.S., while sales from the Canadian
design centers decreased 9.6%.
Total written
orders for the retail segment were up 1.4% compared with the
same period last year, and comparable Design Center written orders
were up 0.4% over the same period.
Operating
income was a loss of $1.7 million, an improvement from a loss
of $2.9 million over the same prior year period, driven primarily
by growing net sales and improving margins.
Wholesale
Segment
Net sales of
$108.4 million compared with $118.9 million in the prior year
quarter, a decrease of 8.9%. The lower net sales were primarily due
to a reduction in sales to the North American retail network. The
prior year quarter net sales benefitted from delayed shipments
during the first half that had begun shipping during the quarter.
Contract sales increased for the current year quarter while
international sales, especially to China decreased.
Operating
income of $13.0 million compared with $7.9 million a year ago,
largely due to higher gross margin and lower advertising costs.
FISCAL 2019 YEAR-TO-DATE
FINANCIAL RESULTS
Consolidated
Net sales
were $562.8 million for the first nine months of fiscal 2019
compared with $561.2 million in the prior year, an increase of
0.3%. Retail net sales increased 2.6% while wholesale net sales
decreased 4.1%.
Gross profit
was $308.7 million compared with $304.8 million in the comparable
prior year period. Consolidated gross margin for fiscal 2019 was
54.9% compared with 54.3%. A price increase earlier in fiscal 2019
improved gross profit, while lower wholesale sales volume
negatively impacted gross profit. Retail sales as a percent of
total consolidated net sales was 78.7% year-to-date compared with
76.9% in the prior year period, increasing our consolidated gross
margin.
Operating
expenses were $270.1 million or 48.0% of net sales compared
with $271.9 million or 48.4% of net sales in the comparable prior
year period.
Operating
income was $38.6 million or 6.9% of net sales compared with
$33.0 million or 5.9% of net sales last year. Adjusted operating
income was $39.2 million or 7.0% of net sales compared with $34.0
million or 6.1% of net sales in the comparable prior year period.
Operating income growth was from increased domestic retail sales
and lower advertising costs partially offset by reduced sales in
wholesale and increased variable logistics costs.
Income tax
expense was $9.7 million for the first nine months of fiscal
2019 compared with $8.0 million a year ago. The fiscal 2019
effective rate was 25.0% compared with 24.4% in the prior year.
Net income
was $29.0 million or $1.08 per diluted share compared with $24.9
million or $0.90 per diluted share in the prior year comparable
period. Adjusted net income was $29.5 million or $1.10 per diluted
share in fiscal 2019 compared with $25.7 million or $0.93 per
diluted share a year ago.
Balance Sheet and
Cash Flow
Total cash and
cash equivalents of $25.7 million increased $3.4 million from
June 30, 2018. Cash provided by operations totaling $44.3 million
during the first nine months of fiscal 2019 were partially offset
by the payment of $41.9 million in cash dividends, including a
special dividend of $1.00 per share paid in January 2019.
Inventories
of $164.6 million was comparable to the balance of $163.0 million
at June 30, 2018.
Total debt of
$9.2 million is an increase of $7.5 million from June 30, 2018 due
to new borrowings under the Company's revolving credit
facility.
Capital
expenditures were $7.0 million during the first nine months of
fiscal 2019, a decrease of $2.1 million compared to the $9.1
million spent a year ago. Fiscal 2019 capital expenditures were
primarily at retail design centers.
Cash
Dividends paid during fiscal 2019 totaled $41.9 million, which
represent the regular quarterly cash dividends of $0.19 per share
(consistent with the prior fiscal year) as well as the special
dividend of $1.00.
CONFERENCE
CALL
Ethan Allen will host an analyst
conference call today, April 29, 2019 at 5:00 PM (Eastern Time) to
discuss its third quarter 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:
5867925
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 United States and abroad. Ethan Allen owns and operates nine
manufacturing facilities including six manufacturing plants and one
sawmill in the United States plus one plant each in Mexico and
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 Relations 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 we have included financial measures
that are not prepared in accordance with GAAP. The Company uses
non-GAAP financial measures including adjusted operating income,
adjusted operating margin, adjusted net income, and adjusted
diluted earnings per share (collectively "non-GAAP financial
measures"). We compute these non-GAAP financial measures by
adjusting the comparable GAAP measure to remove the impact of
certain recurring and non-recurring 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:
competition from overseas manufacturers and domestic retailers;
anticipating or responding to changes in consumer tastes and trends
in a timely manner; the ability to maintain and enhance the brand,
marketing and advertising efforts and pricing strategies; changes
in global and local economic conditions that may adversely affect
consumer demand and spending, the manufacturing operations or
sources of merchandise and international operations; changes in
U.S. policy related to imported merchandise; an economic downturn;
potentially negative or unexpected tax consequences of changes to
fiscal and tax policies; the number of manufacturing and logistics
sites; fluctuations in the price, availability and quality of raw
materials; environmental, health and safety requirements; product
safety concerns; disruptions to the Company's technology
infrastructure (including cyber-attacks); increasing labor costs,
competitive labor markets and the continued ability to retain
high-quality personnel and risks of work stoppages; loss of key
personnel; its ability to obtain sufficient external funding to
finance operations and growth; access to consumer credit; the
effect of operating losses on its ability to pay cash dividends;
additional impairment charges that could reduce profitability; the
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; results of operations for any
quarter are not necessarily indicative of the Company's results of
operations for a full year; 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 Ended
March 31, |
Nine Months Ended
March 31, |
|
|
2019 |
2018 |
2019 |
2018 |
|
Net
sales |
$177.8 |
$181.4 |
$562.8 |
$561.2 |
|
Gross
margin |
55.3% |
53.3% |
54.9% |
54.3% |
|
Operating
margin |
6.0% |
2.1% |
6.9% |
5.9% |
|
Adjusted
operating margin * |
6.2% |
2.4% |
7.0% |
6.1% |
|
Net
income |
$8.0 |
$2.6 |
$29.0 |
$24.9 |
|
Adjusted
net income * |
$8.2 |
$3.0 |
$29.5 |
$25.7 |
|
Diluted
earnings per share |
$0.30 |
$0.09 |
$1.08 |
$0.90 |
|
Adjusted
diluted earnings per share * |
$0.31 |
$0.11 |
$1.10 |
$0.93 |
|
Cash
flows from operating activities |
$12.8 |
$20.9 |
$44.3 |
$35.1 |
|
Capital
expenditures |
$2.0 |
$4.1 |
$7.0 |
$9.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Financial Data by Business Segment: |
|
|
|
|
|
|
Three Months Ended
March 31, |
Nine Months Ended
March 31, |
|
Retail |
2019 |
2018 |
2019 |
2018 |
|
Net
sales |
$138.9 |
$136.9 |
$442.7 |
$431.5 |
|
Operating
margin |
(1.2%) |
(2.1%) |
0.0% |
(1.5%) |
|
Adjusted
operating margin * |
(1.0%) |
(2.1%) |
0.1% |
(1.5%) |
|
|
|
|
|
|
|
Wholesale |
|
|
|
|
|
Net
sales |
$108.4 |
$118.9 |
$334.1 |
$348.5 |
|
Operating
margin |
12.0% |
6.7% |
10.8% |
10.6% |
|
Adjusted
operating margin * |
12.1% |
7.1% |
10.9% |
10.9% |
|
|
|
|
|
|
|
* 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
March 31, |
Nine Months Ended
March 31, |
|
2019 |
2018 |
2019 |
2018 |
Net
sales |
$177,829 |
$181,419 |
$562,766 |
$561,202 |
Cost of
sales |
79,435 |
84,711 |
254,062 |
256,380 |
Gross
profit |
98,394 |
96,708 |
308,704 |
304,822 |
Selling,
general and administrative expenses |
87,725 |
92,835 |
270,108 |
271,862 |
Operating
income |
10,669 |
3,873 |
38,596 |
32,960 |
Interest
(expense), net of interest income |
(62) |
(70) |
63 |
(49) |
Income
before income taxes |
10,607 |
3,803 |
38,659 |
32,911 |
Provision
for income taxes |
2,629 |
1,187 |
9,651 |
8,018 |
Net
income |
$7,978 |
$2,616 |
$29,008 |
$24,893 |
|
|
|
|
|
Per share
data |
|
|
|
|
Basic
earnings per common share: |
|
|
|
|
Net
income per basic share |
$0.30 |
$0.10 |
$1.09 |
$0.91 |
Basic weighted average common shares |
26,705 |
27,476 |
26,690 |
27,469 |
|
|
|
|
|
Diluted
earnings per common share: |
|
|
|
|
Net
income per diluted share |
$0.30 |
$0.09 |
$1.08 |
$0.90 |
Diluted weighted average common shares |
26,751 |
27,692 |
26,749 |
27,725 |
|
|
|
|
|
Comprehensive income |
|
|
|
|
Net
income |
$7,978 |
$2,616 |
$29,008 |
$24,893 |
Other
comprehensive income |
|
|
|
|
Foreign currency translation adjustments |
303 |
1,451 |
355 |
(71) |
Other |
(20) |
(7) |
(65) |
(39) |
Other
comprehensive income (loss), net of tax |
283 |
1,444 |
290 |
(110) |
Comprehensive income |
$8,261 |
$4,060 |
$29,298 |
$24,783 |
Ethan Allen Interiors Inc. |
|
|
Condensed Consolidated Balance Sheets |
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|
(Unaudited) |
|
|
(In thousands) |
|
|
|
March 31, |
June 30, |
Assets |
2019 |
2018 |
Current
assets: |
|
|
Cash and cash equivalents |
$25,742 |
$22,363 |
Accounts receivable, net |
15,838 |
12,364 |
Inventories |
164,625 |
163,012 |
Prepaid expenses and other current assets |
17,905 |
16,686 |
Total current assets |
224,110 |
214,425 |
|
|
|
Property,
plant and equipment, net |
260,222 |
267,903 |
Goodwill |
25,388 |
25,388 |
Intangible assets |
19,740 |
19,740 |
Deferred
income taxes |
1,641 |
1,688 |
Other
assets |
1,731 |
1,289 |
Total assets |
$532,832 |
$530,433 |
|
|
|
Liabilities and Shareholders' Equity |
|
|
Current
liabilities: |
|
|
Accounts payable |
$19,494 |
$18,768 |
Customer deposits |
62,393 |
61,248 |
Accrued compensation and benefits |
22,758 |
18,926 |
Short-term debt |
544 |
584 |
Accrued expenses and other current liabilities |
21,263 |
21,734 |
Total current liabilities |
126,452 |
121,260 |
|
|
|
Long-term
debt |
8,658 |
1,096 |
Deferred
income taxes |
3,723 |
4,160 |
Other
long-term liabilities |
20,950 |
20,047 |
Total liabilities |
$159,783 |
$146,563 |
|
|
|
Shareholders' equity: |
|
|
Ethan
Allen Interiors Inc. shareholders' equity |
$372,975 |
$383,731 |
Noncontrolling interests |
74 |
139 |
Total
shareholders' equity |
373,049 |
383,870 |
Total liabilities and shareholders' equity |
$532,832 |
$530,433 |
Ethan Allen Interiors Inc. |
|
|
|
Design Center Activity |
|
|
|
(Unaudited) |
|
|
|
|
|
Company |
|
|
Independent |
Owned |
Total |
Balance
at December 31, 2018 |
159 |
146 |
305 |
Additions
(1) |
4 |
0 |
4 |
Closings
(1) |
(2) |
(4) |
(6) |
Balance
at March 31, 2019 |
161 |
142 |
303 |
|
|
|
|
U.S. |
41 |
136 |
177 |
International |
120 |
6 |
126 |
|
|
|
|
(1) There
were no relocations during the third quarter of fiscal 2019. |
Reconciliation of U.S. GAAP
Results to Adjusted Financial Measures
Financial measures in accordance
with U.S. GAAP including operating income and margin, net income,
and diluted EPS have been adjusted below. Ethan Allen uses these
adjusted financial measures, both in presenting its results to
stockholders and the investment community, and in its internal
evaluation and management of the business. The Company believes
that these adjusted financial measures and the information they
provide are useful to investors because they permit investors to
view the Company's performance using the same tools that management
uses to gauge progress in achieving its goals. Adjusted measures
may also facilitate comparisons to Ethan Allen's historical
performance.
(Unaudited) |
|
|
|
|
(In thousands, except per share data) |
Three Months Ended |
Nine Months Ended |
|
March 31, |
March 31, |
|
2019 |
2018 |
2019 |
2018 |
Consolidated Operating Income / Operating Margin |
|
|
|
GAAP
Operating income |
$10,669 |
$3,873 |
$38,596 |
$32,960 |
Adjustments (pre-tax) * |
291 |
500 |
588 |
1,035 |
Adjusted
operating income * |
$10,960 |
$4,373 |
$39,184 |
$33,995 |
|
|
|
|
|
Net
sales |
$177,829 |
$181,419 |
$562,766 |
$561,202 |
GAAP
Operating margin |
6.0% |
2.1% |
6.9% |
5.9% |
Adjusted
operating margin * |
6.2% |
2.4% |
7.0% |
6.1% |
|
|
|
|
|
|
|
|
|
|
Net
Income / Diluted EPS |
|
|
|
|
GAAP Net
income |
$7,978 |
$2,616 |
$29,008 |
$24,893 |
Adjustments, net of related tax effects * |
220 |
348 |
444 |
766 |
Adjusted
net income |
$8,198 |
$2,964 |
$29,452 |
$25,659 |
Diluted
weighted average common shares |
26,751 |
27,692 |
26,749 |
27,725 |
GAAP
Diluted earnings per share |
$0.30 |
$0.09 |
$1.08 |
$0.90 |
Adjusted
diluted earnings per share * |
$0.31 |
$0.11 |
$1.10 |
$0.93 |
|
|
|
|
|
|
|
|
|
|
Wholesale Operating Income / Operating Margin |
|
|
|
Wholesale
GAAP operating income |
$13,045 |
$7,927 |
$36,181 |
$36,957 |
Adjustments (pre-tax) * |
70 |
500 |
144 |
1,035 |
Adjusted
wholesale operating income * |
$13,115 |
$8,427 |
$36,325 |
$37,992 |
|
|
|
|
|
Wholesale
net sales |
$108,367 |
$118,921 |
$334,097 |
$348,473 |
Wholesale
GAAP operating margin |
12.0% |
6.7% |
10.8% |
10.6% |
Adjusted
wholesale operating margin * |
12.1% |
7.1% |
10.9% |
10.9% |
|
|
|
|
|
|
|
|
Retail Operating Income / Operating Margin |
|
|
|
Retail
GAAP operating income |
($1,669) |
($2,896) |
$83 |
($6,304) |
Adjustments (pre-tax) * |
221 |
- |
444 |
- |
Adjusted
retail operating income * |
($1,448) |
($2,896) |
$527 |
($6,304) |
|
|
|
|
|
Retail
net sales |
$138,947 |
$136,903 |
$442,669 |
$431,469 |
Retail
GAAP operating margin |
(1.2%) |
(2.1%) |
0.0% |
(1.5%) |
Adjusted
retail operating margin * |
(1.0%) |
(2.1%) |
0.1% |
(1.5%) |
* Adjustments to reported U.S. GAAP financial measures
including operating income and margin, net income, and diluted EPS
have been adjusted by the following: |
|
|
|
|
|
(Unaudited) |
Three Months Ended |
Nine Months Ended |
(In thousands) |
March 31, |
March 31, |
|
2019 |
2018 |
2019 |
2018 |
Organizational changes and other exit costs |
$291 |
$500 |
$429 |
$1,035 |
Retail
asset purchase costs |
- |
- |
159 |
- |
Adjustments to operating income |
$291 |
$500 |
$588 |
$1,035 |
Early
debt extinguishment |
- |
- |
- |
67 |
Adjustments to income before income taxes |
$291 |
$500 |
$588 |
$1,102 |
Related income tax effects (1) |
(71) |
(152) |
(144) |
(336) |
Adjustments to net income |
$220 |
$348 |
$444 |
$766 |
-
Calculated using an effective tax rate of 24.5%
in the current fiscal year and 30.5% in the prior fiscal
year.
This
announcement is distributed by West Corporation on behalf of West
Corporation clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Ethan Allen Interiors Inc. via Globenewswire
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