Ethan Allen Interiors Inc. (“Ethan Allen” or the
“Company”) (NYSE: ETH) today reported financial results for its
fiscal year and fourth quarter ended June 30, 2019.
FULL FISCAL YEAR 2019 COMPARED TO PRIOR
FISCAL YEAR*
- Diluted EPS of $0.96 compared with $1.32. Adjusted diluted EPS
increased 15.6% to $1.56 compared with $1.35.
- Generated $55.2 million of cash from operating activities, up
from $42.5 million last year.
- Cash dividends paid of $47.0 million, a 59.2% increase compared
with $29.5 million paid in the prior fiscal year.
- Consolidated net sales of $746.7 million compared with $766.8
million. Retail net sales increased 0.4% to $589.8 million while
wholesale net sales decreased to $441.6 million compared with
$475.7 million.
- Total international sales decreased $27.4 million.
- Consolidated gross margin of 54.8% compared with 54.2%.
Adjusted gross margin of 55.1% compared to 54.2%.
- Consolidated operating margin of 4.5% compared with 6.4%.
Adjusted operating margin increased to 7.4% compared with
6.5%.
- During fiscal 2019, the Company had taken on bank debt of $16.0
million, which was repaid prior to June 30, 2019.
FOURTH QUARTER FISCAL 2019 COMPARED TO
FOURTH QUARTER FISCAL 2018*
- Diluted loss per share amounted to $0.12 on a net loss of $3.3
million. Adjusted diluted EPS increased 7.0% to $0.46 compared with
$0.43.
- Cash provided by operating activities up 47.7% to $10.9
million.
- Consolidated net sales of $183.9 million compared with $205.6
million. Retail net sales decreased 5.7% to $147.2 million while
wholesale net sales decreased to $107.5 million compared with
$127.3 million in the prior year fourth quarter.
- Total international sales decreased $11.6 million.
- Consolidated gross margin of 54.8% compared with 54.1%.
Adjusted gross margin of 55.9% compared to 54.1%.
- The fourth quarter of fiscal 2019 includes pre-tax charges of
$20.5 million related primarily to restructuring actions and asset
impairments, which negatively impacted diluted EPS by $0.58.
* 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, “Despite many challenges, fiscal 2019
adjusted EPS increased 15.6%, and the Company generated strong cash
flow, which allowed us to increase dividends by 59.2% to $47
million.”
“Sales during the year were impacted by a major
decrease of sales in China and weaker retail sales
in North America, particularly in Canada, and mostly in the
fourth quarter. At the same time, newer areas of our
business showed significant growth. We were pleased
with a 50.5% increase in orders for the fiscal year from
our U.S. government contract business, with a 118.6% increase
in total contract sales for the fiscal year resulting from the
higher order volume. We are also now operating at our
normalized gross margins for the U.S. government program.”
Mr. Kathwari continued, “During the
fourth quarter we began consolidating our Old
Fort, North Carolina, and Passaic, New
Jersey, operations which resulted in restructuring
charges of $8.3 million, most of which were non-cash. We also
incurred $12.1 million of mostly non-cash impairment charges within
our retail segment, primarily related to certain design center
long-lived assets. We expect to finalize the sale of our Passaic
facility in the first quarter of fiscal 2020 for approximately $12
million.”
“Fourth quarter sales were impacted by reduction
of sales in China of $10.0 million and other international also
decreased, especially in Canada. Despite lower sales, our adjusted
EPS for the quarter increased by 7.0%,” Mr. Kathwari concluded. “We
are cautiously optimistic for fiscal 2020 due to continued
strengthening of our talent, relevant offerings in place,
transformation of our retail network, more efficient manufacturing
and logistics, and investments in technology at all levels. In the
fall, we plan to introduce a major new marketing campaign. We will
continue to maintain focus on doing what is right for our clients,
our people and our communities.”
KEY FINANCIAL MEASURES*
(Condensed and
Unaudited) |
|
|
|
|
|
|
(In thousands,
except per share data) |
Three Months Ended |
|
Twelve Months Ended |
|
|
June 30, |
|
June 30, |
|
|
|
2019 |
|
|
2018 |
|
|
|
2019 |
|
|
2018 |
|
|
GAAP gross
profit |
$ |
100,787 |
|
$ |
111,142 |
|
|
$ |
409,491 |
|
$ |
415,964 |
|
|
Adjusted gross
profit * |
$ |
102,781 |
|
$ |
111,142 |
|
|
$ |
411,485 |
|
$ |
415,964 |
|
|
GAAP gross
margin |
|
54.8 |
% |
|
54.1 |
% |
|
|
54.8 |
% |
|
54.2 |
% |
|
Adjusted gross
margin * |
|
55.9 |
% |
|
54.1 |
% |
|
|
55.1 |
% |
|
54.2 |
% |
|
|
|
|
|
|
|
GAAP operating
income |
$ |
(4,649 |
) |
$ |
15,907 |
|
|
$ |
33,947 |
|
$ |
48,867 |
|
|
Adjusted operating
income * |
$ |
15,867 |
|
$ |
16,150 |
|
|
$ |
55,051 |
|
$ |
50,145 |
|
|
GAAP operating
margin |
|
(2.5 |
%) |
|
7.7 |
% |
|
|
4.5 |
% |
|
6.4 |
% |
|
Adjusted operating
margin * |
|
8.6 |
% |
|
7.9 |
% |
|
|
7.4 |
% |
|
6.5 |
% |
|
|
|
|
|
|
|
|
GAAP Diluted
EPS |
$ |
(0.12 |
) |
$ |
0.42 |
|
|
$ |
0.96 |
|
$ |
1.32 |
|
|
Adjusted Diluted
EPS * |
$ |
0.46 |
|
$ |
0.43 |
|
|
$ |
1.56 |
|
$ |
1.35 |
|
|
* See reconciliation of U.S. GAAP to adjusted
key financial measures in the back of this press release
FISCAL 2019 FINANCIAL RESULTS
Consolidated
Net sales were $746.7 million
for fiscal 2019 compared with $766.8 million in the prior year, a
decrease of 2.6%. Retail net sales increased 0.4% while wholesale
net sales decreased 7.2%. There was a $27.4 million decrease in
international sales in the Company’s combined retail and wholesale
segments, which was related to the economic uncertainty surrounding
international trade disputes and a slowing global economy.
Net sales in China were $22.3 million lower in fiscal 2019 compared
to a year ago.
Gross profit was $409.5 million
compared with $416.0 million in the comparable prior year period.
Consolidated gross margin for fiscal 2019 was 54.8% compared with
54.2%. 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 consolidated net sales
was 79.0% in fiscal 2019 compared with 76.6% in the prior year
period, increasing consolidated gross margin. Fiscal 2019
restructuring actions, which included the write-off of inventory,
abnormal manufacturing overhead variances and incremental freight
and relocation costs, negatively impacted gross profit by $2.0
million and gross margin by 30 basis points.
Operating expenses were $375.5
million compared with $367.1 million or 47.9% of net sales in the
comparable prior year period. Included in fiscal 2019 operating
expenses were $18.4 million in restructuring and impairment
charges.
Operating income was $33.9
million compared with $48.9 million last year. Adjusted operating
income was $55.1 million or 7.4% of net sales compared with $50.1
million or 6.5% of net sales in the comparable prior year period.
Adjusted operating income growth was from increased U.S. retail
sales and lower advertising costs partially offset by reduced
wholesale sales.
Income tax expense was $8.2
million compared with $12.7 million a year ago. The fiscal 2019
effective rate was 24.1% compared with 25.9% in the prior year. The
lower effective tax rate in fiscal 2019 was the result of the tax
rate changes from the Tax Cuts and Jobs Act of 2017.
Net income was $25.7 million or
$0.96 per diluted share compared with $36.4 million or $1.32 per
diluted share in the prior year comparable period. Adjusted net
income was $41.6 million or $1.56 per diluted share in fiscal 2019
compared with $37.3 million or $1.35 per diluted share a year
ago.
Retail Segment
Net sales were $589.8 million
compared with $587.5 million in the prior year comparable period,
an increase of 0.4%. Comparative net sales were $574.5 million
versus $579.0 million a year ago. There was a 1.2% increase in net
sales in the U.S., while sales from the Canadian design centers
decreased 17.3%, primarily due to higher tariffs and regional
economic conditions in Canada during fiscal 2019.
Total written orders for the
retail segment were down 1.4% compared with the same period last
year, and comparable design center written orders were down 2.7%
over the same period.
Operating loss was $10.5
million, a decline from an operating loss of $1.7 million over the
same prior year period, driven primarily by restructuring and
impairment charges of $12.1 million. Adjusted operating income was
$2.1 million or 0.4% of net sales, an increase compared with an
operating loss of $1.5 million or -0.3% of net sales for the same
prior year period due to higher net sales of 0.4% and a 110-basis
point increase in gross margin.
Wholesale Segment
Net sales of $441.6 million
compared with $475.7 million in the prior year, a decrease of 7.2%.
The lower net sales were primarily due to a $22.3 million decline
in sales to China and an $18.3 million reduction in sales to the
Company’s North American independent retail network. Partially
offsetting these declines was growth in contract sales, which grew
$19.5 million, primarily due to higher sales from the GSA
contract.
Operating income of $42.5
million compared with $48.5 million a year ago, largely due to
lower sales volumes and restructuring and impairment charges, which
included $2.0 million within cost of goods sold and $6.3 million
within operating expenses. Adjusted operating income was $51.0
million or 11.5% of net sales compared with $49.5 million or 10.4%
of net sales for the same prior year period. Lower national
television advertising costs and improved adjusted gross margins in
case goods and home accents drove adjusted operating income up 2.9%
year over year.
FISCAL 2019 FOURTH QUARTER FINANCIAL
RESULTS
Consolidated
Net sales were $183.9 million
compared with $205.6 million for the same prior year period, a
decrease of 10.5%. Net sales during the just completed fourth
quarter were negatively impacted by an $11.6 million decrease in
consolidated international net sales, primarily due to $10.0
million in lower sales in China and a weaker retail environment,
which reduced written and delivered retail sales by 4.0% and 5.7%,
respectively.
Gross profit was $100.8 million
compared with $111.1 million for the prior year period.
Consolidated gross margin for the quarter was 54.8% compared with
54.1% for the prior year period. Adjusted gross margin, which
excludes restructuring costs from the previously announced plans to
further optimize the Company’s manufacturing and logistics
operations, was 55.9%. Retail sales, as a percentage of total
consolidated net sales, was 80.0% compared with 75.9% in the prior
year fourth quarter, which contributed to increasing consolidated
gross margin.
Operating expenses were $105.4
million compared with $95.2 million or 46.3% of net sales in the
same prior year period. The increase was primarily due to
restructuring and impairment charges and higher occupancy and
retail management costs partially offset by lower national
television advertising costs. Excluding the restructuring and
impairment charges of $18.4 million, operating expenses in the
current fiscal year fourth quarter were down 8.5% to 47.3% of net
sales.
Operating loss was $4.6 million
or -2.5% of net sales compared with operating income of $15.9
million or 7.7% of net sales in the prior year period. Adjusted
operating income was $15.9 million or 8.6% of net sales compared
with $16.2 million or 7.9% of net sales for the same prior year
period. Benefits from lower national television advertising costs
and a higher gross margin were partially offset by higher occupancy
and retail management expenses.
Income tax benefit on the
operating loss was $1.5 million in the current year fourth quarter
compared with income tax expense of $4.7 million a year ago. The
effective rate in the current fourth quarter was 31.0% compared
with 29.0% last year. The inability to utilize certain deferred tax
assets due to the reported operating loss resulted in a higher
effective tax rate of 31.0% in the current year quarter.
Net loss was $3.3 million or
-$0.12 per diluted share compared with net income of $11.5 million
or $0.42 per diluted share in the prior year comparable period.
Adjusted net income was $12.2 million or $0.46 per diluted share
compared with $11.6 million or $0.43 per diluted share a year
ago.
Retail Segment
Net sales were $147.2 million
compared with $156.0 million in the prior year comparable period, a
decrease of 5.7%. Comparative net sales were $143.1 million versus
$153.6 million a year ago. There was a 5.6% decrease in net sales
in the U.S., while sales from the Canadian design centers decreased
8.3%.
Total written orders for the
retail segment were down 4.0% compared with the same period last
year, and comparable design center written orders were down 5.2%
over the same period.
Operating loss was $10.6
million, a decline from operating income of $4.6 million over the
same prior year period, driven primarily by restructuring and
impairment charges of $12.1 million. Adjusted operating income was
$1.6 million or 1.1% of net sales, a decrease compared with $4.8
million or 3.1% of net sales for the same prior year period due to
higher occupancy and retail management costs.
Wholesale Segment
Net sales of $107.5 million
compared with $127.3 million in the prior year quarter, a decrease
of 15.6%. The lower net sales were primarily due to a reduction in
international sales, especially to China as well as a reduction in
sales to the Company’s North American retail network. Contract
sales increased 88.1% for the current year quarter.
Operating income of $6.3
million compared with $11.5 million a year ago, largely due to
lower sales volumes and restructuring actions. Adjusted operating
income was $14.7 million or 13.6% of net sales compared with $11.5
million or 9.1% of net sales for the same prior year period.
Balance Sheet and Cash Flow
Total cash and cash equivalents
of $20.8 million decreased $1.5 million from June 30, 2018. Cash
provided by operations totaling $55.2 million during fiscal 2019
were partially offset by the payment of $47.0 million in cash
dividends, including a special dividend of $1.00 per share paid in
January 2019 and capital expenditures of $9.1 million.
Inventories of $162.4 million
was comparable to the balance of $163.0 million at June 30,
2018.
Total debt of $1.0 million was
comparable to $1.7 million a year ago. At June 30, 2019 and 2018,
total debt consisted only of capital lease obligations for certain
machinery and equipment.
Capital expenditures were $9.1
million during fiscal 2019, a decrease of $3.4 million compared to
the $12.5 million spent a year ago. In fiscal 2019 approximately
65% of capital expenditures related to opening new and relocating
design centers in desirable locations with the remaining 35% for
new machinery and equipment at the Company’s manufacturing plants
and corporate assets.
Cash Dividends totaled $47.0
million, which represented 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.
Property, plant and equipment
totaled $245.2 million, a decrease of $22.7 million due to
depreciation and amortization of $19.6 million and impairment
charges of $13.0 million partially offset by capital expenditures
of $9.1 million.
OPTIMIZATION OF MANUFACTURING AND
LOGISTICS
During April 2019 the Company announced plans to
further improve its vertically integrated operations with a number
of initiatives including converting its case goods manufacturing
plant in North Carolina to a state-of-the-art distribution center,
consolidating case goods manufacturing to its Vermont and other
plants, adding an 80,000 square foot addition to one of its
upholstery plants and moving distribution operations from New
Jersey to North Carolina. In connection with these actions, the
Company recorded pre-tax restructuring, impairment, and other
related charges during the fourth quarter of fiscal 2019 totaling
$8.3 million, which consisted of $3.1 million in non-cash asset
impairments, $2.8 million in employee severance, $2.0 million in
inventory write-offs and manufacturing variances and $0.4 million
of other associated costs, including freight and relocation
expenses. As of June 30, 2019, approximately 380 employee
positions were eliminated due to these actions.
RETAIL SEGMENT IMPAIRMENT
CHARGES
During the fourth quarter of fiscal 2019 the
Company recorded $12.1 million of impairment charges within the
retail segment. Approximately $9.9 million was a non-cash
impairment charge for long-lived assets held primarily at a number
of retail design centers. An additional $2.2 million represented
remaining contractual obligations under leased space that was
exited during the fiscal 2019 fourth quarter.
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 will be payable to shareholders
of record as of Thursday, October 10, 2019, and will be 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.
CONFERENCE CALL
Ethan Allen will host an analyst conference call
today, July 31, 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:
6977039
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 six manufacturing
facilities including three 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 / 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: 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 EndedJune 30, |
Twelve Months EndedJune 30, |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Net sales |
$ |
183.9 |
|
$ |
205.6 |
|
$ |
746.7 |
|
$ |
766.8 |
|
Gross margin |
|
54.8 |
% |
|
54.1 |
% |
|
54.8 |
% |
|
54.2 |
% |
Adjusted gross
margin |
|
55.9 |
% |
|
54.1 |
% |
|
55.1 |
% |
|
54.2 |
% |
Operating income
(loss) |
$ |
(4.6 |
) |
$ |
15.9 |
|
$ |
33.9 |
|
$ |
48.9 |
|
Adjusted
operating income * |
$ |
15.9 |
|
$ |
16.2 |
|
$ |
55.1 |
|
$ |
50.1 |
|
Operating
margin |
|
(2.5 |
%) |
|
7.7 |
% |
|
4.5 |
% |
|
6.4 |
% |
Adjusted
operating margin * |
|
8.6 |
% |
|
7.9 |
% |
|
7.4 |
% |
|
6.5 |
% |
Net income
(loss) |
$ |
(3.3 |
) |
$ |
11.5 |
|
$ |
25.7 |
|
$ |
36.4 |
|
Adjusted net
income * |
$ |
12.2 |
|
$ |
11.6 |
|
$ |
41.6 |
|
$ |
37.3 |
|
Effective tax
rate |
|
31.0 |
% |
|
29.0 |
% |
|
24.1 |
% |
|
25.9 |
% |
Diluted EPS |
$ |
(0.12 |
) |
$ |
0.42 |
|
$ |
0.96 |
|
$ |
1.32 |
|
Adjusted diluted
EPS * |
$ |
0.46 |
|
$ |
0.43 |
|
$ |
1.56 |
|
$ |
1.35 |
|
Cash flows from
operating activities |
$ |
10.9 |
|
$ |
7.4 |
|
$ |
55.2 |
|
$ |
42.5 |
|
Capital
expenditures |
$ |
2.1 |
|
$ |
3.4 |
|
$ |
9.1 |
|
$ |
12.5 |
|
Acquisitions |
$ |
0.0 |
|
$ |
6.3 |
|
$ |
0.5 |
|
$ |
6.3 |
|
Cash dividends
paid |
$ |
5.1 |
|
$ |
5.2 |
|
$ |
47.0 |
|
$ |
29.5 |
|
|
|
|
|
|
Selected Financial Data by Segment |
|
|
|
|
|
Three Months EndedJune 30, |
Twelve Months EndedJune 30, |
Retail |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Net sales |
$ |
147.2 |
|
$ |
156.0 |
|
$ |
589.8 |
|
$ |
587.5 |
|
Gross margin |
|
46.0 |
% |
|
44.5 |
% |
|
45.4 |
% |
|
44.3 |
% |
Operating
margin |
|
(7.2 |
%) |
|
2.9 |
% |
|
(1.8 |
%) |
|
(0.3 |
%) |
Adjusted
operating margin * |
|
1.1 |
% |
|
3.1 |
% |
|
0.4 |
% |
|
(0.3 |
%) |
|
|
|
|
|
Wholesale |
|
|
|
|
Net sales |
$ |
107.5 |
|
$ |
127.3 |
|
$ |
441.6 |
|
$ |
475.7 |
|
Gross margin |
|
31.1 |
% |
|
32.9 |
% |
|
31.7 |
% |
|
32.3 |
% |
Adjusted gross
margin * |
|
33.0 |
% |
|
32.9 |
% |
|
32.1 |
% |
|
32.3 |
% |
Operating
margin |
|
5.9 |
% |
|
9.1 |
% |
|
9.6 |
% |
|
10.2 |
% |
Adjusted
operating margin * |
|
13.6 |
% |
|
9.1 |
% |
|
11.5 |
% |
|
10.4 |
% |
|
|
|
|
|
* 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 June 30, |
Twelve Months Ended June 30, |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Net sales |
$ |
183,918 |
|
$ |
205,582 |
|
$ |
746,684 |
|
$ |
766,784 |
|
Cost of sales |
|
83,131 |
|
|
94,440 |
|
|
337,193 |
|
|
350,820 |
|
Gross profit |
|
100,787 |
|
|
111,142 |
|
|
409,491 |
|
|
415,964 |
|
Selling, general and administrative expenses |
87,056 |
|
|
95,235 |
|
|
357,164 |
|
|
367,097 |
|
Restructuring and impairment charges |
|
18,380 |
|
|
- |
|
|
18,380 |
|
|
- |
|
Operating income (loss) |
|
(4,649 |
) |
|
15,907 |
|
|
33,947 |
|
|
48,867 |
|
Interest (expense), net of interest income |
|
(150 |
) |
|
249 |
|
|
(87 |
) |
|
200 |
|
Income (loss) before income taxes |
|
(4,799 |
) |
|
16,156 |
|
|
33,860 |
|
|
49,067 |
|
Income tax expense (benefit) |
|
(1,489 |
) |
|
4,678 |
|
|
8,162 |
|
|
12,696 |
|
Net income (loss) |
$ |
(3,310 |
) |
$ |
11,478 |
|
$ |
25,698 |
|
$ |
36,371 |
|
|
|
|
|
|
Per share data |
|
|
|
|
Basic earnings per common share: |
|
|
|
|
Net income (loss) per basic share |
$ |
(0.12 |
) |
$ |
0.43 |
|
$ |
0.96 |
|
$ |
1.33 |
|
Basic weighted average common shares |
26,711 |
|
|
26,878 |
|
|
26,695 |
|
|
27,321 |
|
|
|
|
|
|
Diluted earnings per common share: |
|
|
|
|
Net income (loss) per diluted share |
$ |
(0.12 |
) |
$ |
0.42 |
|
$ |
0.96 |
|
$ |
1.32 |
|
Diluted weighted average common shares |
26,758 |
|
|
27,323 |
|
|
26,751 |
|
|
27,625 |
|
|
|
|
|
|
Comprehensive income (loss) |
|
|
|
|
Net income (loss) |
$ |
(3,310 |
) |
$ |
11,478 |
|
$ |
25,698 |
|
$ |
36,371 |
|
Other comprehensive income |
|
|
|
|
Foreign currency translation adjustments |
165 |
|
|
(1,969 |
) |
|
520 |
|
|
(2,040 |
) |
Other |
|
(11 |
) |
|
(12 |
) |
|
(76 |
) |
|
(51 |
) |
Other comprehensive income (loss), net of tax |
154 |
|
|
(1,981 |
) |
|
444 |
|
|
(2,091 |
) |
Comprehensive income (loss) |
$ |
(3,156 |
) |
$ |
9,497 |
|
$ |
26,142 |
|
$ |
34,280 |
|
Ethan Allen
Interiors Inc. |
|
|
Condensed
Consolidated Balance Sheets |
|
|
(Unaudited) |
|
|
(In thousands) |
|
|
|
June 30, |
Assets |
|
2019 |
|
2018 |
Current assets: |
|
|
Cash and cash
equivalents |
|
$20,824 |
|
$22,363 |
Accounts
receivable, net |
|
14,247 |
|
12,364 |
Inventories,
net |
|
162,389 |
|
163,012 |
Prepaid
expenses and other current assets |
|
18,830 |
|
16,686 |
Total current
assets |
|
216,290 |
|
214,425 |
|
|
|
Property, plant and
equipment, net |
|
245,246 |
|
267,903 |
Goodwill |
|
25,388 |
|
25,388 |
Intangible
assets |
|
19,740 |
|
19,740 |
Deferred income
taxes |
|
2,108 |
|
1,688 |
Other assets |
|
1,579 |
|
1,289 |
Total
ASSETS |
|
$510,351 |
|
$530,433 |
|
|
|
Liabilities |
|
|
Current
liabilities: |
|
|
Accounts
payable and accrued expenses |
|
$35,485 |
|
$33,288 |
Customer
deposits |
|
56,714 |
|
61,248 |
Accrued
compensation and benefits |
|
21,327 |
|
18,926 |
Short-term
capital lease obligations |
|
550 |
|
584 |
Other current
liabilities |
|
8,750 |
|
7,214 |
Total current
liabilities |
|
122,826 |
|
121,260 |
|
|
|
Long-term capital
lease obligations |
|
516 |
|
1,096 |
Deferred income
taxes |
|
1,069 |
|
4,159 |
Other long-term
liabilities |
|
22,011 |
|
20,048 |
Total
LIABILITIES |
|
$146,422 |
|
$146,563 |
|
|
|
Shareholders' equity: |
|
|
Ethan Allen Interiors Inc. shareholders' equity |
|
$363,866 |
|
$383,731 |
Noncontrolling interests |
|
63 |
|
139 |
Total shareholders'
equity |
|
363,929 |
|
383,870 |
Total
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
$510,351 |
|
$530,433 |
Ethan
Allen Interiors Inc. |
|
|
|
Design
Center Activity |
|
|
|
(Unaudited) |
|
|
|
|
|
Company |
|
|
Independent |
Owned |
Total |
Balance at March
31, 2019 |
161 |
|
142 |
303 |
|
Additions (1) |
4 |
|
2 |
6 |
|
Closings (1) |
(7 |
) |
0 |
(7 |
) |
Balance at June
30, 2019 |
158 |
|
144 |
302 |
|
|
|
|
|
U.S. |
40 |
|
138 |
178 |
|
International |
118 |
|
6 |
124 |
|
|
|
|
|
(1) There were two relocations during the fourth quarter of
fiscal 2019. |
Reconciliation of U.S. GAAP Results to Adjusted
Financial Measures
Financial measures in accordance with U.S. GAAP
including gross profit and margin, 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 |
Twelve Months Ended |
|
June 30, |
June 30, |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Consolidated Gross Profit / Gross Margin |
|
|
|
|
GAAP Gross
profit |
$ |
100,787 |
|
$ |
111,142 |
|
$ |
409,491 |
|
$ |
415,964 |
|
Adjustments
(pre-tax) * |
|
1,994 |
|
|
- |
|
|
1,994 |
|
|
- |
|
Adjusted gross profit * |
$ |
102,781 |
|
$ |
111,142 |
|
$ |
411,485 |
|
$ |
415,964 |
|
GAAP gross
margin |
|
54.8 |
% |
|
54.1 |
% |
|
54.8 |
% |
|
54.2 |
% |
Adjusted gross margin * |
|
55.9 |
% |
|
54.1 |
% |
|
55.1 |
% |
|
54.2 |
% |
|
|
|
|
Consolidated Operating Income / Operating Margin |
|
|
|
GAAP Operating
income (loss) |
$ |
(4,649 |
) |
$ |
15,907 |
|
$ |
33,947 |
|
$ |
48,867 |
|
Adjustments
(pre-tax) * |
|
20,516 |
|
|
243 |
|
|
21,104 |
|
|
1,278 |
|
Adjusted operating income * |
$ |
15,867 |
|
$ |
16,150 |
|
$ |
55,051 |
|
$ |
50,145 |
|
|
|
|
|
|
Net sales |
$ |
183,918 |
|
$ |
205,582 |
|
$ |
746,684 |
|
$ |
766,784 |
|
GAAP Operating
margin |
|
(2.5 |
%) |
|
7.7 |
% |
|
4.5 |
% |
|
6.4 |
% |
Adjusted operating margin * |
|
8.6 |
% |
|
7.9 |
% |
|
7.4 |
% |
|
6.5 |
% |
|
|
|
|
|
Net Income /
Diluted EPS |
|
|
|
|
GAAP Net income
(loss) |
$ |
(3,310 |
) |
$ |
11,478 |
|
$ |
25,698 |
|
$ |
36,371 |
|
Adjustments, net of
related tax effects * |
|
15,490 |
|
|
169 |
|
|
15,934 |
|
|
935 |
|
Adjusted net income |
$ |
12,180 |
|
$ |
11,647 |
|
$ |
41,632 |
|
$ |
37,306 |
|
Diluted weighted
average common shares |
|
26,758 |
|
|
27,323 |
|
|
26,751 |
|
|
27,625 |
|
GAAP Diluted
EPS |
$ |
(0.12 |
) |
$ |
0.42 |
|
$ |
0.96 |
|
$ |
1.32 |
|
Adjusted diluted EPS * |
$ |
0.46 |
|
$ |
0.43 |
|
$ |
1.56 |
|
$ |
1.35 |
|
|
|
|
|
|
Wholesale Operating Income / Operating Margin |
|
|
|
|
Wholesale GAAP
operating income |
$ |
6,300 |
|
$ |
11,542 |
|
$ |
42,481 |
|
$ |
48,499 |
|
Adjustments
(pre-tax) * |
|
8,354 |
|
|
- |
|
|
8,498 |
|
|
1,035 |
|
Adjusted wholesale operating income * |
$ |
14,654 |
|
$ |
11,542 |
|
$ |
50,979 |
|
$ |
49,534 |
|
|
|
|
|
|
Wholesale net
sales |
$ |
107,454 |
|
$ |
127,258 |
|
$ |
441,551 |
|
$ |
475,731 |
|
Wholesale GAAP
operating margin |
|
5.9 |
% |
|
9.1 |
% |
|
9.6 |
% |
|
10.2 |
% |
Adjusted wholesale operating margin * |
|
13.6 |
% |
|
9.1 |
% |
|
11.5 |
% |
|
10.4 |
% |
|
|
|
|
|
Retail
Operating Income / Operating Margin |
|
|
|
|
Retail GAAP
operating income (loss) |
$ |
(10,612 |
) |
$ |
4,566 |
|
$ |
(10,529 |
) |
$ |
(1,738 |
) |
Adjustments
(pre-tax) * |
|
12,162 |
|
|
243 |
|
|
12,606 |
|
|
243 |
|
Adjusted retail operating income * |
$ |
1,550 |
|
$ |
4,809 |
|
$ |
2,077 |
|
$ |
(1,495 |
) |
|
|
|
|
|
Retail net
sales |
$ |
147,160 |
|
$ |
156,033 |
|
$ |
589,829 |
|
$ |
587,502 |
|
Retail GAAP
operating margin |
|
(7.2 |
%) |
|
2.9 |
% |
|
(1.8 |
%) |
|
(0.3 |
%) |
Adjusted retail operating margin * |
|
1.1 |
% |
|
3.1 |
% |
|
0.4 |
% |
|
(0.3 |
%) |
*
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 |
Twelve Months Ended |
(In
thousands) |
June 30, |
June 30, |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Inventory
write-downs and manufacturing overhead costs |
$ |
1,994 |
|
$ |
- |
|
$ |
1,994 |
|
$ |
- |
|
Adjustments to gross profit |
$ |
1,994 |
|
$ |
- |
|
$ |
1,994 |
|
$ |
- |
|
|
|
|
|
|
Restructuring
charges, including inventory write-downs |
$ |
8,324 |
|
$ |
- |
|
$ |
8,324 |
|
$ |
- |
|
Impairment of
long-lived assets, including lease exit costs |
|
12,050 |
|
|
- |
|
|
12,050 |
|
|
- |
|
Contingent legal
claim |
|
- |
|
|
- |
|
|
- |
|
|
500 |
|
Retail
acquisition and other exit costs |
|
142 |
|
|
243 |
|
|
730 |
|
|
778 |
|
Adjustments to operating income |
$ |
20,516 |
|
$ |
243 |
|
$ |
21,104 |
|
$ |
1,278 |
|
Early debt
extinguishment |
|
- |
|
|
- |
|
|
- |
|
|
67 |
|
Adjustments to income before income taxes |
$ |
20,516 |
|
$ |
243 |
|
$ |
21,104 |
|
$ |
1,345 |
|
Related income
tax effects (1) |
|
(5,026 |
) |
|
(74 |
) |
|
(5,170 |
) |
|
(410 |
) |
Adjustments to net income |
$ |
15,490 |
|
$ |
169 |
|
$ |
15,934 |
|
$ |
935 |
|
(1) Calculated using an effective tax rate of 24.5% in fiscal
2019 and 30.5% in fiscal 2018.
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