ETHAN ALLEN REPORTS FISCAL 2017 FIRST QUARTER RESULTS

25 oktober 2016

  ETHAN ALLEN REPORTS FISCAL 2017 FIRST QUARTER RESULTS

DANBURY, CT - October 25, 2016 - Ethan Allen Interiors Inc. ("Ethan Allen" or the "Company") (NYSE: ETH) today reported operating results for the fiscal 2017 first quarter ended September 30, 2016. Please refer to the accompanying financial statements and reconciliation to non-GAAP measures discussed below.

Fiscal 2017 First Quarter Highlights compared to Fiscal 2016 First Quarter:

• Consolidated net sales of $193.3 million increased 1.5%
• Retail net sales increased 4.3% to $152.3 million; comparable store net sales increased 5.7%
• Retail total written orders increased 8.1% and comparable written orders increased 8.0%
• Wholesale net sales decreased 4.9% to $114.6 million
• Gross margin of 56.1% up from 55.0%
• Operating margin of 9.5%, compared to 11.0%; adjusted operating margin of 9.8%, compared to previous year of 11.0% (See Exhibit 1 for a reconciliation of GAAP to non-GAAP operating margin)
• Operating income of $18.3 million, compared to $20.9 million; adjusted operating income of $19.0 million compared to previous year of $20.9 million (See Exhibit 1 for a reconciliation of GAAP to non-GAAP operating income)
• Diluted earnings per share ("EPS") of $0.41 compared to previous year of $0.46; adjusted EPS of $0.43 compared to previous year adjusted EPS of $0.46 (See Exhibit 1 for a reconciliation of GAAP to non-GAAP EPS)
• EBITDA of $23.4 million, or 12.1% of sales, compared to $25.7 million, or 13.5% of sales; adjusted EBITDA of $24.0 million, or 12.4% of sales compared to $25.7 million, or 13.5% of sales (See Exhibit 1)
• Paid dividends of $4.7 million, an increase of 18.7%
• Repurchased 0.1 million shares for $3.4 million

"As we mentioned in our October 25 ^th press release, we are looking forward to discussing our initiatives and progress during our Fall Investor Meeting to be held tomorrow morning," said Farooq Kathwari, Chairman and CEO. He further added, "We are pleased with our results, including an 8.1% written sales increase, and with the fact that we have maintained a strong adjusted operating margin of 9.8% despite making added investments in a number of areas, such as marketing, new Design Center openings, and the launch of new product programs, including Ethan Allen | Disney. We are also happy with the continued increase of our cash dividend, which rose this quarter by 18.7% to $4.7 million. Our many initiatives will continue to position us as a known and desired brand. We remain cautiously optimistic."

FISCAL 2017 FIRST QUARTER FINANCIAL RESULTS :

Consolidated
Net sales for the quarter ended September 30, 2016 increased 1.5% over the prior year to $193.3 million, with an increase in our retail segment and a decrease in our wholesale segment. 
Gross profit was $108.5 million for the quarter ended September 30, 2016, an increase of $3.8 million, or 3.6% over the prior year quarter, and gross margin was 56.1% compared to 55.0% in the prior year quarter. Retail sales as a percent of total consolidated sales increased to 78.8% from 76.7%, increasing our consolidated gross margin due to mix.
Operating expenses were $90.1 million in the quarter ended September 30, 2016, or 46.6% of sales compared to $83.8 million, or 44.0% of sales in the prior year quarter. Variable costs increased due to increased sales for the retail segment. Operating expenses in the first quarter of fiscal 2017 also increased due to increased advertising expenses to support our new product launches, expenses associated with the Ethan Allen | Disney launch, and a loss on the disposition of retail real estate.
Operating income was $18.3 million, or 9.5% of sales in the quarter ended September 30, 2016, compared to the prior year quarter operating income of $20.9 million, or 11.0% of sales.  Adjusted operating income was $19.0 million, or 9.8% of sales in the quarter ended September 30, 2016, compared to $20.9 million, or 11.0% of sales in the same period of the prior year. (See Exhibit 1 for a reconciliation of GAAP to non-GAAP presentation)
Net income for the quarter ended September 30, 2016 was $11.5 million or $0.41 per diluted share compared to $13.1 million or $0.46 per diluted share in the prior year first quarter. Adjusted net income was $11.9 million or $0.43 per diluted share in the quarter ended September 30, 2016, and $13.1 million or $0.46 per diluted share in the same period of the prior year. (See Exhibit 1 for a reconciliation of GAAP to non-GAAP presentation)

Retail Segment
Net sales increased 4.3% to $152.3 million in the quarter ended September 30, 2016, including a comparable design center net sales increase of 5.7%.
Comparable written orders for the Retail Division increased 8.0% for the first quarter of fiscal 2017 compared to the prior year first quarter and total written orders for the Retail Division increased 8.1% over the same prior year period. 
Retail operating income of $1.0 million in the quarter ended September 30, 2016 declined over the same period of the prior year of $1.6 million, a decrease of $0.6 million. The positive impact of the increases in sales and gross margin were offset by increased advertising expenses as well as $0.6 million in adjustments related to the disposition of one real estate property referred to in Exhibit 1.

Wholesale Segment
Net sales of $114.6 million decreased 4.9%, with decreased sales to our retail and independent dealers.
Wholesale operating income of $16.5 million compared to $20.6 million. The current year was impacted by lower sales, increased advertising expense and the impact of the Ethan Allen | Disney product launch.

Balance Sheet and Cash Flow
Total debt of $41.1 million decreased $0.8 million from June 30, 2016 due to scheduled repayments, and working capital increased $3.4 million, or 2.7% from June 30, 2016. We repurchased 107,700 shares of Ethan Allen common stock during the current quarter decreasing working capital by $3.4 million.
Total cash and securities , including restricted cash, of $76.6 million increased $16.1 million from June 30, 2016 largely due to $27.5 million cash generated from operations during the current quarter.
Inventories of $159.3 million decreased by $3.0 million from June 30, 2016, primarily from our retail service centers.
Capital expenditures were $7.4 million fiscal year to date at September 30, 2016 compared to $3.1 million for the same prior year period.
Dividends and share repurchases; During the quarter ended September 30, 2016, we paid $4.7 million of dividends, an 18.7% increase over the same prior year quarter. We repurchased 107,700 shares for $3.4 million which will settle in the second quarter.

Investor Meeting & Analyst Conference Call
Ethan Allen will conduct an investor meeting and conference call at 9:00 AM (Eastern) on Wednesday, October 26 to discuss its financial results and business initiatives. Topics will include the repositioning of our offerings, our expanded marketing, investments in new Design Centers around the country, investments in technology, and the launch of the Ethan Allen | Disney magical home program in November 2016. The live webcast is accessible via the Company's website at http://ethanallen.com/investors. To participate in the call, dial 866-219-5894 (or 703-639-1125 for international callers) and provide conference ID# 1676458. An archived recording of the call will be made available for at least 60-days on the Company's website.

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 seventy five percent of its products are made in its North American plants. For more information on Ethan Allen's products and services, visit ethanallen.com.

Non-GAAP Financial Information
This press release is intended to supplement, rather than to supersede, the Company's condensed 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 the following non-GAAP financial measures: "adjusted operating expenses", "adjusted operating income", "adjusted operating margin", "adjusted net income", "adjusted earnings per share", and earnings before interest, taxes, depreciation and amortization ("EBITDA") (collectively "non-GAAP financial measures"). We compute these non-GAAP financial measures by adjusting the GAAP measures to remove the impact of certain recurring and non-recurring charges and gains and the tax effect of these adjustments.  The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The Company uses these non-GAAP financial measures for financial and operational decision making and as a means 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 future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. The non-GAAP financial measures used by the Company in this press release may be different from the non-GAAP financial measures, including similarly titled measures, used by other companies. A reconciliation of these financial measures to the most directly comparable financial measure reported in accordance with GAAP is also provided at the end of this press release.

Forward-Looking Information
This press release and any related webcasts, conference calls and other related discussions should also be read in conjunction with the Company's Annual Report on Form 10-K for the year ended June 30, 2016 (the "2016 Form 10-K") and other reports filed with the Securities and Exchange Commission.

This press release contains forward-looking statements within the meaning of 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 our management's beliefs and assumptions concerning future events based on information currently available to us relating to our future results. Such forward-looking statements are identified in this press release and in 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. A number of risks and uncertainties could cause actual results to differ materially from those anticipated in the forward-looking statements, including, but not limited to: changes in global or regional political or economic conditions, including changes in governmental and central bank policies; our ability to secure debt or other forms of financing; the effect of operating losses on our ability to pay cash dividends; changes in business conditions in the furniture industry, including changes in consumer spending patterns, tastes and demand for home furnishings; competition from overseas manufacturers and domestic retailers and competitive factors such as changes in products or marketing efforts of others; effects of our brand awareness and marketing programs, including changes in demand for our existing and new products; our 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; fluctuations in interest rates and the cost, availability and quality of raw materials; pricing pressures; the effects of labor strikes; weather conditions that may affect sales; volatility in fuel, utility, transportation and security costs; the potential effects of natural disasters affecting our suppliers or trading partners; the effects of terrorist attacks or conflicts or wars involving the United States or its allies or trading partners; and those matters discussed in "Item 1A - Risk Factors" of our Annual Report on Form 10-K for the year ended June 30, 2016, and elsewhere in this press release and our SEC filings. Accordingly, actual circumstances and results could differ materially from those contemplated by the forward-looking statements.

Given the risks and uncertainties surrounding forward-looking statements, you should not place undue reliance on these statements. Many of these factors are beyond our ability to control or predict. Our forward-looking statements speak only as of the date of this press release. Other than as required by law, we undertake no obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise.

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Ethan Allen Interiors Inc.
Selected Financial Information
Unaudited
(in millions)
Selected Consolidated Financial Data:
	Three Months Ended
	09/30/16	09/30/15
Net sales	$193.3	$190.4
Gross margin	56.1%	55.0%
Operating margin	9.5%	11.0%
Adjusted operating margin *	9.8%	11.0%
Net income	$11.5	$13.1
Adjusted net income *	$11.9	$13.1
Operating cash flow	$27.5	$16.1
Capital expenditures	$7.4	$3.1
Acquisitions	$0.0	$0.0
Company stock repurchases (trade date)	$3.4	$0.0
EBITDA	$23.4	$25.7
EBITDA as % of net sales	12.1%	13.5%
Adjusted EBITDA  *	$24.0	$25.7
Adjusted EBITDA as % of net sales *	12.4%	13.5%
Selected Financial Data by Business Segment:
	Three Months Ended
	09/30/16	09/30/15
Retail
Net sales	$152.3	$146.0
Operating margin	0.7%	1.1%
Adjusted operating margin *	1.1%	1.1%
Wholesale
Net sales	$114.6	$120.5
Operating margin	14.4%	17.1%
Adjusted operating margin *	14.4%	17.1%

Ethan Allen Interiors Inc.
Condensed Consolidated Statements of Comprehensive Income
Unaudited
(in thousands)
	Three Months Ended
	09/30/16	09/30/15
Net sales	$193,287	$190,391
Cost of sales	84,820	85,718
Gross profit	108,467	104,673
Selling, general and administrative expenses	90,130	83,773
Operating income	18,337	20,900
Interest and other income	143	126
Interest expense	323	456
Income before income taxes	18,157	20,570
Income tax expense	6,628	7,423
Net income	$11,529	$13,147
Basic earnings per common share:
Net income per basic share	$0.42	$0.46
Basic weighted average shares outstanding	27,725	28,410
Diluted earnings per common share:
Net income per diluted share	$0.41	$0.46
Diluted weighted average shares outstanding	28,012	28,673
Comprehensive income:
Net income	$11,529	$13,147
Other comprehensive income
Currency translation adjustment	(930)	(984)
Other	(12)	6
Other comprehensive income (loss) net of tax	(942)	(978)
Comprehensive income	$10,587	$12,169

Ethan Allen Interiors Inc.
Condensed Consolidated Balance Sheets
Unaudited
(in thousands)
	September 30,	June 30,
	2016	2016
Assets
Current assets:
Cash and cash equivalents	$69,254	$52,659
Marketable securities	-	-
Accounts receivable, net	9,867	9,467
Inventories	159,343	162,323
Prepaid expenses & other current assets	24,494	23,755
Total current assets	262,958	248,204
Property, plant and equipment, net	273,455	273,615
Intangible assets, net	45,128	45,128
Restricted cash and investments	7,302	7,820
Other assets	2,750	2,642
Total Assets	$591,593	$577,409
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of long-term debt	2,941	3,001
Customer deposits	62,392	60,958
Accounts payable	20,857	15,437
Accrued expenses & other current liabilities	48,506	43,951
Total current liabilities	134,696	123,347
Long-term debt	38,147	38,837
Other long-term liabilities	22,958	23,023
Total liabilities	195,801	185,207
Shareholders' equity:
Common stock	489	489
Additional paid-in-capital	376,065	374,972
Less: Treasury stock	(628,300)	(624,932)
Retained earnings	653,122	646,315
Accumulated other comprehensive income	(5,776)	(4,846)
Total Ethan Allen Interiors Inc. shareholders' equity	395,600	391,998
Noncontrolling interests	192	204
Total shareholders' equity	395,792	392,202
Total Liabilities and Shareholders' Equity	$591,593	$577,409

Ethan Allen Interiors Inc.
GAAP Reconciliation
Three Months Ended September 30, 2016 and 2015
Unaudited
(in thousands, except per share amounts)
	Three Months Ended
	September 30,
	2016	2015
Net Income / Earnings Per Share
Net income	$11,529	$13,147
Adjustments net of related tax effects *	391	8
Normalized income tax effects *	1	(85)
Adjusted net income	$11,921	$13,070
Diluted weighted average shares outstanding	28,012	28,673
Earnings per diluted share	$0.41	$0.46
Adjusted earnings per diluted share	$0.43	$0.46
Consolidated Operating Income / Operating Margin
Operating income	$18,337	$20,900
Add: adjustments *	616	13
Adjusted operating income *	$18,953	$20,913
Net sales	$193,287	$190,391
Operating margin	9.5%	11.0%
Adjusted operating margin *	9.8%	11.0%
Wholesale Operating Income / Operating Margin
Wholesale operating income	$16,491	$20,587
Add: adjustments *	-	-
Adjusted wholesale operating income *	$16,491	$20,587
Wholesale net sales	$114,564	$120,455
Wholesale operating margin	14.4%	17.1%
Adjusted wholesale operating margin *	14.4%	17.1%
Retail Operating Income / Operating Margin
Retail operating income	$1,023	$1,640
Add: adjustments *	616	13
Adjusted retail operating income *	$1,639	$1,653
Retail net sales	$152,255	$146,040
Retail operating margin	0.7%	1.1%
Adjusted retail operating margin *	1.1%	1.1%

Ethan Allen Interiors Inc.
GAAP Reconciliation
Three Months Ended September 30, 2016 and 2015
Unaudited
(in thousands, except per share amounts)
	Three Months Ended
	September 30,
	2016	2015
EBITDA
Net income	$11,529	$13,147
Add:  interest expense, net	201	354
income tax expense	6,628	7,423
depreciation and amortization	4,999	4,783
EBITDA	$23,357	$25,707
Net sales	$193,287	$190,391
EBITDA as % of net sales	12.1%	13.5%
EBITDA	$23,357	$25,707
Add: adjustments *	616	13
Adjusted EBITDA	$23,973	$25,720
Net sales	$193,287	$190,391
Adjusted EBITDA as % of net sales	12.4%	13.5%
* Adjustments consist of the following:
	Three Months Ended
	September 30,
	2016	2015
Adjustments net of related income tax effects:
Real estate losses (gains)	$616	$-
Restructuring charges	-	13
	616	13
Related tax effects	(225)	(5)
Adjustments net of related income tax effects	$391	$8
Related tax effects are calculated using a normalized tax rate of 36.5%

Design Center Activity First Quarter Fiscal 2017
		Company
	Independent	Owned	Total
Balance at beginning of period	153	143	296
Additions (includes Relocations) (1)	-	2	2
Closings (includes Relocations) (1)	(2)	-	(2)
Transfers	-	-	-
Balance at end of period	151	145	296
United States	50	139	189
International	101	6	107
(1)  Relocations in additions & closing	-	-	-

Ethan Allen Interiors Inc.
Investor / Media Contact:
Corey Whitely
Executive Vice President, Administration
Chief Financial Officer and Treasurer
cwhitely@ethanalleninc.com

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