eth_10q-123111.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2011
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 1-11692
Ethan Allen Interiors Inc.
(Exact name of registrant as specified in its charter)
| Delaware |
|
06-1275288 |
|
| (State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
| |
|
|
|
| Ethan Allen Drive, Danbury, Connecticut |
|
06811 |
|
| (Address of principal executive offices) |
|
(Zip Code) |
|
(203) 743-8000
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes[ ] No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files). [X] Yes [ ] No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act
|
Large accelerated filer [ ]
|
Accelerated filer [X]
|
|
|
Non-accelerated filer [ ]
|
Smaller reporting company [ ]
|
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).[ ] Yes[X] No
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
At January 25, 2012, there were 28,853,322 shares of Class A Common Stock,
par value $.01, outstanding.
Item 1. Financial Statements
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share data)
| |
|
December 31, 2011
|
|
|
June 30, 2011
|
|
| |
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
66,352 |
|
|
$ |
78,519 |
|
|
Marketable securities (note 5)
|
|
|
11,016 |
|
|
|
12,909 |
|
|
Accounts receivable, less allowance for doubtful accounts of $1,199 at December 31, 2011 and $1,171 at June 30, 2011
|
|
|
13,828 |
|
|
|
15,036 |
|
|
Inventories (note 6)
|
|
|
136,197 |
|
|
|
141,692 |
|
|
Prepaid expenses and other current assets
|
|
|
20,330 |
|
|
|
20,372 |
|
|
Total current assets
|
|
|
247,723 |
|
|
|
268,528 |
|
|
Property, plant and equipment, net
|
|
|
291,098 |
|
|
|
294,853 |
|
|
Goodwill and other intangible assets
|
|
|
45,128 |
|
|
|
45,128 |
|
|
Restricted cash and investments (note 4)
|
|
|
15,402 |
|
|
|
16,391 |
|
|
Other assets
|
|
|
3,020 |
|
|
|
3,425 |
|
|
Total assets
|
|
$ |
602,371 |
|
|
$ |
628,325 |
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt (note 9)
|
|
$ |
- |
|
|
$ |
19 |
|
|
Customer deposits
|
|
|
46,561 |
|
|
|
62,649 |
|
|
Accounts payable
|
|
|
22,452 |
|
|
|
26,958 |
|
|
Accrued compensation and benefits
|
|
|
28,884 |
|
|
|
28,359 |
|
|
Accrued expenses and other current liabilities (note 7)
|
|
|
32,709 |
|
|
|
36,631 |
|
|
Total current liabilities
|
|
|
130,606 |
|
|
|
154,616 |
|
|
Long-term debt (note 9)
|
|
|
152,924 |
|
|
|
165,013 |
|
|
Other long-term liabilities
|
|
|
20,340 |
|
|
|
18,975 |
|
|
Deferred income taxes
|
|
|
8,067 |
|
|
|
8,034 |
|
|
Total liabilities
|
|
|
311,937 |
|
|
|
346,638 |
|
|
Shareholders' equity:
|
|
|
|
|
|
|
|
|
|
Class A common stock, par value $0.01; 150,000,000 shares authorized; 48,473,470 shares issued at December 31, 2011 and 48,350,065 shares issued at June 30, 2011
|
|
|
485 |
|
|
|
484 |
|
|
Class B common stock, par value $0.01; 600,000 shares authorized; no shares issued and outstanding at December 31, 2011 and June 30, 2011
|
|
|
- |
|
|
|
- |
|
|
Preferred stock, par value $0.01; 1,055,000 shares authorized; no shares issued and outstanding at December 31, 2011 and June 30, 2011
|
|
|
- |
|
|
|
- |
|
|
Additional paid-in-capital
|
|
|
360,492 |
|
|
|
359,728 |
|
| |
|
|
|
|
|
|
|
|
|
Less: Treasury stock (at cost), 19,623,385 shares at December 31, 2011 and 19,571,092 shares at June 30, 2011
|
|
|
(583,538 |
) |
|
|
(582,691 |
) |
|
Retained earnings
|
|
|
512,704 |
|
|
|
501,908 |
|
|
Accumulated other comprehensive income (note 13)
|
|
|
45 |
|
|
|
2,258 |
|
|
Total Ethan Allen Interiors Inc. shareholders' equity
|
|
|
290,188 |
|
|
|
281,687 |
|
|
Noncontrolling interests
|
|
|
246 |
|
|
|
- |
|
|
Total shareholders equity
|
|
|
290,434 |
|
|
|
281,687 |
|
|
Total liabilities and shareholders' equity
|
|
$ |
602,371 |
|
|
$ |
628,325 |
|
|
See accompanying notes to consolidated financial statements.
|
|
|
|
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
(In thousands, except per share data)
| |
|
Three months ended
|
|
|
Six months ended
|
|
| |
|
December 31,
|
|
|
December 31,
|
|
| |
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$ |
183,275 |
|
|
$ |
173,345 |
|
|
$ |
368,196 |
|
|
$ |
338,186 |
|
|
Cost of sales
|
|
|
85,056 |
|
|
|
83,484 |
|
|
|
172,092 |
|
|
|
165,944 |
|
|
Gross profit
|
|
|
98,219 |
|
|
|
89,861 |
|
|
|
196,104 |
|
|
|
172,242 |
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
|
|
|
42,246 |
|
|
|
40,068 |
|
|
|
85,866 |
|
|
|
79,395 |
|
|
General and administrative
|
|
|
42,006 |
|
|
|
39,259 |
|
|
|
82,673 |
|
|
|
76,702 |
|
|
Restructuring and impairment charge, net (note 7)
|
|
|
29 |
|
|
|
59 |
|
|
|
(11 |
) |
|
|
284 |
|
|
Total operating expenses
|
|
|
84,281 |
|
|
|
79,386 |
|
|
|
168,528 |
|
|
|
156,381 |
|
|
Operating income
|
|
|
13,938 |
|
|
|
10,475 |
|
|
|
27,576 |
|
|
|
15,861 |
|
|
Interest and other miscellaneous income, net
|
|
|
145 |
|
|
|
1,168 |
|
|
|
205 |
|
|
|
4,325 |
|
|
Interest and other related financing costs (note 9)
|
|
|
2,274 |
|
|
|
2,902 |
|
|
|
4,625 |
|
|
|
5,876 |
|
|
Income before income taxes
|
|
|
11,809 |
|
|
|
8,741 |
|
|
|
23,156 |
|
|
|
14,310 |
|
|
Income tax expense (benefit) (note 3)
|
|
|
3,732 |
|
|
|
(6,003 |
) |
|
|
8,309 |
|
|
|
(4,247 |
) |
|
Net income
|
|
$ |
8,077 |
|
|
$ |
14,744 |
|
|
$ |
14,847 |
|
|
$ |
18,557 |
|
|
Per share data (note 12):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per basic share
|
|
$ |
0.28 |
|
|
$ |
0.51 |
|
|
$ |
0.52 |
|
|
$ |
0.65 |
|
|
Basic weighted average common shares
|
|
|
28,823 |
|
|
|
28,728 |
|
|
|
28,791 |
|
|
|
28,753 |
|
|
Diluted earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per diluted share
|
|
$ |
0.28 |
|
|
$ |
0.51 |
|
|
$ |
0.51 |
|
|
$ |
0.64 |
|
|
Diluted weighted average common shares
|
|
|
29,069 |
|
|
|
28,921 |
|
|
|
29,010 |
|
|
|
28,936 |
|
|
See accompanying notes to consolidated financial statements.
|
|
|
|
|
|
|
ETHAN ALLEN INTERIORS INC.
|
|
Consolidated Statements of Cash Flows (Unaudited)
|
|
(In thousands)
|
| |
|
|
Six months ended
|
|
| |
|
|
December 31,
|
|
| |
|
|
2011
|
|
|
|
2010
|
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
14,847 |
|
|
$ |
18,557 |
|
Adjustments to reconcile net income to net
cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
9,582 |
|
|
|
10,929 |
|
|
Compensation expense related to share-based awards
|
|
|
743 |
|
|
|
436 |
|
|
Provision (benefit) for deferred income taxes
|
|
|
6 |
|
|
|
(11 |
) |
|
(Gain) loss on disposal of property, plant and equipment
|
|
|
1,617 |
|
|
|
273 |
|
|
Other
|
|
|
162 |
|
|
|
(90 |
) |
|
Change in assets and liabilities, net of the effects from acquired and divested businesses:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
956 |
|
|
|
2,429 |
|
|
Inventories
|
|
|
5,973 |
|
|
|
(2,664 |
) |
|
Prepaid and other current assets
|
|
|
85 |
|
|
|
(10,726 |
) |
|
Other assets
|
|
|
83 |
|
|
|
388 |
|
|
Customer deposits
|
|
|
(16,408 |
) |
|
|
(13,843 |
) |
|
Accounts payable
|
|
|
(4,506 |
) |
|
|
(2,037 |
) |
|
Accrued expenses
|
|
|
(3,540 |
) |
|
|
351 |
|
|
Other liabilities
|
|
|
1,365 |
|
|
|
(1,220 |
) |
|
Net cash provided by (used in) operating activities
|
|
|
10,965 |
|
|
|
2,772 |
|
| |
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from the disposal of property, plant & equipment
|
|
|
1,792 |
|
|
|
99 |
|
|
Change in restricted cash and investments
|
|
|
989 |
|
|
|
981 |
|
|
Capital expenditures
|
|
|
(11,392 |
) |
|
|
(4,157 |
) |
|
Purchases of marketable securities
|
|
|
(2,108 |
) |
|
|
(6,358 |
) |
|
Sales of marketable securities
|
|
|
3,825 |
|
|
|
1,000 |
|
|
Other
|
|
|
769 |
|
|
|
(218 |
) |
|
Net cash provided by (used in) investing activities
|
|
|
(6,125 |
) |
|
|
(8,653 |
) |
| |
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
Payments on long-term debt
|
|
|
(12,128 |
) |
|
|
(6,655 |
) |
|
Proceeds from issuance of common stock
|
|
|
22 |
|
|
|
- |
|
|
Proceeds from non controlling interest
|
|
|
275 |
|
|
|
- |
|
|
Payment of cash dividends
|
|
|
(4,031 |
) |
|
|
(2,876 |
) |
|
Purchases and other retirements of company stock
|
|
|
(847 |
) |
|
|
(5,377 |
) |
|
Net cash provided by (used in) financing activities
|
|
|
(16,709 |
) |
|
|
(14,908 |
) |
|
Effect of exchange rate changes on cash
|
|
|
(298 |
) |
|
|
(32 |
) |
|
Net increase (decrease) in cash & cash equivalents
|
|
|
(12,167 |
) |
|
|
(20,821 |
) |
|
Cash & cash equivalents at beginning of period
|
|
|
78,519 |
|
|
|
73,852 |
|
|
Cash & cash equivalents at end of period
|
|
$ |
66,352 |
|
|
$ |
53,031 |
|
|
See accompanying notes to consolidated financial statements.
|
|
|
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders’ Equity
Six Months Ended December 31, 2011
(Unaudited)
(In thousands, except share data)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Balance at June 30, 2011
|
|
$ |
484 |
|
|
$ |
359,728 |
|
|
$ |
(582,691 |
) |
|
$ |
2,258 |
|
|
$ |
501,908 |
|
|
$ |
- |
|
|
$ |
281,687 |
|
|
Issuance of common shares upon the exercise of share-based awards
|
|
|
1 |
|
|
|
21 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
22 |
|
|
Compensation expense associated with share-based awards (note 11)
|
|
|
- |
|
|
|
743 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
743 |
|
|
Purchase/retirement of 52,293 shares of company stock
|
|
|
- |
|
|
|
- |
|
|
|
(847 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
(847 |
) |
|
Dividends declared on common stock
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(4,051 |
) |
|
|
|
|
|
|
(4,051 |
) |
|
Increase from business combination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
275 |
|
|
|
275 |
|
|
Other comprehensive income (note 13):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustments
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,241 |
) |
|
|
- |
|
|
|
|
|
|
|
(2,241 |
) |
|
Unrealized gain (loss) on investments
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3 |
) |
|
|
- |
|
|
|
|
|
|
|
(3 |
) |
|
Loss on derivatives, net of tax
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
31 |
|
|
|
- |
|
|
|
|
|
|
|
31 |
|
|
Net income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
14,847 |
|
|
|
(29 |
) |
|
|
14,818 |
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,605 |
|
|
Balance at December 31, 2011
|
|
$ |
485 |
|
|
$ |
360,492 |
|
|
$ |
(583,538 |
) |
|
$ |
45 |
|
|
$ |
512,704 |
|
|
$ |
246 |
|
|
$ |
290,434 |
|
|
See accompanying notes to consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(1) Basis of Presentation
Ethan Allen Interiors Inc. ("Interiors") is a Delaware corporation incorporated on May 25, 1989. The consolidated financial statements include the accounts of Interiors, its wholly owned subsidiary Ethan Allen Global, Inc. ("Global"), and Global’s subsidiaries (collectively "We", "Us", "Our", "Ethan Allen", or the "Company"). All intercompany accounts and transactions have been eliminated in the consolidated financial statements. All of Global’s capital stock is owned by Interiors, which has no assets or operating results other than those associated with its investment in Global.
We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Due to the inherent uncertainty involved in making those estimates, actual results could differ from those estimates. Areas in which significant estimates have been made include, but are not limited to, revenue recognition, the allowance for doubtful accounts receivable, inventory obsolescence, tax valuation allowances, useful lives for property, plant and equipment and intangible assets, goodwill and indefinite-lived intangible asset impairment analyses, the evaluation of uncertain tax positions and the fair value of assets acquired and liabilities assumed in business combinations.
In October 2011 the Company and one of its independent retailers formed a new business entity which began operating a new Ethan Allen design center in Florida. Our consolidated financial statements include the accounts of this entity because we are a majority shareholder and have the power to direct the activities that most significantly impact the entity’s performance. Noncontrolling interest amounts in the net income (loss) of this entity of ($29 thousand) net of tax, for the three and six months ended December 31, 2011, is included in the Consolidated Statement of Operations within interest and other miscellaneous income, net. Additionally, changes to noncontrolling investment interests of $0.2 million are presented in the equity section of the Consolidated Balance Sheets at December 31, 2011.
(2) Interim Financial Presentation
In our opinion, all adjustments, consisting only of normal recurring adjustments necessary for fair presentation, have been included in the consolidated financial statements. The results of operations for the three and six months ended December 31, 2011 are not necessarily indicative of results that may be expected for the entire fiscal year. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended June 30, 2011.
The Company reviews its expected annual effective income tax rates and makes changes on a quarterly basis as necessary based on certain factors such as changes in forecasted annual operating income; changes to actual or forecasted permanent book to tax differences; impacts from future tax audits with state, federal or foreign tax authorities; impacts from tax law changes; or change in judgment as to the realizability of deferred tax assets. The Company identifies items which are not normal and are non-recurring in nature and treats these as discrete events. The tax effect of discrete items is recorded in the quarter in which the discrete events occur. Due to the volatility of these factors, the Company's consolidated effective income tax rate can change significantly on a quarterly basis.
The Company conducts business globally and, as a result, the Company or one or more of its subsidiaries files income tax returns in the U.S., various state, and foreign jurisdictions. In the normal course of business, the Company is subject to examination by the taxing authorities in such major jurisdictions as the U.S., Canada, and Mexico. As of December 31, 2011, the Company and certain of its subsidiaries are currently under U.S. and Canada audit from 2001 through 2010. It is reasonably possible that some of these audits may be completed during the next twelve months. It is reasonable to expect that various issues relating to uncertain tax benefits will be resolved within the next twelve months as exams are completed or as statutes expire and will impact the effective tax rate.
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Due to the challenging economic times, financial losses in fiscal 2009 and 2010 resulting in a three year cumulative loss, and after considering both positive and negative evidence, management’s assessment is that realization of tax assets is not reasonably assured due to a lack of available objective positive evidence. As a result, the Company established a full valuation allowance as of June 30, 2010. At December 31, 2011, the Company remains in a three year cumulative loss and the full valuation allowance remains in place with a balance of $23.9 million compared with $23.5 million at June 30, 2011. Management will continue to assess the realizability of the tax assets based on actual and forecasted operating results on a quarterly basis, which will likely cause volatility in the effective tax rate of the Company.
The Company’s consolidated effective tax rate was 31.6% and 35.9% for the three and six months ended December 31, 2011 respectively, and negative 68.7% and negative 29.7% for the three and six months ended December 31, 2010 respectively. The current quarter effective tax rate includes tax expense on the current quarter’s net income, interest expense on uncertain tax positions, and the impact of maintaining valuation allowances on deferred tax assets which also affected the income tax expense in both periods. The prior period effective tax rate benefitted from the utilization of certain deferred tax assets.
(4) Restricted Cash and Investments
At December 31, 2011 and June 30, 2011, we held $15.4 million and $16.4 million respectively, of restricted cash and investments in lieu of providing letters of credit for the benefit of the provider of our workmen’s compensation and other insurance and for the benefit of the issuer of our private label credit card. These funds can be invested in high quality money market mutual funds, U.S. Treasuries and U.S. Government agency fixed income instruments, and cannot be withdrawn without the prior written consent of the secured party. These assets are carried at cost, which approximates market value and are classified as long-term assets because they are not expected to be used within one year to fund operations. See also Note 5, “Marketable Securities” and Note 14, “Financial Instruments".
(5) Marketable Securities
At December 31, 2011 and June 30, 2011, the Company held marketable securities of $11.0 million and $12.9 million respectively, classified as current assets, consisting of U.S. municipal bonds with maturities ranging from less than one year to less than two years, which were rated A/A1 or better by the rating services Standard & Poors (“S&P”) and Moodys Investors Service (“Moodys”) respectively. There have been no material realized or unrealized gains or losses for the six months ended December 31, 2011 and December 31, 2010. We do not believe there are any impairments considered to be other than temporary at December 31, 2011. Also see Note 4, "Restricted Cash and Investments" and Note 14, “Financial Instruments".
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(6) Inventories
Inventories at December 31, 2011 and June 30, 2011 are summarized as follows (in thousands):
| |
|
December 31,
|
|
|
June 30,
|
|
| |
|
2011
|
|
|
2011
|
|
| |
|
|
|
|
|
|
|
Finished goods
|
|
$ |
103,742 |
|
|
$ |
108,438 |
|
|
Work in process
|
|
|
8,596 |
|
|
|
8,868 |
|
|
Raw materials
|
|
|
23,859 |
|
|
|
24,386 |
|
| |
|
$ |
136,197 |
|
|
$ |
141,692 |
|
Inventories are presented net of a related valuation allowance of $3.1 million at December 31, 2011 and $1.7 million at June 30, 2011.
(7) Restructuring and Impairment Charges
In recent years, we have announced and executed plans to consolidate our operations as part of an overall strategy to maximize production efficiencies and maintain our competitive advantage. Plans announced in fiscal 2008 and 2009 had no material impact on fiscal 2012 financial statements and the balance of reserves for these actions, for non-cancellable lease obligations with expirations ranging from less than two to 22 years, totaled $1.6 million and $2.5 million at December 31, 2011 and June 30, 2011 respectively.
(8) Business Acquisitions and Joint Ventures
From time to time the Company acquires design centers from its independent retailers in arms length transactions. There were no material acquisitions completed during the six months ended December 31, 2011 or 2010 respectively. In October 2011, the Company and one if its independent retailers formed a joint venture which began operating a new Ethan Allen design center in Florida during the quarter ended December 31, 2011. The Company contributed $0.8 million for a 75% interest in the joint venture. The independent retailer holds a non-controlling interest.
(9) Borrowings
Total debt obligations at December 31, 2011 and June 30, 2011 consist of the following (in thousands):
| |
|
December 31,
|
|
|
June 30,
|
|
| |
|
2011
|
|
|
2011
|
|
|
5.375% Senior Notes due 2015
|
|
$ |
152,924 |
|
|
$ |
164,821 |
|
|
Other debt
|
|
|
- |
|
|
|
211 |
|
|
Total debt
|
|
|
152,924 |
|
|
|
165,032 |
|
|
Less current maturities
|
|
|
- |
|
|
|
19 |
|
|
Total long-term debt
|
|
$ |
152,924 |
|
|
$ |
165,013 |
|
In September 2005, we issued $200.0 million in ten-year senior unsecured notes due 2015 (the "Senior Notes"). The Senior Notes were issued by Global, bearing an annual coupon rate of 5.375% with interest payable semi-annually in arrears on April 1 and October 1. We have used the net proceeds of $198.4 million to improve our retail network, invest in our manufacturing and logistics operations, and for other general corporate purposes. During fiscal 2011, the Company reduced its outstanding debt by $38.2 million. Outstanding debt was further reduced by $12.1 million during the current fiscal year.
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
We also maintain a $50 million senior secured, asset-based revolving credit facility (the “Facility”). At December 31, 2011 and June 30, 2011, we had no revolving loans and $0.7 million of standby and trade letters of credit outstanding under the Facility. The Facility is subject to borrowing base availability and includes a right for the Company to increase the total facility to $100 million subject to certain conditions. The Facility is secured by all property owned, leased or operated by the Company in the United States excluding any real property owned by the Company and contains customary covenants which may limit the Company’s ability to incur debt, engage in mergers and consolidations, make restricted payments (including dividends), sell certain assets, and make investments. Remaining availability under the facility totaled $49.3 million at December 31, 2011 and June 30, 2011 and as a result, covenants and other restricted payment limitations did not apply. The Facility expires March 25, 2016, or June 26, 2015 if the Senior Notes have not been refinanced prior to that date.
At December 31, 2011 and June 30, 2011, we were in compliance with all covenants of the Senior Notes and the Facility.
(10) Litigation
Environmental Matters
We and our subsidiaries are subject to various environmental laws and regulations. Under these laws, we and/or our subsidiaries are, or may be, required to remove or mitigate the effects on the environment of the disposal or release of certain hazardous materials. As of December 31, 2011 and June 30, 2011, we believe that the Company was adequately reserved. We believe our currently anticipated capital expenditures for environmental control facility matters are not material.
We are subject to other federal, state and local environmental protection laws and regulations and are involved, from time to time, in investigations and proceedings regarding environmental matters. Such investigations and proceedings typically concern air emissions, water discharges, and/or management of solid and hazardous wastes. We believe that our facilities are in material compliance with all such applicable laws and regulations.
Regulations issued under the Clean Air Act Amendments of 1990 required the industry to reformulate certain furniture finishes or institute process changes to reduce emissions of volatile organic compounds. Compliance with many of these requirements has been facilitated through the introduction of high solids coating technology and alternative formulations. In addition, we have instituted a variety of technical and procedural controls, including reformulation of finishing materials to reduce toxicity, implementation of high velocity low pressure spray systems, development of storm water protection plans and controls, and further development of related inspection/audit teams, all of which have served to reduce emissions per unit of production. We remain committed to implementing new waste minimization programs and/or enhancing existing programs with the objective of (i) reducing the total volume of waste, (ii) limiting the liability associated with waste disposal, and (iii) continuously improving environmental and job safety programs on the factory floor which serve to minimize emissions and safety risks for employees. We will continue to evaluate the most appropriate, cost effective, control technologies for finishing operations and design production methods to reduce the use of hazardous materials in the manufacturing process.
(11) Share-Based Compensation
Effective October 1, 2011, the Company and M. Farooq Kathwari, our President and Chief Executive Officer, entered into a new employment agreement (the "Agreement"). Pursuant to the terms of the Agreement, Mr. Kathwari was awarded on October 1, 2011, (i) options to purchase 300,000 shares of our common stock at an exercise price of $13.61 (the closing price of a share of our common stock on September 30, 2011), and (ii) 105,000 shares of restricted stock, with both awards vesting ratably over a 5-year period on each June 30, unless earlier vested, in certain circumstances, in accordance with the terms of the Agreement. During the quarter ended September 30, 2011, the Company awarded options to purchase 30,000 shares of our common stock to certain executives other than Mr. Kathwari, at the closing stock price on the respective grant dates. These options vest in four equal annual installments on the grant date anniversary. On July 26, 2011, as a result of the Company’s performance, the Compensation Committee of the Company’s board of directors awarded Mr. Kathwari 30,000 service-based restricted shares, which vest in three equal annual installments on the grant date anniversary.
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(12) Earnings Per Share
Basic and diluted earnings per share are calculated using the following weighted average share data (in thousands):
| |
|
Three months ended
|
|
|
Six months ended
|
|
| |
|
December 31,
|
|
|
December 31,
|
|
| |
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Weighted average common shares outstanding for basic calculation
|
|
|
28,823 |
|
|
|
28,728 |
|
|
|
28,791 |
|
|
|
28,753 |
|
|
Effect of dilutive stock options and other share-based awards
|
|
|
246 |
|
|
|
193 |
|
|
|
219 |
|
|
|
183 |
|
|
Weighted average common shares outstanding adjusted for dilution calculation
|
|
|
29,069 |
|
|
|
28,921 |
|
|
|
29,010 |
|
|
|
28,936 |
|
As of December 31, 2011 and 2010, stock options to purchase 1,666,700 and 1,922,853 common shares, respectively, were excluded from the respective diluted earnings per share calculation because their impact was anti-dilutive.
(13) Comprehensive Income
Our accumulated other comprehensive income, which is comprised of losses on certain derivative instruments, accumulated foreign currency translation adjustments, and unrealized gain and loss on investments totaled less than $0.1 million at December 31, 2011 and $2.3 million at June 30, 2011. Foreign currency translation adjustments are the result of changes in foreign currency exchange rates related to our operations in Canada and Mexico, and, during the quarter ended December 2011, a plant under development in Honduras. Foreign currency translation adjustments exclude income tax expense (benefit) given that the earnings of non-U.S. subsidiaries are deemed to be reinvested for an indefinite period of time.
(14) Fair Value Measurements
We determine fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value is calculated based on assumptions that market participants use in pricing the asset or liability, and not on assumptions specific to the Company. In addition, the fair value of liabilities includes consideration of non-performance risk including our own credit risk. Each fair value measurement is reported in one of three levels, determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:
|
|
Level 1
|
Inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
|
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
|
|
Level 2
|
Inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
|
|
|
Level 3
|
Inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.
|
The following section describes the valuation methodologies we use to measure different financial assets and liabilities at fair value.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table presents our assets and liabilities measured at fair value on a recurring basis at December 31, 2011 and June 30, 2011 (in thousands):
|
December 31, 2011
|
|
| |
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Balance
|
|
|
Cash equivalents
|
|
$ |
81,754 |
|
|
|
- |
|
|
|
- |
|
|
$ |
81,754 |
|
|
Available-for-sale securities
|
|
|
- |
|
|
|
11,016 |
|
|
|
- |
|
|
|
11,016 |
|
|
Total
|
|
$ |
81,754 |
|
|
$ |
11,016 |
|
|
$ |
- |
|
|
$ |
92,770 |
|
|
June 30, 2011
|
|
| |
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Balance
|
|
|
Cash equivalents
|
|
$ |
94,910 |
|
|
|
- |
|
|
|
- |
|
|
$ |
94,910 |
|
|
Available-for-sale securities
|
|
|
- |
|
|
|
12,909 |
|
|
|
- |
|
|
|
12,909 |
|
|
Total
|
|
$ |
94,910 |
|
|
$ |
12,909 |
|
|
$ |
- |
|
|
$ |
107,819 |
|
Cash equivalents consist of money market accounts and mutual funds in U.S. government and agency fixed income securities. We use quoted prices in active markets for identical assets or liabilities to determine fair value. At December 31, 2011 and June 30, 2011, $15.4 million and $16.4 million, respectively, of the cash equivalents were restricted, and classified as a long-term asset.
Available-for-sale securities consist of U.S. municipal bonds with maturities of less than two years. The municipal bonds are rated A/A1 or better by S&P/Moodys respectively. As of December 31, 2011 and December 31, 2010, there were no material gross unrealized gains or losses on available-for-sale securities.
As of December 31, 2011 and June 30, 2011, the contractual maturities of our available-for-sale investments were as follows:
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
|
December 31, 2011
|
|
| |
|
Cost
|
|
|
Estimated Fair Value
|
|
|
Due in one year or less
|
|
$ |
7,590 |
|
|
$ |
7,696 |
|
|
Due after one year through five years
|
|
$ |
3,281 |
|
|
$ |
3,320 |
|
|
June 30, 2011
|
|
| |
|
Cost
|
|
|
Estimated Fair Value
|
|
|
Due in one year or less
|
|
$ |
7,311 |
|
|
$ |
7,393 |
|
|
Due after one year through five years
|
|
$ |
5,428 |
|
|
$ |
5,517 |
|
No investments have been in a continuous loss position for more than one year, and no other-than-temporary impairments were recognized. Also see Note 4, "Restricted Cash and Investments", and Note 5, "Marketable Securities".
Assets and Liabilities Measured at Fair Value on a Non-recurring Basis
We measure certain assets at fair value on a non-recurring basis. These assets are recognized at fair value when they are deemed to be other-than-temporarily impaired. During the six month periods ended December 31, 2011 and 2010, we did not record any other-than-temporary impairments on those assets required to be measured at fair value on a non-recurring basis.
(15) Segment Information
Our operations are classified into two operating segments: wholesale and retail. These operating segments represent strategic business areas which, although they operate separately and provide their own distinctive services, enable us to more effectively offer our complete line of home furnishings and accessories.
The wholesale segment is principally involved in the development of the Ethan Allen brand, which encompasses the design, manufacture, domestic and offshore sourcing, sale and distribution of a full range of home furnishings and accessories to a network of independently operated and Ethan Allen operated design centers as well as related marketing and brand awareness efforts. Wholesale revenue is generated upon the wholesale sale and shipment of our product to all retail design centers, including those operated by Ethan Allen. Wholesale profitability includes (i) the wholesale gross margin, which represents the difference between the wholesale sales price and the cost associated with manufacturing and/or sourcing the related product, and (ii) other operating costs associated with wholesale segment activities.
The retail segment sells home furnishings and accessories to consumers through a network of Company operated design centers. Retail revenue is generated upon the retail sale and delivery of our product to our customers. Retail profitability includes (i) the retail gross margin, which represents the difference between the retail sales price and the cost of goods purchased from the wholesale segment, and (ii) other operating costs associated with retail segment activities.
Inter-segment eliminations result, primarily, from the wholesale sale of inventory to the retail segment, including the related profit margin.
We evaluate performance of the respective segments based upon revenues and operating income. While the manner in which our home furnishings and accessories are marketed and sold is consistent, the nature of the underlying recorded sales (i.e. wholesale versus retail) and the specific services that each operating segment provides (i.e. wholesale manufacturing, sourcing, and distribution versus retail selling) are different. Within the wholesale segment, we maintain revenue information according to each respective product line (i.e. case goods, upholstery, or home accessories and other). The allocation of retail sales by product line is reasonably similar to that of the wholesale segment. A breakdown of wholesale sales by these product lines for the three and six months ended December 31, 2011 and 2010 is provided as follows:
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
| |
|
Three months ended
|
|
|
Six months ended
|
|
| |
|
December 31,
|
|
|
December 31,
|
|
| |
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Case Goods
|
|
|
39 |
% |
|
|
40 |
% |
|
|
39 |
% |
|
|
38 |
% |
|
Upholstered Products
|
|
|
44 |
% |
|
|
46 |
% |
|
|
45 |
% |
|
|
47 |
% |
|
Home Accessories and Other
|
|
|
17 |
% |
|
|
14 |
% |
|
|
16 |
% |
|
|
15 |
% |
| |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
Segment information for the three and six months ended December 31, 2011 and 2010 is provided below (in thousands):
| |
|
Three months ended
|
|
|
Six months ended
|
|
| |
|
December 31,
|
|
|
December 31,
|
|
| |
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale segment
|
|
$ |
106,631 |
|
|
$ |
100,793 |
|
|
$ |
223,025 |
|
|
$ |
208,348 |
|
|
Retail segment
|
|
|
143,104 |
|
|
|
131,014 |
|
|
|
284,285 |
|
|
|
252,037 |
|
|
Elimination of inter-company sales
|
|
|
(66,460 |
) |
|
|
(58,462 |
) |
|
|
(139,114 |
) |
|
|
(122,199 |
) |
|
Consolidated Total
|
|
$ |
183,275 |
|
|
$ |
173,345 |
|
|
$ |
368,196 |
|
|
$ |
338,186 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale segment
|
|
$ |
15,702 |
|
|
$ |
9,884 |
|
|
$ |
31,393 |
|
|
$ |
21,823 |
|
|
Retail segment (1)(2)
|
|
|
(2,532 |
) |
|
|
(1,206 |
) |
|
|
(4,029 |
) |
|
|
(5,496 |
) |
|
Adjustment of inter-company profit (3)
|
|
|
768 |
|
|
|
1,797 |
|
|
|
212 |
|
|
|
(466 |
) |
|
Consolidated Total
|
|
$ |
13,938 |
|
|
$ |
10,475 |
|
|
$ |
27,576 |
|
|
$ |
15,861 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation & Amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale segment
|
|
$ |
1,780 |
|
|
$ |
2,394 |
|
|
$ |
3,984 |
|
|
$ |
4,963 |
|
|
Retail segment
|
|
|
2,813 |
|
|
|
2,928 |
|
|
|
5,598 |
|
|
|
5,966 |
|
|
Consolidated Total
|
|
$ |
4,593 |
|
|
$ |
5,322 |
|
|
$ |
9,582 |
|
|
$ |
10,929 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale segment
|
|
$ |
6,598 |
|
|
$ |
1,595 |
|
|
$ |
8,403 |
|
|
$ |
2,686 |
|
|
Retail segment
|
|
|
1,419 |
|
|
|
1,058 |
|
|
|
2,989 |
|
|
|
1,471 |
|
|
Consolidated Total
|
|
$ |
8,017 |
|
|
$ |
2,653 |
|
|
$ |
11,392 |
|
|
$ |
4,157 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
December 31,
|
|
|
June 30,
|
|
|
|
|
|
|
|
|
|
| |
|
|
2011 |
|
|
|
2011 |
|
|
|
|
|
|
|
|
|
|
Total Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale segment
|
|
$ |
297,169 |
|
|
$ |
309,081 |
|
|
|
|
|
|
|
|
|
|
Retail segment
|
|
|
332,545 |
|
|
|
347,044 |
|
|
|
|
|
|
|
|
|
|
Inventory profit elimination (4)
|
|
|
(27,343 |
) |
|
|
(27,800 |
) |
|
|
|
|
|
|
|
|
|
Consolidated Total
|
|
$ |
602,371 |
|
|
$ |
628,325 |
|
|
|
|
|
|
|
|
|
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
|
(1)
|
Operating income (loss) for the retail segment for the three months ended December 31, 2010 includes pre-tax restructuring and impairment charges of $0.1 million.
|
|
(2)
|
Operating income (loss) for the retail segment for the six months ended December 31, 2010 includes pre-tax restructuring and impairment charges of $0.3 million.
|
|
(3)
|
Represents the change in wholesale profit contained in Ethan Allen operated design center inventory at the end of the period.
|
|
(4)
|
Represents the wholesale profit contained in Ethan Allen operated design center inventory that has not yet been realized. These profits are realized when the related inventory is sold.
|
At December 31, 2011, there were 84 independent retail design centers located outside the United States compared with 61 at December 31, 2010. Approximately 5.6% of our net sales during the current six months were derived from sales to these retail design centers compared with 6.2% in the prior year.
(16) Recently Issued Accounting Pronouncements
In June 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-05, “Presentation of Comprehensive Income”. This ASU increases the prominence of items reported in other comprehensive income by eliminating the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendment requires that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments do not change the items that must be reported in other comprehensive income. This ASU is effective for annual and interim periods beginning on or after December 15, 2011 (July 1, 2012 for the Company), and must be applied retrospectively.
(17) Financial Information About the Parent, the Issuer and the Guarantors
On September 27, 2005, Global (the "Issuer") issued $200 million aggregate principal amount of Senior Notes which have been guaranteed on a senior basis by Interiors (the "Parent"), and other wholly owned domestic subsidiaries of the Issuer and the Parent, including Ethan Allen Retail, Inc., Ethan Allen Operations, Inc., Ethan Allen Realty, LLC, Lake Avenue Associates, Inc. and Manor House, Inc. The subsidiary guarantors (other than the Parent) are collectively called the "Guarantors". The guarantees of the Guarantors are unsecured. All of the guarantees are full, unconditional and joint and several and the Issuer and each of the Guarantors are 100% owned by the Parent. Our other subsidiaries which are not guarantors are called the "Non-Guarantors".
The following tables set forth the condensed consolidating balance sheets as of December 31, 2011 and June 30, 2011, the condensed consolidating statements of operations for the three and six months ended December 31, 2011 and 2010, and the condensed consolidating statements of cash flows for the six months ended December 31, 2011 and 2010 of the Parent, the Issuer, the Guarantors and the Non-Guarantors.
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
CONDENSED CONSOLIDATING BALANCE SHEET
(In thousands)
December 31, 2011
| |
|
Parent
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Non-Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
- |
|
|
$ |
58,255 |
|
|
$ |
5,625 |
|
|
$ |
2,472 |
|
|
$ |
- |
|
|
$ |
66,352 |
|
|
Marketable securities
|
|
|
- |
|
|
|
11,016 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
11,016 |
|
|
Accounts receivable, net
|
|
|
- |
|
|
|
13,359 |
|
|
|
469 |
|
|
|
- |
|
|
|
- |
|
|
|
13,828 |
|
|
Inventories
|
|
|
- |
|
|
|
- |
|
|
|
159,124 |
|
|
|
4,416 |
|
|
|
(27,343 |
) |
|
|
136,197 |
|
|
Prepaid expenses and other current assets
|
|
|
- |
|
|
|
6,275 |
|
|
|
11,718 |
|
|
|
2,337 |
|
|
|
- |
|
|
|
20,330 |
|
|
Intercompany receivables
|
|
|
- |
|
|
|
808,523 |
|
|
|
262,217 |
|
|
|
(13,955 |
) |
|
|
(1,056,785 |
) |
|
|
- |
|
|
Total current assets
|
|
|
- |
|
|
|
897,428 |
|
|
|
439,153 |
|
|
|
(4,730 |
) |
|
|
(1,084,128 |
) |
|
|
247,723 |
|
|
Property, plant and equipment, net
|
|
|
- |
|
|
|
8,380 |
|
|
|
269,110 |
|
|
|
13,608 |
|
|
|
- |
|
|
|
291,098 |
|
|
Goodwill and other intangible assets
|
|
|
- |
|
|
|
37,905 |
|
|
|
7,223 |
|
|
|
- |
|
|
|
- |
|
|
|
45,128 |
|
|
Restricted cash and investments
|
|
|
- |
|
|
|
15,402 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
15,402 |
|
|
Other assets
|
|
|
- |
|
|
|
2,260 |
|
|
|
760 |
|
|
|
- |
|
|
|
- |
|
|
|
3,020 |
|
|
Investment in affiliated companies
|
|
|
616,411 |
|
|
|
(99,697 |
) |
|
|
- |
|
|
|
- |
|
|
|
(516,714 |
) |
|
|
- |
|
|
Total assets
|
|
$ |
616,411 |
|
|
$ |
861,678 |
|
|
$ |
716,246 |
|
|
$ |
8,878 |
|
|
$ |
(1,600,842 |
) |
|
$ |
602,371 |
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer deposits
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
44,459 |
|
|
$ |
2,102 |
|
|
$ |
- |
|
|
$ |
46,561 |
|
|
Accounts payable
|
|
|
- |
|
|
|
6,420 |
|
|
|
15,814 |
|
|
|
218 |
|
|
|
- |
|
|
|
22,452 |
|
|
Accrued expenses and other current liabilities
|
|
|
2,152 |
|
|
|
43,516 |
|
|
|
15,127 |
|
|
|
798 |
|
|
|
- |
|
|
|
61,593 |
|
|
Intercompany payables
|
|
|
323,825 |
|
|
|
597 |
|
|
|
727,969 |
|
|
|
4,394 |
|
|
|
(1,056,785 |
) |
|
|
- |
|
|
Total current liabilities
|
|
|
325,977 |
|
|
|
50,533 |
|
|
|
803,369 |
|
|
|
7,512 |
|
|
|
(1,056,785 |
) |
|
|
130,606 |
|
|
Long-term debt
|
|
|
- |
|
|
|
152,924 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
152,924 |
|
|
Other long-term liabilities
|
|
|
- |
|
|
|
6,253 |
|
|
|
13,995 |
|
|
|
92 |
|
|
|
- |
|
|
|
20,340 |
|
|
Deferred income taxes
|
|
|
- |
|
|
|
8,067 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
8,067 |
|
|
Total liabilities
|
|
|
325,977 |
|
|
|
217,777 |
|
|
|
817,364 |
|
|
|
7,604 |
|
|
|
(1,056,785 |
) |
|
|
311,937 |
|
|
Shareholders’ equity
|
|
|
290,434 |
|
|
|
643,901 |
|
|
|
(101,118 |
) |
|
|
1,274 |
|
|
|
(544,057 |
) |
|
|
290,434 |
|
|
Total liabilities and shareholders’ equity
|
|
$ |
616,411 |
|
|
$ |
861,678 |
|
|
$ |
716,246 |
|
|
$ |
8,878 |
|
|
$ |
(1,600,842 |
) |
|
$ |
602,371 |
|
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
|
CONDENSED CONSOLIDATING BALANCE SHEET
|
|
(In thousands)
|
|
June 30, 2011
|
| |
|
Parent
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Non-Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
- |
|
|
$ |
69,763 |
|
|
$ |
7,716 |
|
|
$ |
1,040 |
|
|
$ |
- |
|
|
$ |
78,519 |
|
|
Marketable securities
|
|
|
- |
|
|
|
12,909 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
12,909 |
|
|
Accounts receivable, net
|
|
|
- |
|
|
|
13,609 |
|
|
|
174 |
|
|
|
1,253 |
|
|
|
- |
|
|
|
15,036 |
|
|
Inventories
|
|
|
- |
|
|
|
- |
|
|
|
164,938 |
|
|
|
4,554 |
|
|
|
(27,800 |
) |
|
|
141,692 |
|
|
Prepaid expenses and other current assets
|
|
|
- |
|
|
|
4,598 |
|
|
|
14,866 |
|
|
|
908 |
|
|
|
- |
|
|
|
20,372 |
|
|
Intercompany receivables
|
|
|
- |
|
|
|
784,285 |
|
|
|
249,461 |
|
|
|
(8,423 |
) |
|
|
(1,025,323 |
) |
|
|
- |
|
|
Total current assets
|
|
|
- |
|
|
|
885,164 |
|
|
|
437,155 |
|
|
|
(668 |
) |
|
|
(1,053,123 |
) |
|
|
268,528 |
|
|
Property, plant and equipment, net
|
|
|
- |
|
|
|
8,023 |
|
|
|
276,057 |
|
|
|
10,773 |
|
|
|
- |
|
|
|
294,853 |
|
|
Goodwill and other intangible assets
|
|
|
- |
|
|
|
37,905 |
|
|
|
7,223 |
|
|
|
- |
|
|
|
- |
|
|
|
45,128 |
|
|
Restricted cash and investments
|
|
|
- |
|
|
|
16,391 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
16,391 |
|
|
Other assets
|
|
|
- |
|
|
|
2,700 |
|
|
|
725 |
|
|
|
- |
|
|
|
- |
|
|
|
3,425 |
|
|
Investment in affiliated companies
|
|
|
602,699 |
|
|
|
(93,132 |
) |
|
|
- |
|
|
|
- |
|
|
|
(509,567 |
) |
|
|
- |
|
|
Total assets
|
|
$ |
602,699 |
|
|
$ |
857,051 |
|
|
$ |
721,160 |
|
|
$ |
10,105 |
|
|
$ |
(1,562,690 |
) |
|
$ |
628,325 |
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
19 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
19 |
|
|
Customer deposits
|
|
|
- |
|
|
|
- |
|
|
|
59,633 |
|
|
|
3,016 |
|
|
|
- |
|
|
|
62,649 |
|
|
Accounts payable
|
|
|
- |
|
|
|
7,333 |
|
|
|
19,233 |
|
|
|
392 |
|
|
|
- |
|
|
|
26,958 |
|
|
Accrued expenses and other current liabilities
|
|
|
2,130 |
|
|
|
43,212 |
|
|
|
18,746 |
|
|
|
902 |
|
|
|
- |
|
|
|
64,990 |
|
|
Intercompany payables
|
|
|
318,882 |
|
|
|
597 |
|
|
|
702,748 |
|
|
|
3,096 |
|
|
|
(1,025,323 |
) |
|
|
- |
|
|
Total current liabilities
|
|
|
321,012 |
|
|
|
51,142 |
|
|
|
800,379 |
|
|
|
7,406 |
|
|
|
(1,025,323 |
) |
|
|
154,616 |
|
|
Long-term debt
|
|
|
- |
|
|
|
164,832 |
|
|
|
181 |
|
|
|
- |
|
|
|
- |
|
|
|
165,013 |
|
|
Other long-term liabilities
|
|
|
- |
|
|
|
4,392 |
|
|
|
14,474 |
|
|
|
109 |
|
|
|
- |
|
|
|
18,975 |
|
|
Deferred income taxes
|
|
|
- |
|
|
|
8,034 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
8,034 |
|
|
Total liabilities
|
|
|
321,012 |
|
|
|
228,400 |
|
|
|
815,034 |
|
|
|
7,515 |
|
|
|
(1,025,323 |
) |
|
|
346,638 |
|
|
Shareholders’ equity
|
|
|
281,687 |
|
|
|
628,651 |
|
|
|
(93,874 |
) |
|
|
2,590 |
|
|
|
(537,367 |
) |
|
|
281,687 |
|
|
Total liabilities and shareholders’ equity
|
|
$ |
602,699 |
|
|
$ |
857,051 |
|
|
$ |
721,160 |
|
|
$ |
10,105 |
|
|
$ |
(1,562,690 |
) |
|
$ |
628,325 |
|
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
|
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
|
|
(In thousands)
|
|
Three months ended December 31, 2011
|
| |
|
Parent
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Non-Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net sales
|
|
$ |
- |
|
|
$ |
106,087 |
|
|
$ |
196,556 |
|
|
$ |
8,533 |
|
|
$ |
(127,901 |
) |
|
$ |
183,275 |
|
|
Cost of sales
|
|
|
- |
|
|
|
78,863 |
|
|
|
130,514 |
|
|
|
4,503 |
|
|
|
(128,824 |
) |
|
|
85,056 |
|
|
Gross profit
|
|
|
- |
|
|
|
27,224 |
|
|
|
66,042 |
|
|
|
4,030 |
|
|
|
923 |
|
|
|
98,219 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
45 |
|
|
|
10,699 |
|
|
|
70,117 |
|
|
|
3,391 |
|
|
|
- |
|
|
|
84,252 |
|
|
Restructuring and impairment charge, (credit) net
|
|
|
- |
|
|
|
- |
|
|
|
29 |
|
|
|
- |
|
|
|
- |
|
|
|
29 |
|
|
Total operating expenses
|
|
|
45 |
|
|
|
10,699 |
|
|
|
70,146 |
|
|
|
3,391 |
|
|
|
- |
|
|
|
84,281 |
|
|
Operating income (loss)
|
|
|
(45 |
) |
|
|
16,525 |
|
|
|
(4,104 |
) |
|
|
639 |
|
|
|
923 |
|
|
|
13,938 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other miscellaneous income, net
|
|
|
8,122 |
|
|
|
(3,451 |
) |
|
|
89 |
|
|
|
6 |
|
|
|
(4,621 |
) |
|
|
145 |
|
|
Interest and other related financing costs
|
|
|
- |
|
|
|
2,274 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,274 |
|
|
Income before income tax expense
|
|
|
8,077 |
|
|
|
10,800 |
|
|
|
(4,015 |
) |
|
|
645 |
|
|
|
(3,698 |
) |
|
|
11,809 |
|
|
Income tax expense
|
|
|
- |
|
|
|
3,601 |
|
|
|
124 |
|
|
|
7 |
|
|
|
- |
|
|
|
3,732 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
$ |
8,077 |
|
|
$ |
7,199 |
|
|
$ |
(4,139 |
) |
|
$ |
638 |
|
|
$ |
(3,698 |
) |
|
$ |
8,077 |
|
|
Three months ended December 31, 2010
|
| |
|
Parent |
|
|
Issuer |
|
|
Guarantors |
|
|
Non-Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net sales
|
|
$ |
- |
|
|
$ |
100,980 |
|
|
$ |
182,505 |
|
|
$ |
7,899 |
|
|
$ |
(118,039 |
) |
|
$ |
173,345 |
|
|
Cost of sales
|
|
|
- |
|
|
|
77,387 |
|
|
|
121,588 |
|
|
|
4,271 |
|
|
|
(119,762 |
) |
|
|
83,484 |
|
|
Gross profit
|
|
|
- |
|
|
|
23,593 |
|
|
|
60,917 |
|
|
|
3,628 |
|
|
|
1,723 |
|
|
|
89,861 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
45 |
|
|
|
11,789 |
|
|
|
64,358 |
|
|
|
3,135 |
|
|
|
- |
|
|
|
79,327 |
|
|
Restructuring and impairment charge, (credit) net
|
|
|
- |
|
|
|
- |
|
|
|
59 |
|
|
|
- |
|
|
|
- |
|
|
|
59 |
|
|
Total operating expenses
|
|
|
45 |
|
|
|
11,789 |
|
|
|
64,417 |
|
|
|
3,135 |
|
|
|
- |
|
|
|
79,386 |
|
|
Operating income (loss)
|
|
|
(45 |
) |
|
|
11,804 |
|
|
|
(3,500 |
) |
|
|
493 |
|
|
|
1,723 |
|
|
|
10,475 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other miscellaneous income, net
|
|
|
14,789 |
|
|
|
(1,916 |
) |
|
|
(16 |
) |
|
|
- |
|
|
|
(11,689 |
) |
|
|
1,168 |
|
|
Interest and other related financing costs
|
|
|
- |
|
|
|
2,825 |
|
|
|
77 |
|
|
|
- |
|
|
|
- |
|
|
|
2,902 |
|
|
Income before income tax expense
|
|
|
14,744 |
|
|
|
7,063 |
|
|
|
(3,593 |
) |
|
|
493 |
|
|
|
(9,966 |
) |
|
|
8,741 |
|
|
Income tax expense
|
|
|
- |
|
|
|
(6,003 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(6,003 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
$ |
14,744 |
|
|
$ |
13,066 |
|
|
$ |
(3,593 |
) |
|
$ |
493 |
|
|
$ |
(9,966 |
) |
|
$ |
14,744 |
|
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
|
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
|
|
(In thousands)
|
|
Six months ended December 31, 2011
|
| |
|
Parent
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Non-Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net sales
|
|
$ |
- |
|
|
$ |
222,563 |
|
|
$ |
391,376 |
|
|
$ |
17,428 |
|
|
$ |
(263,171 |
) |
|
$ |
368,196 |
|
|
Cost of sales
|
|
|
- |
|
|
|
166,387 |
|
|
|
259,697 |
|
|
|
9,636 |
|
|
|
(263,628 |
) |
|
|
172,092 |
|
|
Gross profit
|
|
|
- |
|
|
|
56,176 |
|
|
|
131,679 |
|
|
|
7,792 |
|
|
|
457 |
|
|
|
196,104 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
90 |
|
|
|
22,458 |
|
|
|
139,155 |
|
|
|
6,836 |
|
|
|
- |
|
|
|
168,539 |
|
|
Restructuring and impairment charge, (credit) net
|
|
|
- |
|
|
|
- |
|
|
|
(11 |
) |
|
|
- |
|
|
|
- |
|
|
|
(11 |
) |
|
Total operating expenses
|
|
|
90 |
|
|
|
22,458 |
|
|
|
139,144 |
|
|
|
6,836 |
|
|
|
- |
|
|
|
168,528 |
|
|
Operating income (loss)
|
|
|
(90 |
) |
|
|
33,718 |
|
|
|
(7,465 |
) |
|
|
956 |
|
|
|
457 |
|
|
|
27,576 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other miscellaneous income, net
|
|
|
14,937 |
|
|
|
(6,510 |
) |
|
|
145 |
|
|
|
6 |
|
|
|
(8,373 |
) |
|
|
205 |
|
|
Interest and other related financing costs
|
|
|
- |
|
|
|
4,625 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4,625 |
|
|
Income before income tax expense
|
|
|
14,847 |
|
|
|
22,583 |
|
|
|
(7,320 |
) |
|
|
962 |
|
|
|
(7,916 |
) |
|
|
23,156 |
|
|
Income tax expense
|
|
|
- |
|
|
|
8,103 |
|
|
|
170 |
|
|
|
36 |
|
|
|
- |
|
|
|
8,309 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
$ |
14,847 |
|
|
$ |
14,480 |
|
|
$ |
(7,490 |
) |
|
$ |
926 |
|
|
$ |
(7,916 |
) |
|
$ |
14,847 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended December 31, 2010
| |
|
Parent
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Non-Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net sales
|
|
$ |
- |
|
|
$ |
208,498 |
|
|
$ |
357,475 |
|
|
$ |
14,812 |
|
|
$ |
(242,599 |
) |
|
$ |
338,186 |
|
|
Cost of sales
|
|
|
- |
|
|
|
159,821 |
|
|
|
240,150 |
|
|
|
7,910 |
|
|
|
(241,937 |
) |
|
|
165,944 |
|
|
Gross profit
|
|
|
- |
|
|
|
48,677 |
|
|
|
117,325 |
|
|
|
6,902 |
|
|
|
(662 |
) |
|
|
172,242 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
90 |
|
|
|
22,051 |
|
|
|
127,879 |
|
|
|
6,077 |
|
|
|
- |
|
|
|
156,097 |
|
|
Restructuring and impairment charge, (credit) net
|
|
|
- |
|
|
|
- |
|
|
|
284 |
|
|
|
- |
|
|
|
- |
|
|
|
284 |
|
|
Total operating expenses
|
|
|
90 |
|
|
|
22,051 |
|
|
|
128,163 |
|
|
|
6,077 |
|
|
|
- |
|
|
|
156,381 |
|
|
Operating income (loss)
|
|
|
(90 |
) |
|
|
26,626 |
|
|
|
(10,838 |
) |
|
|
825 |
|
|
|
(662 |
) |
|
|
15,861 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other miscellaneous income, net
|
|
|
18,647 |
|
|
|
(5,841 |
) |
|
|
(29 |
) |
|
|
5 |
|
|
|
(8,457 |
) |
|
|
4,325 |
|
|
Interest and other related financing costs
|
|
|
- |
|
|
|
|