Ethan Allen Interiors Inc. (“Ethan Allen” or the “Company”) (NYSE:
ETD) today reported its financial and business results for its
fiscal 2023 first quarter ended September 30, 2022.
Farooq Kathwari, Ethan Allen’s Chairman,
President and CEO commented, “We are pleased with our fiscal 2023
first quarter results. Our sales increased 17.7% to $214.5 million
and our diluted earnings per share increased by 48.1% to $1.17. We
are also pleased to generate strong operating cash flow of $38.4
million during the quarter and returned $20.9 million to
shareholders through cash dividends. We benefited from efficiencies
throughout our vertically integrated structure and a higher backlog
of orders.”
Mr. Kathwari continued, “Moving forward we are
well-positioned to manage the challenging trends within the global
economy. As we celebrate 90 years of innovation, our focus is on
the continued strengthening of our vertically integrated structure.
This includes our interior design network with major advancements
in technology, accelerating introductions of relevant offerings,
expanding our marketing and continuing to invest in our North
American manufacturing and logistics. About 75% of our products are
made in our North American workshops.”
FISCAL 2023
FIRST QUARTER
HIGHLIGHTS*
- Consolidated net sales growth of
17.7% to $214.5 million
- Retail net sales of $183.7 million increased 18.5%
- Wholesale net sales of $114.7
million increased 4.8%
- Written order trends
- Retail segment written orders
increased 7.4% compared with the pre-pandemic first quarter of
fiscal 2020; down 8.6% compared with the first quarter of fiscal
2022
- Wholesale
segment written orders were 0.1% lower than the first quarter of
fiscal 2020; declined 7.2% from a year ago
- Consolidated
gross margin increased to 60.4%, up from 59.9% a year ago due to a
change in sales mix with the Retail segment becoming a larger
portion, a favorable product mix, product pricing actions taken and
higher manufacturing productivity and efficiency
- Operating margin
of 18.5%; adjusted operating margin of 17.6% compared with 15.2%
last year due to strong net sales growth, retail and wholesale
gross margin expansion and controlling costs by leveraging cost
reductions partially offset by higher delivery, freight and
marketing costs; selling, general and administrative expenses
decreased from 44.7% of net sales to 42.9%, reflecting the
Company’s operating leverage
- Diluted EPS of
$1.17 compared with $0.79; adjusted diluted EPS of $1.11 increased
38.8%
- Generated $38.4
million of cash from operating activities; cash and short-term
investments totaled $142.4 million with no debt outstanding
- Paid special
cash dividends and regular quarterly cash dividends totaling $20.9
million
- Ended the
quarter with $167.7 million in inventory, down $8.8 million from
June 30, 2022
* See reconciliation of U.S. GAAP to adjusted
key financial measures in the back of this press release.
Comparisons are to the first quarter of fiscal 2022.
KEY FINANCIAL MEASURES*
(Unaudited) |
(In thousands,
except per share data) |
|
Three months ended |
|
|
September 30, |
|
|
|
|
|
2022 |
|
|
2021 |
|
% Change |
|
|
|
Net sales |
$ |
214,530 |
|
$ |
182,327 |
|
17.7 |
% |
|
|
|
Gross profit |
$ |
129,616 |
|
$ |
109,192 |
|
18.7 |
% |
|
|
|
Gross margin |
|
60.4 |
% |
|
59.9 |
% |
|
|
|
|
GAAP operating income |
$ |
39,650 |
|
$ |
27,360 |
|
44.9 |
% |
|
|
|
Adjusted operating income* |
$ |
37,692 |
|
$ |
27,728 |
|
35.9 |
% |
|
|
|
GAAP operating margin |
|
18.5 |
% |
|
15.0 |
% |
|
|
|
|
Adjusted operating margin* |
|
17.6 |
% |
|
15.2 |
% |
|
|
|
|
GAAP net income |
$ |
29,880 |
|
$ |
20,153 |
|
48.3 |
% |
|
|
|
Adjusted net income* |
$ |
28,417 |
|
$ |
20,429 |
|
39.1 |
% |
|
|
|
Effective tax rate |
|
25.3 |
% |
|
26.3 |
% |
|
|
|
|
GAAP diluted EPS |
$ |
1.17 |
|
$ |
0.79 |
|
48.1 |
% |
|
|
|
Adjusted diluted EPS* |
$ |
1.11 |
|
$ |
0.80 |
|
38.8 |
% |
|
|
|
Cash flows from operating
activities |
$ |
38,422 |
|
$ |
16,989 |
|
126.2 |
% |
|
|
|
* See reconciliation of U.S. GAAP to adjusted
key financial measures in the back of this press release
BALANCE SHEET
and CASH FLOW
Cash
and short-term investments totaled $142.4 million
at September 30, 2022, compared with $121.1 million at June 30,
2022. The increase of $21.3 million during the quarter was
primarily due to $38.4 million in cash generated from operating
activities and $8.1 million in proceeds received from a
sale-leaseback transaction completed in August 2022 partially
offset by $20.9 million in cash dividends paid and capital
expenditures of $3.2 million as the Company continues to return
capital to shareholders and reinvest back into the business.
Cash from operating activities
totaled $38.4 million, an increase from $17.0 million in the prior
year period due to an improvement in working capital and higher net
income. The increase in working capital was primarily from a
reduction in customer deposits as net shipments outpaced written
orders and improved collections on accounts receivable partially
offset by a reduction in inventory levels.
Cash
dividends paid were $20.9 million, which
included a special cash dividend of $12.7 million, or $0.50 per
share. Ethan Allen has a long history of returning capital to
shareholders and is pleased to have paid the special cash dividend
in August 2022, which highlights the Company’s strong balance sheet
and operating results.
Inventories, net decreased
to $167.7 million at September 30, 2022, compared with $176.5
million at June 30, 2022, as the Company restores its operating
inventory levels to more historical norms as backlog declines.
Customer deposits from
written orders decreased $12.2 million during the quarter and
totaled $108.9 million at September 30, 2022. Increased
manufacturing capacity and related deliveries combined with the
pace of written orders led to the reduction in customer
deposits.
No
debt outstanding at September 30,
2022.
CONFERENCE CALL
Ethan Allen will host an analyst conference call
today, October 26, 2022, at 5:00 PM (Eastern Time) to discuss its
results. The analyst conference call will be webcast live from the
Company’s Investor Relations website at
https://ir.ethanallen.com.
The following information is provided for those
who would like to participate in the conference call:
- U.S.
Participants:
877-705-2976
- International
Participants:
201-689-8798
- Meeting
Number: 13732728
For those unable to listen live, an archived
recording of the call will be made available on the Company’s
website referenced above for up to six months.
ABOUT ETHAN ALLEN
Ethan Allen Interiors Inc. (NYSE: ETD) is a
leading interior design company, manufacturer and retailer in the
home furnishings marketplace. The Company is a global luxury home
fashion brand that is vertically integrated from product design
through home delivery, which offers its customers stylish product
offerings, artisanal quality, and personalized service. The Company
provides complimentary interior design service to its clients and
sells a full range of home furnishings through a retail network of
design centers located throughout the United States and abroad as
well as online at ethanallen.com. Ethan Allen owns and operates ten
manufacturing facilities located in the United States, Mexico and
Honduras, including one sawmill, one rough mill and a lumberyard.
Approximately 75% of its products are manufactured or assembled in
these North American facilities.
For more information on Ethan Allen's products
and services, visit www.ethanallen.com.
Investor / Media Contact:
Matt McNultySenior Vice President, Chief Financial Officer and
TreasurerIR@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
derived from the consolidated financial statements but are not
presented in accordance with GAAP. The Company uses non-GAAP
financial measures, including 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. Investors should consider these
non-GAAP financial measures in addition to, and not as a substitute
for, or superior to, the financial performance measures prepared 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 these 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 and
Section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). Generally, forward-looking statements represent
management’s beliefs and assumptions concerning current
expectations, projections or trends relating to results of
operations, financial results, financial condition, strategic
objectives and plans, expenses, dividends, share repurchases,
liquidity, use of cash and cash requirements, investments, future
economic performance, business and industry and the effect of the
COVID-19 pandemic on the business operations and financial results.
Such forward-looking statements can be identified by the fact that
they do not relate strictly to historical or current
facts. These forward-looking statements may include words such
as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,”
“believe,” “continue,” “may,” “will,” “short-term,” “target,”
“outlook,” “forecast,” “future,” “strategy,” “opportunity,”
“would,” “guidance,” “non-recurring,” “one-time,” “unusual,”
“should,” “likely,” “COVID-19 impact,” and other words and terms of
similar meaning in connection with any discussion of the timing or
nature of future operating or financial performance or other
events. The Company derives many of its forward-looking statements
from operating budgets and forecasts, which are based upon many
detailed assumptions. While the Company believes that its
assumptions are reasonable, it cautions that it is very difficult
to predict the impact of known factors and it is impossible for the
Company to anticipate all factors that could affect actual results
and matters that are identified as “short term,” “non-recurring,”
“unusual,” “one-time,” or other words and terms of similar meaning
may in fact recur in one or more future financial reporting
periods.
Forward-looking statements are subject to risks
and uncertainties that may cause actual results to differ
materially from those that are expected. Actual results could
differ materially from those anticipated in the forward-looking
statements due to a number of risks and uncertainties including,
but not limited to, the risks and uncertainties disclosed in Part
I, Item 1A. Risk Factors, in the Company’s 2022 Annual Report on
Form 10-K and other factors identified in its reports filed with
the Securities and Exchange Commission (the “SEC”), available on
the SEC's website at www.sec.gov.
All forward-looking statements attributable to
the Company, or persons acting on its behalf, are expressly
qualified in their entirety by these cautionary statements, as well
as other cautionary statements. A reader should evaluate all
forward-looking statements made in this press release in the
context of these risks and uncertainties. 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. The Company
is including this cautionary note to make applicable and take
advantage of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 for forward-looking statements. The
forward-looking statements included in this press release are made
only as of the date hereof. The Company undertakes no obligation to
publicly update or revise any forward-looking statement, whether as
a result of new information, future events or otherwise, except as
otherwise required by law.
Ethan Allen Interiors Inc. |
Consolidated Statements of Comprehensive
Income |
(Unaudited) |
(In thousands, except per share data) |
|
Three months ended September 30, |
|
|
|
2022 |
|
|
2021 |
|
|
Net sales |
$ |
214,530 |
|
$ |
182,327 |
|
|
Cost of sales |
|
84,914 |
|
|
73,135 |
|
|
Gross profit |
|
129,616 |
|
|
109,192 |
|
|
Selling, general and administrative expenses |
|
91,962 |
|
|
81,577 |
|
|
Restructuring and other impairment charges, net of gains |
|
(1,996 |
) |
|
255 |
|
|
Operating income |
|
39,650 |
|
|
27,360 |
|
|
Interest expense and other financing costsInterest and other
income, net |
|
55396 |
|
|
4828 |
|
|
Income before income taxes |
|
39,991 |
|
|
27,340 |
|
|
Income tax expense |
|
10,111 |
|
|
7,187 |
|
|
Net income |
$ |
29,880 |
|
$ |
20,153 |
|
|
|
|
|
|
|
Per share data |
|
|
|
|
Diluted earnings per common share: |
|
|
|
|
Net income per diluted share |
$ |
1.17 |
|
$ |
0.79 |
|
|
Diluted weighted average common shares |
|
25,560 |
|
|
25,451 |
|
|
|
|
|
|
|
Ethan Allen Interiors
Inc. |
|
|
Condensed Consolidated
Balance Sheets |
|
|
(Unaudited) |
|
|
(In thousands) |
|
|
|
September 30, |
June 30, |
ASSETS |
|
2022 |
|
|
2022 |
|
Current assets: |
|
|
Cash and cash equivalents |
$ |
92,878 |
|
$ |
109,919 |
|
Investments |
|
49,566 |
|
|
11,199 |
|
Accounts receivable, net |
|
8,607 |
|
|
17,019 |
|
Inventories, net |
|
167,656 |
|
|
176,504 |
|
Prepaid expenses and other
current assets |
|
32,987 |
|
|
32,108 |
|
Total current assets |
|
351,694 |
|
|
346,749 |
|
|
|
|
Property, plant and equipment,
net |
|
221,779 |
|
|
223,530 |
|
Goodwill |
|
25,388 |
|
|
25,388 |
|
Intangible assets |
|
19,740 |
|
|
19,740 |
|
Operating lease right-of-use
assets |
|
99,500 |
|
|
100,782 |
|
Deferred income taxes |
|
1,019 |
|
|
820 |
|
Other assets |
|
2,729 |
|
|
2,886 |
|
Total ASSETS |
$ |
721,849 |
|
$ |
719,895 |
|
|
|
|
LIABILITIES AND SHAREHOLDERS’
EQUITY |
|
|
Current liabilities: |
|
|
Accounts payable and accrued
expenses |
$ |
36,744 |
|
$ |
37,370 |
|
Customer deposits |
|
108,888 |
|
|
121,080 |
|
Accrued compensation and
benefits |
|
19,955 |
|
|
22,700 |
|
Current operating lease
liabilities |
|
24,972 |
|
|
25,705 |
|
Other current liabilities |
|
17,731 |
|
|
8,788 |
|
Total current liabilities |
|
208,290 |
|
|
215,643 |
|
|
|
|
Operating lease liabilities,
long-term |
|
88,776 |
|
|
89,506 |
|
Deferred income taxes |
|
3,769 |
|
|
4,418 |
|
Other long-term liabilities |
|
5,275 |
|
|
3,005 |
|
Total LIABILITIES |
$ |
306,110 |
|
$ |
312,572 |
|
|
|
|
Shareholders’ equity: |
|
|
Ethan Allen Interiors Inc. shareholders’ equity |
$ |
415,772 |
|
$ |
407,349 |
|
Noncontrolling interests |
|
(33 |
) |
|
(26 |
) |
Total shareholders’ equity |
$ |
415,739 |
|
$ |
407,323 |
|
Total LIABILITIES AND
SHAREHOLDERS’ EQUITY |
$ |
721,849 |
|
$ |
719,895 |
|
Reconciliation of
Non-GAAP
Financial Measures
To supplement the financial measures prepared in
accordance with GAAP, the Company uses non-GAAP financial measures,
including adjusted operating income and margin, adjusted net income
and adjusted diluted earnings per share. The reconciliations of
these non-GAAP financial measures to the most directly comparable
financial measures calculated and presented in accordance with GAAP
are shown in tables below.
These non-GAAP measures are derived from the
consolidated financial statements but are not presented in
accordance with GAAP. The Company believes these non-GAAP measures
provide a meaningful comparison of its results to others in its
industry and prior year results. Investors should consider
these non-GAAP financial measures in addition to, and not as a
substitute for, its financial performance measures prepared in
accordance with GAAP. Moreover, these non-GAAP financial
measures have limitations in that they do not reflect all the items
associated with the operations of the business as determined in
accordance with GAAP. Other companies may calculate similarly
titled non-GAAP financial measures differently than the Company
does, limiting the usefulness of those measures for comparative
purposes.
Despite the limitations of these non-GAAP
financial measures, the Company believes these adjusted financial
measures and the information they provide are useful in viewing its
performance using the same tools that management uses to assess
progress in achieving its goals. Adjusted measures may also
facilitate comparisons to historical performance.
The following tables below provide a
reconciliation of non-GAAP financial measures used in this release
to the most directly comparable GAAP financial measures.
(Unaudited) |
(In thousands, except per share
data) |
Three months ended |
|
|
|
|
|
September 30, |
|
|
|
|
|
|
2022 |
|
|
2021 |
|
% Change |
|
|
|
|
Consolidated
Adjusted Operating Income / Operating Margin |
GAAP Operating income |
$ |
39,650 |
|
$ |
27,360 |
|
44.9 |
% |
|
|
|
|
Adjustments (pre-tax)* |
|
(1,958 |
) |
|
368 |
|
|
|
|
|
|
Adjusted operating income* |
$ |
37,692 |
|
$ |
27,728 |
|
35.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Net sales |
$ |
214,530 |
|
$ |
182,327 |
|
17.7 |
% |
|
|
|
|
GAAP Operating margin |
|
18.5 |
% |
|
15.0 |
% |
|
|
|
|
|
Adjusted operating margin* |
|
17.6 |
% |
|
15.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Adjusted Net Income / Adjusted Diluted EPS |
GAAP Net income |
$ |
29,880 |
|
$ |
20,153 |
|
48.3 |
% |
|
|
|
|
Adjustments, net of tax* |
|
(1,463 |
) |
|
276 |
|
|
|
|
|
|
Adjusted net income |
$ |
28,417 |
|
$ |
20,429 |
|
39.1 |
% |
|
|
|
|
Diluted weighted average common
shares |
|
25,560 |
|
|
25,451 |
|
|
|
|
|
|
GAAP Diluted EPS |
$ |
1.17 |
|
$ |
0.79 |
|
48.1 |
% |
|
|
|
|
Adjusted diluted EPS* |
$ |
1.11 |
|
$ |
0.80 |
|
38.8 |
% |
|
|
|
|
* Adjustments to
reported GAAP financial measures including operating income and
margin, net income and diluted EPS have been adjusted by the
following: |
|
|
|
|
|
(Unaudited) |
Three months ended |
|
(In thousands) |
September 30, |
|
|
|
2022 |
|
|
2021 |
|
|
|
Gain on sale-leaseback
transaction |
$ |
(2,257 |
) |
$ |
- |
|
|
|
Severance, lease exit costs
and other charges |
|
299 |
|
|
368 |
|
|
|
Adjustments to operating income |
$ |
(1,958 |
) |
$ |
368 |
|
|
|
Adjustments to income before income taxes |
$ |
(1,958 |
) |
$ |
368 |
|
|
|
Related income tax effects on
non-recurring items(1) |
|
495 |
|
|
(92 |
) |
|
|
Adjustments to net income |
$ |
(1,463 |
) |
$ |
276 |
|
|
|
(1) Calculated using the marginal tax rate for
each period presented.
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