Ethan Allen Interiors Inc. (“Ethan Allen” or the “Company”) (NYSE:
ETD) today reported its financial and operating results for the
fiscal 2024 first quarter ended September 30, 2023.
Farooq Kathwari, Ethan Allen’s Chairman,
President and CEO commented, “We are pleased to report our
financial and operating results for the fiscal 2024 first quarter
ended September 30, 2023. Our first quarter consolidated net sales
were impacted due to major flooding in our Vermont manufacturing
plant and strong prior year results that benefited from delivery of
pandemic related written order backlog. Also, as expected, the
economy has slowed down. Despite these challenges, we were able to
maintain a strong gross margin of 61.1% and an adjusted operating
margin of 12.1%. We also continued to generate positive operating
cash flow and as of September 30, 2023, we had total cash and
investments of $163.2 million and no debt. We paid a special
cash dividend of $0.50 per share during August 2023, in addition to
our regular quarterly cash dividend of $0.36 per share. We are also
pleased to announce that yesterday our Board approved our regular
quarterly cash dividend of $0.36 per share, payable on November 22,
2023.”
Mr. Kathwari continued, “We are celebrating our
91st year and have always focused on the concept of constant
reinvention. During the quarter we launched our major initiative of
Interior Design Destination. This initiative was launched in our
Danbury, CT flagship design center in April 2023 and we are now in
the process of launching across our network of 174 design centers
in North America over the next four months. This initiative
provides us the opportunity to strongly differentiate our
enterprise by providing relevant offerings under the umbrella of
Classics with a Modern Perspective, strong values and the service
of interior design professionals who are utilizing state-of-the-art
technology to service clients. We’ve also made major investments in
our North American manufacturing, where we produce about 75% of our
products.”
“For our first quarter ended September 30, 2023,
we delivered consolidated net sales of $163.9 million, which was
negatively impacted by approximately $15 million due to the
flooding of our Vermont facility. As previously disclosed, our wood
furniture manufacturing operations sustained damage from
heavy flooding, which resulted in a pre-tax charge of $2.1 million,
net of insurance and grant proceeds. We resumed limited operations
during the second half of the quarter, and at this time, the
majority of our associates are back at work. Although we continue
to work through the cleanup and repair, as our work is ongoing, we
are pleased to say that we remain open for business in Vermont and
are actively working on the production of our customer orders.”
“We are proud to celebrate our culture of
constant reinvention, excited to start the next phase of Ethan
Allen’s journey, and pleased to welcome both present and future
clients to the Interior Design Destination. While we understand and
navigate the challenges of a slower economy and the reduction of
consumer focus on the home, we remain cautiously optimistic,”
concluded Mr. Kathwari.
FISCAL 2024 FIRST QUARTER
HIGHLIGHTS*
- Consolidated net sales of $163.9
million were lower by 23.6%
- Retail net sales of $133.6 million were lower by 27.3%
- Wholesale net sales of $99.4 million
were lower by 13.3%
- Written order trends
- Retail segment written orders
decreased 13.2%
- Wholesale
segment written orders decreased 15.6%
- Consolidated
gross margin increased to 61.1%, up from 60.4% a year ago due to
favorable product mix and lower input costs including reduced
inbound freight and raw material costs, partially offset by lower
delivered unit volume and change in sales mix
- Operating margin
of 11.2%; adjusted operating margin of 12.1% compared with 17.6%
last year due to fixed costs deleveraging from lower consolidated
net sales and expenses incurred with the launch of the Interior
Design Destination initiative including projection, new product
display, merchandising and sample costs partially offset by gross
margin expansion, lower headcount and the Company’s ability to
maintain a disciplined approach to cost savings and expense
control
- Advertising
expenses were equal to 2.0% of net sales compared to 2.5% in the
prior year first quarter; promotional activity remained disciplined
and was comparable to the prior year
- Diluted EPS of
$0.58 compared with $1.17; adjusted diluted EPS decreased to $0.63
from $1.11; adjusted diluted EPS for the three months ended
September 30, 2019 (pre-pandemic) was $0.35
- Generated $16.7
million of cash from operating activities compared with $38.4
million a year ago
- Paid cash
dividends totaling $21.9 million, which included a $0.50 per share
special cash dividend and the regular quarterly cash dividend of
$0.36 per share
- Ended the
quarter with $163.2 million in cash and investments with no debt
outstanding
- Reduced
inventory carrying levels to $149.6 million as of September 30,
2023, down $18.0 million or 10.8% from a year ago
- Named one of
America’s Top 10 Retailers by Newsweek, including recognition
as the #1 retailer of Premium Furniture
- Celebrated the
launch of Ethan Allen’s next reinvention as the Interior
Design Destination with several design center grand reopenings
during the quarter, with many more scheduled to occur in the coming
months
- New
state-of-the-art design centers in The Villages, FL, Avon, OH and
New York, NY were opened
- The Company’s
wood furniture manufacturing plant in Orleans, Vermont sustained
significant flooding in July 2023 that lowered shipments by
approximately $15 million and resulted in total expenditures of
$3.6 million less $1.5 million in insurance recoveries and grant
proceeds received from the State of Vermont for a pre-tax charge of
$2.1 million; as of September 30, 2023, the majority of associates
are back at work and operating capacity is improving with an
expected recovery from the delayed shipments in the second and
third quarters of fiscal 2024
* See reconciliation of GAAP to adjusted key
financial measures in the back of this press release. Comparisons
are to the first quarter of fiscal 2023.
KEY FINANCIAL MEASURES*
(Unaudited) |
(In thousands,
except per share data) |
|
Three months ended |
|
|
September 30, |
|
|
|
|
|
2023 |
|
|
2022 |
|
% Change |
|
|
|
Net sales |
$ |
163,892 |
|
$ |
214,530 |
|
(23.6 |
%) |
|
|
|
Gross profit |
$ |
100,141 |
|
$ |
129,616 |
|
(22.7 |
%) |
|
|
|
Gross margin |
|
61.1 |
% |
|
60.4 |
% |
|
|
|
|
GAAP operating income |
$ |
18,351 |
|
$ |
39,650 |
|
(53.7 |
%) |
|
|
|
Adjusted operating income* |
$ |
19,843 |
|
$ |
37,692 |
|
(47.4 |
%) |
|
|
|
GAAP operating margin |
|
11.2 |
% |
|
18.5 |
% |
|
|
|
|
Adjusted operating margin* |
|
12.1 |
% |
|
17.6 |
% |
|
|
|
|
GAAP net income |
$ |
14,939 |
|
$ |
29,880 |
|
(50.0 |
%) |
|
|
|
Adjusted net income* |
$ |
16,054 |
|
$ |
28,417 |
|
(43.5 |
%) |
|
|
|
Effective tax rate |
|
25.6 |
% |
|
25.3 |
% |
|
|
|
|
GAAP diluted EPS |
$ |
0.58 |
|
$ |
1.17 |
|
(50.4 |
%) |
|
|
|
Adjusted diluted EPS* |
$ |
0.63 |
|
$ |
1.11 |
|
(43.2 |
%) |
|
|
|
Cash flows from operating
activities |
$ |
16,700 |
|
$ |
38,422 |
|
(56.5 |
%) |
|
|
|
* See reconciliation of GAAP to adjusted key
financial measures in the back of this press release
BALANCE SHEET and CASH FLOW
Cash and investments totaled
$163.2 million at September 30, 2023, compared with $172.7 million
at June 30, 2023. The decrease of $9.5 million was primarily due to
$21.9 million in cash dividends paid and capital expenditures of
$3.7 million as the Company continues to return capital to
shareholders and reinvest back into the business. These cash
outflows were partially offset by $16.7 million in cash generated
from operating activities.
Cash
dividends paid were $21.9 million, which
included a special cash dividend of $12.7 million, or $0.50 per
share, and a regular quarterly cash dividend of $9.2 million, or
$0.36 per share, both paid in August 2023.
Cash from operating activities
totaled $16.7 million during fiscal 2024, a decrease from $38.4
million in the prior year due to lower net income and less
favorable changes in working capital, including timing of insurance
renewals and payments of annual incentive compensation.
Inventories, net totaled
$149.6 million at September 30, 2023, compared with $149.2 million
at June 30, 2023. Inventory balances are down $18.0 million or
10.8% from a year ago as the Company aligns its inventory with
incoming order trends while also ensuring appropriate levels are
maintained to service customers.
Customer deposits from
written orders totaled $77.9 million at September 30, 2023,
compared with $77.8 million at June 30, 2023. Wholesale order
backlog was $75.4 million at September 30, 2023, down 28.6% from a
year ago, but up from $74.0 million at June 30, 2023 due to the
timing of incoming contract orders.
No debt outstanding at
September 30, 2023.
DIVIDENDS
On August 1, 2023, the Company’s Board of
Directors declared a $0.50 per share special cash dividend and a
regular quarterly cash dividend of $0.36 per share, which were paid
on August 31, 2023. Ethan Allen has a long history of returning
capital to shareholders and is pleased to pay a special cash
dividend, which highlights the Company’s strong balance sheet and
operating results. Most recently, on October 24, 2023, the
Company’s Board of Directors declared a regular quarterly cash
dividend of $0.36 per share, payable on November 22, 2023, to
shareholders of record on November 7, 2023.
CONFERENCE CALL
Ethan Allen will host a conference call with
investors and analysts today, October 25, 2023, at 5:00 PM (Eastern
Time) to discuss these results. The 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:
13740818
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 Relations 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,” “pandemic,” 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 2023 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. |
Condensed Consolidated Statements of Comprehensive
Income |
(Unaudited) |
(In thousands, except per share data) |
|
Three months ended September 30, |
|
|
|
2023 |
|
2022 |
|
|
|
Net sales |
$ |
163,892 |
$ |
214,530 |
|
|
|
Cost of sales |
|
63,751 |
|
84,914 |
|
|
|
Gross profit |
|
100,141 |
|
129,616 |
|
|
|
Selling, general and administrative expenses |
|
80,298 |
|
91,962 |
|
|
|
Restructuring and other charges, net of gains |
|
1,492 |
|
(1,996 |
) |
|
|
Operating income |
|
18,351 |
|
39,650 |
|
|
|
Interest and other income, net |
|
1,724 |
|
341 |
|
|
|
Income before income taxes |
|
20,075 |
|
39,991 |
|
|
|
Income tax expense |
|
5,136 |
|
10,111 |
|
|
|
Net income |
$ |
14,939 |
$ |
29,880 |
|
|
|
|
|
|
|
|
Net income per diluted share |
$ |
0.58 |
$ |
1.17 |
|
|
|
Diluted weighted average common shares |
|
25,618 |
|
25,560 |
|
|
|
Ethan Allen Interiors
Inc. |
|
|
Condensed Consolidated
Balance Sheets |
|
|
(Unaudited) |
|
|
(In thousands) |
|
|
|
September 30, |
June 30, |
ASSETS |
|
2023 |
|
|
2023 |
|
Current assets |
|
|
Cash and cash equivalents |
$ |
56,888 |
|
$ |
62,130 |
|
Investments |
|
106,284 |
|
|
110,577 |
|
Accounts receivable, net |
|
11,053 |
|
|
11,577 |
|
Inventories, net |
|
149,623 |
|
|
149,195 |
|
Prepaid expenses and other
current assets |
|
28,950 |
|
|
25,974 |
|
Total current assets |
|
352,798 |
|
|
359,453 |
|
|
|
|
Property, plant and equipment,
net |
|
221,504 |
|
|
222,167 |
|
Goodwill |
|
25,388 |
|
|
25,388 |
|
Intangible assets |
|
19,740 |
|
|
19,740 |
|
Operating lease right-of-use
assets |
|
117,332 |
|
|
115,861 |
|
Deferred income taxes |
|
655 |
|
|
640 |
|
Other assets |
|
2,146 |
|
|
2,204 |
|
Total ASSETS |
$ |
739,563 |
|
$ |
745,453 |
|
|
|
|
LIABILITIES AND SHAREHOLDERS’
EQUITY |
|
|
Current liabilities |
|
|
Accounts payable and accrued
expenses |
$ |
29,633 |
|
$ |
28,565 |
|
Customer deposits |
|
77,928 |
|
|
77,765 |
|
Accrued compensation and
benefits |
|
20,579 |
|
|
23,534 |
|
Current operating lease
liabilities |
|
26,530 |
|
|
26,045 |
|
Other current liabilities |
|
10,272 |
|
|
7,188 |
|
Total current liabilities |
|
164,942 |
|
|
163,097 |
|
|
|
|
Operating lease liabilities,
long-term |
|
105,102 |
|
|
104,301 |
|
Deferred income taxes |
|
3,066 |
|
|
3,056 |
|
Other long-term liabilities |
|
3,897 |
|
|
3,993 |
|
Total LIABILITIES |
$ |
277,007 |
|
$ |
274,447 |
|
|
|
|
Shareholders’ equity |
|
|
Ethan Allen Interiors Inc. shareholders’ equity |
$ |
462,584 |
|
$ |
471,028 |
|
Noncontrolling interests |
|
(28 |
) |
|
(22 |
) |
Total shareholders’ equity |
$ |
462,556 |
|
$ |
471,006 |
|
Total LIABILITIES AND
SHAREHOLDERS’ EQUITY |
$ |
739,563 |
|
$ |
745,453 |
|
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, |
|
|
|
|
|
|
2023 |
|
|
2022 |
|
% Change |
|
|
|
|
Consolidated
Adjusted Operating Income / Operating Margin |
GAAP Operating income |
$ |
18,351 |
|
$ |
39,650 |
|
(53.7 |
%) |
|
|
|
|
Adjustments (pre-tax)* |
|
1,492 |
|
|
(1,958 |
) |
|
|
|
|
|
Adjusted operating income* |
$ |
19,843 |
|
$ |
37,692 |
|
(47.4 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Net sales |
$ |
163,892 |
|
$ |
214,530 |
|
(23.6 |
%) |
|
|
|
|
GAAP Operating margin |
|
11.2 |
% |
|
18.5 |
% |
|
|
|
|
|
Adjusted operating margin* |
|
12.1 |
% |
|
17.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Adjusted Net Income / Adjusted Diluted EPS |
GAAP Net income |
$ |
14,939 |
|
$ |
29,880 |
|
(50.0 |
%) |
|
|
|
|
Adjustments, net of tax* |
|
1,115 |
|
|
(1,463 |
) |
|
|
|
|
|
Adjusted net income |
$ |
16,054 |
|
$ |
28,417 |
|
(43.5 |
%) |
|
|
|
|
Diluted weighted average common
shares |
|
25,618 |
|
|
25,560 |
|
|
|
|
|
|
GAAP Diluted EPS |
$ |
0.58 |
|
$ |
1.17 |
|
(50.4 |
%) |
|
|
|
|
Adjusted diluted EPS* |
$ |
0.63 |
|
$ |
1.11 |
|
(43.2 |
%) |
|
|
|
|
* 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, |
|
|
|
2023 |
|
|
2022 |
|
|
|
Orleans, Vermont flood |
$ |
2,096 |
|
$ |
- |
|
|
|
Gain on sale-leaseback
transaction |
|
(655 |
) |
|
(2,257 |
) |
|
|
Severance and other
charges |
|
51 |
|
|
299 |
|
|
|
Adjustments to operating income |
$ |
1,492 |
|
$ |
(1,958 |
) |
|
|
Related income tax effects on
non-recurring items(1) |
|
(377 |
) |
|
495 |
|
|
|
Adjustments to net income |
$ |
1,115 |
|
$ |
(1,463 |
) |
|
|
(1) Calculated using the marginal tax rate for
each period presented
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