Ethan Allen Announces Sales Increase Of 9.1%

Furniture World Magazine

Ethan Allen Interiors Inc. reported sales and earnings for the first quarter ended September 30, 2005. Net delivered sales for the first quarter ended September 30, 2005 increased 9.1% to $251.3 million from $230.3 million in the prior year quarter. Net delivered sales for the Company's Retail division increased 11.8% to $158.4 million, while Wholesale sales increased 10.6% to $178.4 million during that same period. Comparable Ethan Allen store delivered sales increased 8.8% over the prior year quarter. During that same period, Retail division written sales increased 18.1% while comparable store written sales increased 15.4%. The Company previously announced, on September 7, 2005, the planned conversion of one of its existing manufacturing facilities into a regional distribution center. In connection with this announcement, the Company recorded a pre-tax restructuring and impairment charge of $4.2 million ($2.6 million, after-tax), or $0.08 per share, in the quarter ended September 30, 2005. In addition, on July 1, 2005, the Company was obligated to begin applying the provisions of Statement of Financial Accounting Standards ("SFAS") No. 123(R), Share-Based Payment, which require compensation costs related to share-based payment transactions, including employee stock options, to be recognized in the financial statements. As a result, the Company recorded additional compensation expense totaling $1.2 million ($0.7 million, after-tax), or $0.02 per share, during the quarter ended September 30, 2005. For the first quarter ended September 30, 2005, earnings per share, which includes the aforementioned pre-tax restructuring and impairment charge, amounted to $0.49 on net income of $17.1 million. This compares to earnings per share and net income of $0.51 and $18.8 million, respectively, in the prior year comparable period. Excluding the impact of the restructuring and impairment charge, earnings per share for the current quarter amounted to $0.57 on net income of $19.7 million. In the current quarter, operating income, which includes the aforementioned restructuring and impairment charge, decreased 8.9% to $28.2 million, or 11.2% of net sales, from $31.0 million, or 13.4% of net sales, in the prior year period. Excluding the restructuring and impairment charge, operating income increased 4.8% to $32.4 million, or 12.9% of net sales. During the current quarter, the Company utilized $36.8 million of available cash from operations to repurchase 1,140,000 shares of its common stock in the open market. As of September 30, 2005, the Company had a remaining authorization to repurchase an additional 860,000 shares. Farooq Kathwari, Chairman and CEO, commented: "We are pleased with our results for the quarter. Despite the challenges facing the economy and our industry, sales increased 9.1% and earnings per share, excluding the restructuring and impairment charge, increased 11.8%. We generated nearly $46 million of operating cash, returning approximately $42 million to our shareholders through the repurchase of stock and the payment of quarterly dividends." Mr. Kathwari continued: "We believe that the structural changes implemented during the past three years have provided us with an opportunity to improve upon all aspects of our operations. In that time, we have undertaken important initiatives to enhance our product offerings, our manufacturing, sourcing and logistics activities, our retail network, including both our stores and our people, and our marketing efforts. These activities will enable us to further differentiate Ethan Allen and better position the Company for future growth." Commenting on business trends, Mr. Kathwari stated: "While order trends remain encouraging, written business has slowed from the levels noted during the past three months. In addition, we remain cautiously aware of the threat of further increases in the cost of fuel and raw materials and the impact such events could have on consumer spending and profitability. Still, at this time, we believe that the current analyst estimates for both the fiscal second quarter ended December 31, 2005 and the fiscal year ended June 30, 2006 are within reach." Ethan Allen Interiors Inc. is a leading manufacturer and retailer of quality home furnishings. The Company sells a full range of furniture products and decorative accessories through an exclusive network of 311 retail stores in the United States and abroad, of which 129 are Company-owned. Ethan Allen has 11 manufacturing facilities, which include 2 sawmills, located throughout the United States.