GlobeNewswire Inc | Aug 9, 2021 04:06PM EDT

August 09, 2021

DANBURY, CT, Aug. 09, 2021 (GLOBE NEWSWIRE) -- Ethan Allen Interiors Inc. (Ethan Allen or the Company) (NYSE: ETH) today reported its business and financial results for the fourth quarter and fiscal year ended June 30, 2021.

Farooq Kathwari, Ethan Allens Chairman, President and CEO commented, We are pleased to report strong results for the fourth quarter and fiscal year ended June 30, 2021. For the fourth quarter we achieved consolidated net sales growth of 94.7%, an operating margin of 13.5% and diluted EPS of $0.71. Adjusted EPS was $0.74, up from a loss of $0.15 last year. Many of the changes we implemented last year have allowed us to better manage expenses and improve our operating leverage. Additionally, we strengthened the business by expanding capacity, enhanced our use of technology and brought back many associates to further our talent. These initiatives helped produce strong results for the full fiscal 2021 year, including net sales of $685.2 million and EPS of $2.37. We also generated $129.9 million of cash from operating activities, repaid 100% of our outstanding debt, increased our regular quarterly cash dividend by 19% and in May 2021 paid a $0.75 special cash dividend. Last week we announced another special cash dividend of $0.75 in addition to our regular quarterly dividend of $0.25 per share, both payable on August 31, 2021.

Demand trends have remained strong and our focus remains on servicing our large backlog of written orders. Both our wholesale and retail segments experienced high demand, with fiscal 2021 written orders increasing 31.7% at wholesale and 47.7% at retail. We, like others, have been impacted by supply chain issues, including raw material delays and increased costs of shipping. Fortunately, about 75% of our products are made in our North American manufacturing workshops, which together with our strong logistics network of national distribution centers and retail home delivery centers delivering product with white glove service to our clients homes, are an important competitive advantage, continued Mr. Kathwari.

We are focused on continuing to increase capacity and deliver product while making investments in technology throughout the Company, all to drive future growth and enhance the customer experience. We believe we have a great opportunity to continue our growth in sales and profitability due to our dedicated team, our vertically integrated structure, and the personal service of ourinterior design professionals increasingly combined with technology, concluded Mr. Kathwari.

FISCAL 2021FOURTH QUARTER HIGHLIGHTS*

-- Consolidated net sales increased 94.7% to $178.3 million -- Retail segment written orders growth of 105.0% -- Wholesale net sales of $106.4 million increased 106.2%; Retail net sales of $150.7 million rose 113.0% -- Wholesale segment written orders increased 82.3%; Excluding GSA and other government orders, wholesale segment orders increased 87.0% -- Consolidated gross margin increased to 58.7%; Operating margin grew to 13.5% due to net sales growth and controlling costs by leveraging cost reductions from measures taken as part of our previously announced COVID-19 action plan -- Operating expenses decreased to 45.2% of net sales from 65.9%; Operating expenses increased $20.2 million due to higher selling, delivery and incentive compensation expenses due to strong net sales growth partially offset by lower advertising spend -- Diluted EPS of $0.71 compared to ($0.48); Adjusted EPS of $0.74 compared to ($0.15) -- Strong cash generation of $27.8 million; Cash on hand of $104.6 million and no debt outstanding -- Paid a special cash dividend and regular quarterly cash dividend totaling $31.7 million during the quarter

FULL FISCAL YEAR 2021 HIGHLIGHTS*

-- Consolidated net sales increased 16.2% to $685.2 million -- Retail segment written orders growth of 47.7% -- Wholesale net sales of $413.1 million increased 22.2%; Retail net sales of $555.0 million rose 19.9% -- Wholesale segment written orders increased 31.7%; excluding GSA and other government orders, wholesale segment orders grew 41.7% -- Consolidated gross margin rose to 57.4%; Operating margin increased to 11.3% -- Operating expenses decreased to 46.1% of net sales from 52.3% due to improved operating leverage -- Diluted EPS of $2.37 compared to $0.34; Adjusted EPS of $2.37 compared to $0.52 -- Generated $129.9 million of cash from operating activities compared with $52.7 million last year -- Repaid 100% of outstanding debt during the year -- The Company increased its regular quarterly cash dividend by 19% in November 2020 as well as paid a $0.75 per share special cash dividend in May 2021 -- Opened several new design centers in the past 12 months including Oxnard, California; Towson, Maryland; Alpharetta, Georgia; and Portland, Oregon -- The Company held its first-ever Virtual Celebration to congratulate associates for exceptional interior design work

* See reconciliation of U.S. GAAP to adjusted key financial measures in the back of this press release. Comparisons are to the fourth quarter of fiscal 2020 and the full fiscal 2020 year

KEY FINANCIAL MEASURES*

(Unaudited)(In thousands, except per share data) Three months ended Twelve months ended June 30, June 30, 2021 2020 % Chg 2021 2020 % ChgNet sales $ 178,323 $ 91,568 94.7 % $ 685,169 $ 589,837 16.2 %GAAP gross $ 104,596 $ 47,868 118.5 % $ 393,107 $ 323,132 21.7 %profitAdjustedgross $ 104,846 $ 48,767 115.0 % $ 393,746 $ 328,555 19.8 %profit*GAAP gross 58.7 % 52.3 % 57.4 % 54.8 % marginAdjustedgross 58.8 % 53.3 % 57.5 % 55.7 % margin*GAAPoperating $ 24,062 $ (12,447 ) 293.3 % $ 77,285 $ 14,644 427.8 %income(loss)Adjustedoperating $ 25,084 $ (4,982 ) 603.5 % $ 80,335 $ 17,072 370.6 %income(loss)*GAAPoperating 13.5 % (13.6 %) 11.3 % 2.5 % marginAdjustedoperating 14.1 % (5.4 %) 11.7 % 2.9 % margin*GAAP netincome $ 18,161 $ (12,069 ) 250.5 % $ 60,005 $ 8,900 574.2 %(loss)Adjusted netincome $ 18,933 $ (3,654 ) 618.1 % $ 60,059 $ 13,512 344.5 %(loss)*Effective 24.3 % 8.5 % 21.5 % 37.3 % tax rateGAAP diluted $ 0.71 $ (0.48 ) 247.9 % $ 2.37 $ 0.34 597.1 %EPSAdjusted $ 0.74 $ (0.15 ) 593.3 % $ 2.37 $ 0.52 355.8 %diluted EPS*Capital $ 1,687 $ 3,252 (48.1 %) $ 12,029 $ 15,709 (23.4 %)expendituresCash flowsfrom $ 27,792 $ 14,012 98.3 % $ 129,912 $ 52,696 146.5 %operatingactivities

* See reconciliation of U.S. GAAP to adjusted key financial measures in the back of this press release

BALANCE SHEET AND CASH FLOW

Total cash andcash equivalentswas $104.6 million at June 30, 2021 compared with $72.3 million a year ago. Cash and cash equivalents aggregated to 15.3% of total assets at June 30, 2021, compared with 11.6% last year. Cash and cash equivalents increased $32.3 million during fiscal 2021 primarily due to net cash provided by operating activities of $129.9 million and net proceeds of $4.9 million from the sale of property, plant and equipment, partially offset by the repayment of 100% or $50.0 million of outstanding borrowings under the Companys existing credit facility, cash dividends paid of $43.3 million and capital expenditures of $12.0 million. Strong cash flow performance was driven by increased customer deposits from written orders partially offset by higher inventory balances.

Capital expendituresin fiscal 2021 were $12.0 million compared with $15.7 million in the prior year. As part of the Companys initial response to the COVID-19 health crisis a year ago, the Company delayed investments and capital expenditures, which led to a reduction in capital spending. Partially offsetting the decreases was the Companys investment in the expansion of its existing Maiden, North Carolina manufacturing campus, which will help increase overall capacity beginning in fiscal 2022.

Cash dividendspaidwere $43.3 million during fiscal 2021, which included a special cash dividend of $19.0 million paid in May 2021. The Company previously had suspended its regular quarterly cash dividend as of April 28, 2020 and reinstated it on August 4, 2020.

Inventories, netof $144.0 million increased $17.9 million compared with $126.1 million at June 30, 2020 as the Company continues to increase its manufacturing productivity and service center inventory.

Customer depositsfrom written orders for the Companys retail segment more than doubled during fiscal 2021 and totaled $130.6 million at June 30, 2021. Strong written retail order growth of 47.7% outpaced net sales growth of 19.9% and led to high customer deposits and backlog at June 30, 2021.

No debtoutstanding as of June 30, 2021 as the Company paid down the remaining $50.0 million of its borrowing in September 2020 using available cash on hand.

DIVIDEND DECLARED

On August 3, 2021, the Company announced that its Board of Directors had declared a $0.75 per share special cash dividend to shareholders of record on August 17, 2021, payable on August 31, 2021. The Board also declared a regular quarterly cash dividend of$0.25per share, payable on August 31, 2021 to shareholders of record at the close of business on August 17, 2021.

DESIGN CENTER ACTIVITY

Independent Company- Design Center activity Retailers Operated TotalBalance at June 30, 2020 160 144 304 New locations 18 3 21 Closures (17 ) (6 ) (23 )Transfers - - - Balance at June 30, 2021 161 141 302 Relocations (in new and closures) - 2 2 U.S. 34 136 170 International 127 5 132

CONFERENCE CALL

Ethan Allen will host an analyst conference call today, August 9, 2021 at 5:00 PM (Eastern Time) to discuss its results. The analyst conference call will be webcast live from the Companys Investor Relations website at https://ir.ethanallen.com.

The following information is provided for those who would like to participate:

-- U.S. Participants: 877-705-2976 -- International Participants: 201-689-8798 -- Meeting Number: 13721721

For those unable to listen live, an archived recording of the call will be made available on the Companys website referenced above for at least 60 days.

ABOUT ETHAN ALLEN

Ethan Allen Interiors Inc. (NYSE: ETH) is a leading interior design company, manufacturer and retailer in the home furnishings marketplace. The Company provides complimentary interior design service to its clients and sells a full range of furniture products and decorative home accents through a retail network of approximately 300 design centers in the United States and abroad as well as online at ethanallen.com. Ethan Allen owns and operates nine manufacturing facilities, including six manufacturing plants in the United States, two manufacturing plants in Mexico and one manufacturing plant in Honduras. Approximately 75% of its products are manufactured or assembled in these North American facilities.

For more information on Ethan Allen's products and services, visitwww.ethanallen.com.

Investor / Media ContactMatt McNultyVice President, FinanceIR@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 not prepared in accordance with GAAP. The Company uses non-GAAP financial measures, including adjusted gross profit and margin, 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. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial measures presented 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 the 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 news 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, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represent management's beliefs and assumptions concerning future events based on information currently available to the Company relating to its future results. Such forward-looking statements are identified in this news release and incorporated herein by reference by use of certain forward-looking 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 similar expressions and the negatives of such forward-looking words. These forward-looking statements are subject to management decisions and various assumptions about future events, including projections about future financial growth and trends with respect to the Companys business and results of operations, and are not guarantees of future performance. 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 following: the ongoing global COVID-19 pandemic may continue to materially adversely affect the Companys business, its results of operations and overall financial performance; additional funding from external sources may not be available at the levels required, or may cost more than expected; declines in certain economic conditions, which impact consumer confidence and consumer spending; a decline in the health of the economy and consumer spending may affect consumer purchases of discretionary items; financial or operational difficulties due to competition in the residential furniture industry; a significant shift in consumer preference toward purchasing products online; ability to maintain and enhance the Ethan Allen brand; failure to successfully anticipate or respond to changes in consumer tastes and trends; global and local economic uncertainty may materially adversely affect manufacturing operations or sources of merchandise and international operations; competition from overseas manufacturers and domestic retailers; disruptions in the supply chain; the number of manufacturing and logistics sites may increase exposure to business disruptions and could result in higher transportation costs; fluctuations in the price, availability and quality of raw materials could result in increased costs or cause production delays; current and former manufacturing and retail operations and products are subject to increasingly stringent environmental, health and safety requirements; product recalls or product safety concerns; reliance on information technology systems to process transactions, summarize results, and manage its business and that of certain independent retailers; disruptions in both primary and back-up systems; successful cyber-attacks and the ability to maintain adequate cyber-security systems and procedures; loss, corruption and misappropriation of data and information relating to customers; changes in United States trade and tax policy; reliance on certain key personnel; loss of key personnel or inability to hire additional qualified personnel; additional asset impairment charges that could reduce profitability; access to consumer credit could be interrupted; inability to maintain current design center locations at current costs; failure to successfully select and secure design center locations; changes to tax policies; hazards and risks which may not be fully covered by insurance; possible failure to protect the Companys intellectual property; and other factors disclosed in Part I, Item 1A. Risk Factors, in the Companys 2020 Annual Report on Form 10-K.

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 Companys ability to control or predict. These forward-looking statements speak only as of the date of this news release. Other than as required by law, the Company undertakes no obligation to update or revise its forward-looking statements, whether because of new information, future events, or otherwise. Accordingly, actual circumstances and results could differ materially from those contemplated by the forward-looking statements.

Ethan Allen Interiors Inc.Consolidated Statements of Comprehensive Income(Unaudited)(In thousands, except per share data) Three months Twelve months endedJune endedJune 30, 30, 2021 2020 2021 2020 Net sales $ 178,323 $ 91,568 $ 685,169 $ 589,837 Cost of sales 73,727 43,700 292,062 266,705 Gross profit 104,596 47,868 393,107 323,132 Selling, general and 79,762 53,161 313,411 311,507 administrative expensesRestructuring and otherimpairment charges, net 772 7,154 2,411 (3,019 )of gainsOperating income (loss) 24,062 (12,447 ) 77,285 14,644 Other expenses Interestand other financing 48 555 481 739 costs Other (15 ) (195 ) (393 ) 284 income (expense), netIncome (loss) before 23,999 (13,197 ) 76,411 14,189 income taxesIncome tax expense 5,838 (1,128 ) 16,406 5,289 (benefit)Net income (loss) $ 18,161 $ (12,069 ) $ 60,005 $ 8,900 Per share data Diluted earnings per common share:Net income per diluted $ 0.71 $ (0.48 ) $ 2.37 $ 0.34 shareDiluted weighted 25,493 25,179 25,352 26,069 average common shares

Ethan Allen Interiors Inc. Condensed Consolidated Balance Sheets (Unaudited) (In thousands) June 30, June 30,ASSETS 2021 2020 Current assets: Cash and cash equivalents $ 104,596 $ 72,276 Accounts receivable, net 9,026 8,092 Inventories, net 143,978 126,101 Prepaid expenses and other current assets 37,679 23,483 Total current assets 295,279 229,952 Property, plant and equipment, net 231,446 236,678 Goodwill 25,388 25,388 Intangible assets 19,740 19,740 Operating lease right-of-use assets 108,730 109,342 Deferred income taxes 1,078 137 Other assets 1,584 1,552 Total ASSETS $ 683,245 $ 622,789 LIABILITIES AND SHAREHOLDERS? EQUITY Current liabilities: Accounts payable and accrued expenses $ 37,786 $ 25,595 Customer deposits and deferred revenue 130,635 64,031 Accrued compensation and benefits 23,866 18,278 Current operating lease liabilities 27,395 27,366 Other current liabilities 4,220 3,708 Total current liabilities 223,902 138,978 Long-term debt - 50,000 Operating lease liabilities, long-term 97,911 102,111 Deferred income taxes 5,028 1,074 Other long-term liabilities 4,986 2,562 Total LIABILITIES $ 331,827 $ 294,725 Shareholders? equity: Ethan Allen Interiors Inc. shareholders? equity $ 351,443 $ 328,065 Noncontrolling interests (25 ) (1 )Total shareholders? equity $ 351,418 $ 328,064 Total LIABILITIES AND SHAREHOLDERS? EQUITY $ 683,245 $ 622,789

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 gross profit and margin, adjusted operating income, adjusted retail operating income and margin, adjusted wholesale 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 show 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 Twelve months ended June 30, June 30, 2021 2020 % 2021 2020 % Change ChangeConsolidated Adjusted Gross Profit / Gross MarginGAAP Gross $ 104,596 $ 47,868 118.5 % $ 393,107 $ 323,132 21.7 %profitAdjustments 250 899 639 5,423 (pre-tax) *Adjustedgross profit $ 104,846 $ 48,767 115.0 % $ 393,746 $ 328,555 19.8 %*Adjustedgross margin 58.8 % 53.3 % 57.5 % 55.7 % * Consolidated Adjusted Operating Income / Operating MarginGAAPOperating $ 24,062 $ (12,447 ) 293.3 % $ 77,285 $ 14,644 427.8 %income(loss)Adjustments 1,022 7,465 3,050 2,428 (pre-tax)*Adjustedoperating $ 25,084 $ (4,982 ) 603.5 % $ 80,335 $ 17,072 370.6 %income(loss)* Consolidated $ 178,323 $ 91,568 94.7 % $ 685,169 $ 589,837 16.2 %Net salesGAAPOperating 13.5 % (13.6 %) 11.3 % 2.5 % marginAdjustedoperating 14.1 % (5.4 %) 11.7 % 2.9 % margin* Consolidated Adjusted Net Income / Adjusted Diluted EPSGAAP Netincome $ 18,161 $ (12,069 ) 250.5 % $ 60,005 $ 8,900 574.2 %(loss)Adjustments, 772 8,415 54 4,612 net of tax*Adjusted netincome $ 18,933 $ (3,654 ) 618.1 % $ 60,059 $ 13,512 344.5 %(loss)Dilutedweightedaverage 25,493 25,179 25,352 26,069 commonsharesGAAP Diluted $ 0.71 $ (0.48 ) 247.9 % $ 2.37 $ 0.34 597.1 %EPSAdjusted $ 0.74 $ (0.15 ) 593.3 % $ 2.37 $ 0.52 355.8 %diluted EPS* Wholesale Adjusted Operating Income / Adjusted Operating MarginWholesaleGAAP $ 11,915 $ 1,512 688.0 % $ 52,281 $ 33,106 57.9 %operatingincomeAdjustments 552 (103 ) 552 (5,794 ) (pre-tax)*Adjustedwholesale $ 12,467 $ 1,409 784.8 % $ 52,833 $ 27,312 93.4 %operatingincome* Wholesale $ 106,372 $ 51,591 106.2 % $ 413,076 $ 337,948 22.2 %net salesWholesaleGAAP 11.2 % 2.9 % 12.7 % 9.8 % operatingmarginAdjustedwholesale 11.7 % 2.7 % 12.8 % 8.1 % operatingmargin* Retail Adjusted Operating Income / Adjusted Operating MarginRetail GAAPoperating $ 11,970 $ (14,071 ) 185.1 % $ 28,824 $ (21,414 ) 234.6 %income(loss)Adjustments 470 7,568 2,498 8,222 (pre-tax)*Adjustedretailoperating $ 12,440 $ (6,503 ) 291.3 % $ 31,322 $ (13,192 ) 337.4 %income(loss)* Retail net $ 150,676 $ 70,735 113.0 % $ 554,971 $ 462,800 19.9 %salesRetail GAAPoperating 7.9 % (19.9 %) 5.2 % (4.6 %) marginAdjustedretail 8.3 % (9.2 %) 5.6 % (2.9 %) operatingmargin*

* Adjustments to reported GAAP financial measures including gross profit andmargin, operating income and margin, net income and diluted EPS have beenadjusted by the following: (Unaudited) Three months ended Twelve months ended(In thousands) June 30, June 30, 2021 2020 2021 2020 Inventory write-downs andadditional reserves $ 196 $ 899 $ 585 $ 4,107 (wholesale)Optimization ofmanufacturing and logistics 54 - 54 1,316 (wholesale)Adjustments to gross profit $ 250 $ 899 $ 639 $ 5,423 Inventory write-downs andadditional reserves $ 196 $ 899 $ 585 $ 4,107 (wholesale)Optimization ofmanufacturing and logistics 356 - 356 2,147 (wholesale)Gain on sale of property,plant and equipment - - - (11,497 )(wholesale)Gain on sale of property,plant and equipment - - (473 ) - (retail)Employee retention credit - (1,177 ) - (1,177 )(wholesale)Severance and other charges - 175 (389 ) 626 (wholesale)Severance and other charges 339 414 811 562 (retail)Impairment of long-livedassets and lease exit costs 131 7,154 2,160 7,660 (retail)Adjustments to operating 1,022 7,465 3,050 2,428 incomeAdjustments to income 1,022 7,789 3,050 2,752 before income taxesRelated income tax effects (250 ) (1,908 ) (747 ) (674 )on non-recurring items^(1)Income tax expense(benefit) from valuation - 2,534 (2,249 ) 2,534 allowance changeAdjustments to net income $ 772 $ 8,415 $ 54 $ 4,612

(1)Calculated using a tax rate of 24.5% in all periods presented.