UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| For the quarterly period ended | September 30, 2004 |
or
[ ] TRANSITION REPORT PURSUANT TO SECTIONS 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 ID No.) |
| Ethan Allen Drive, Danbury, Connecticut 06811
(Address of principal executive offices) |
| (203) 743-8000
(Registrant’s telephone number, including area code) |
| N/A
(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 is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
At September 30, 2004, there were 35,942,528 shares
of
Class A Common Stock, par value $.01, outstanding.
| Item | Page |
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|---|---|---|
Part I - Financial Information |
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1. Financial Statements as of September 30, 2004 and June 30, 2004 and for the three months ended September 30, 2004 and 2003 |
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Consolidated Balance Sheets |
2 | |
Consolidated Statements of Operations |
3 | |
Consolidated Statements of Cash Flows |
4 | |
Consolidated Statements of Shareholders' Equity |
5 | |
Notes to Consolidated Financial Statements |
6 | |
2. Management's Discussion and Analysis of Financial Condition and Results of Operations |
13 | |
3. Quantitative and Qualitative Disclosures About Market Risk |
22 | |
4. Controls and Procedures |
22 | |
Part II - Other Information |
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1. Legal Proceedings |
23 | |
2. Unregistered Sales of Equity Securities and Use of Proceeds |
23 | |
3. Defaults Upon Senior Securities |
23 | |
4. Submission of Matters to a Vote of Security Holders |
23 | |
5. Other Information |
23 | |
6. Exhibits |
23 | |
Signatures |
24 |
1
ETHAN ALLEN INTERIORS
INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share data)
| September 30, 2004 |
June 30, 2004 | |||||||
|---|---|---|---|---|---|---|---|---|
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 35,960 | $ | 27,528 | ||||
| Accounts receivable, less allowance for doubtful | ||||||||
| accounts of $2,030 at September 30, 2004 and $2,194 | ||||||||
| at June 30, 2004 | 25,932 | 26,967 | ||||||
| Inventories (note 4) | 179,194 | 186,895 | ||||||
| Prepaid expenses and other current assets | 31,106 | 28,166 | ||||||
| Deferred income taxes | 25,575 | 26,026 | ||||||
| Total current assets | 297,767 | 295,582 | ||||||
| Property, plant and equipment, net | 274,794 | 277,021 | ||||||
| Intangible assets, net (note 6) | 80,181 | 80,038 | ||||||
| Other assets | 2,549 | 1,790 | ||||||
| Total assets | $ | 655,291 | $ | 654,431 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Current maturities of long-term debt and capital | ||||||||
| lease obligations | $ | 4,693 | $ | 4,712 | ||||
| Customer deposits | 59,973 | 56,026 | ||||||
| Accounts payable | 28,387 | 22,222 | ||||||
| Accrued compensation and benefits | 26,370 | 27,950 | ||||||
| Accrued expenses and other current liabilities (note 5) | 24,563 | 25,779 | ||||||
| Total current liabilities | 143,986 | 136,689 | ||||||
| Long-term debt | 4,490 | 4,509 | ||||||
| Other long-term liabilities | 1,154 | 1,205 | ||||||
| Deferred income taxes | 52,287 | 51,248 | ||||||
| Total liabilities | 201,917 | 193,651 | ||||||
| Shareholders' equity: | ||||||||
| Class A common stock, par value $.01, 150,000,000 shares authorized; 45,822,983 shares issued at September 30, 2004 and 45,812,032 shares issued at June 30, 2004 | 458 | 458 | ||||||
| Class B common stock, par value $.01, 600,000 shares | ||||||||
| authorized; no shares issued and outstanding at | ||||||||
| September 30, 2004 and June 30, 2004 | -- | -- | ||||||
| Preferred stock, par value $.01, 1,055,000 shares authorized; no shares issued and outstanding at September 30, 2004 and June 30, 2004 | -- | -- | ||||||
| Additional paid-in capital | 290,060 | 289,707 | ||||||
| 290,518 | 290,165 | |||||||
| Less: Treasury stock (at cost), 9,880,455 shares at | ||||||||
| September 30, 2004 and 9,255,955 shares at June 30, 2004 | (265,786 | ) | (244,026 | ) | ||||
| Retained earnings | 427,558 | 414,041 | ||||||
| Accumulated other comprehensive income (note 9) | 1,084 | 600 | ||||||
| Total shareholders' equity | 453,374 | 460,780 | ||||||
| Total liabilities and shareholders' equity | $ | 655,291 | $ | 654,431 | ||||
See accompanying notes to consolidated financial statements.
2
ETHAN ALLEN INTERIORS
INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share data)
| Three Months Ended September 30, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2004 |
2003 |
|||||||
| Net sales | $ | 230,346 | $ | 222,765 | ||||
| Cost of sales | 119,953 | 114,322 | ||||||
| Gross profit | 110,393 | 108,443 | ||||||
| Operating expenses: | ||||||||
| Selling | 43,213 | 44,609 | ||||||
| General and administrative | 36,112 | 35,522 | ||||||
| Restructuring and impairment charges (note 5) | (167 | ) | (264 | ) | ||||
| Total operating expenses | 79,158 | 79,867 | ||||||
| Operating income | 31,235 | 28,576 | ||||||
| Interest and other miscellaneous income, net | (55 | ) | 2,211 | |||||
| Interest and other related financing costs | 149 | 141 | ||||||
| Income before income taxes | 31,031 | 30,646 | ||||||
| Income tax expense | 12,102 | 11,707 | ||||||
| Net income | $ | 18,929 | $ | 18,939 | ||||
| Per share data (note 8): | ||||||||
| Basic earnings per common share: | ||||||||
| Net income per basic share | $ | 0.52 | $ | 0.51 | ||||
| Basic weighted average common shares | 36,211 | 37,227 | ||||||
| Diluted earnings per common share: | ||||||||
| Net income per diluted share | $ | 0.51 | $ | 0.50 | ||||
| Diluted weighted average common shares | 37,098 | 38,247 | ||||||
See accompanying notes to consolidated financial statements.
3
ETHAN ALLEN INTERIORS
INC. AND SUBSIDIARIES
Consolidated
Statements of Cash Flows
(In thousands)
| Three Months Ended September 30, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2004 |
2003 |
|||||||
| Operating activities: | ||||||||
| Net income | $ | 18,929 | $ | 18,939 | ||||
| Adjustments to reconcile net income to net | ||||||||
| cash provided by operating activities: | ||||||||
| Depreciation and amortization | 5,250 | 5,265 | ||||||
| Compensation expense (benefit) related to restricted stock award | 79 | 66 | ||||||
| Provision (benefit) for deferred income taxes | 1,490 | 2,014 | ||||||
| Restructuring and impairment charges (credits) | (167 | ) | (264 | ) | ||||
| (Gain) loss on disposal of property, plant | ||||||||
| and equipment | 200 | (1,129 | ) | |||||
| Other | 14 | 12 | ||||||
| Change in assets and liabilities, net of the | ||||||||
| effects of acquired and divested businesses: | ||||||||
| Accounts receivable | 1,035 | (1,699 | ) | |||||
| Inventories | 7,701 | 7,910 | ||||||
| Prepaid expenses and other current assets | 1,117 | 3,681 | ||||||
| Other assets | (945 | ) | 331 | |||||
| Customer deposits | 3,947 | 6,511 | ||||||
| Accounts payable | 3,069 | 7,569 | ||||||
| Accrued expenses and other current liabilities | (4,302 | ) | 1,137 | |||||
| Other long-term liabilities | (51 | ) | (371 | ) | ||||
| Net cash provided by operating activities | 37,366 | 49,972 | ||||||
| Investing activities: | ||||||||
| Proceeds from the disposal of property, plant and equipment | 34 | 3,425 | ||||||
| Capital expenditures | (7,480 | ) | (4,010 | ) | ||||
| Acquisitions | (54 | ) | -- | |||||
| Other | 338 | 35 | ||||||
| Net cash used in investing activities | (7,162 | ) | (550 | ) | ||||
| Financing activities: | ||||||||
| Payments on long-term debt and capital leases | (42 | ) | (53 | ) | ||||
| Net proceeds from issuance of common stock | 183 | 861 | ||||||
| Dividends paid | (3,664 | ) | (2,614 | ) | ||||
| Payments to acquire treasury stock | (18,573 | ) | -- | |||||
| Net cash used in financing activities | (22,096 | ) | (1,806 | ) | ||||
| Effect of exchange rate changes on cash | 324 | 13 | ||||||
| Net increase (decrease) in cash and cash equivalents | 8,432 | 47,629 | ||||||
| Cash and cash equivalents - beginning of year | 27,528 | 81,856 | ||||||
| Cash and cash equivalents - end of period | $ | 35,960 | $ | 129,485 | ||||
See accompanying notes to consolidated financial statements.
4
ETHAN ALLEN
INTERIORS INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders’ Equity
Three Months Ended September 30, 2004
(In thousands, except share data)
| Common Stock |
Additional Paid-in Capital |
Treasury Stock |
Accumulated Other Comprehensive Income (Loss) |
Retained Earnings |
Total | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance at June 30, 2004 | $ | 458 | $ | 289,707 | $ | (244,026 | ) | $ | 600 | $ | 414,041 | $ | 460,780 | |||||||
| Issuance of 10,951 shares of common stock upon the exercise of stock options and restricted stock award compensation | -- | 262 | -- | -- | -- | 262 | ||||||||||||||
| Purchase of treasury stock | -- | -- | (21,760 | ) | -- | -- | (21,760 | ) | ||||||||||||
| Tax benefit associated with the | ||||||||||||||||||||
| exercise of employee stock options | -- | 91 | -- | -- | -- | 91 | ||||||||||||||
| Dividends declared on common stock | -- | -- | -- | -- | (5,412 | ) | (5,412 | ) | ||||||||||||
| Other comprehensive income (note 9) | -- | -- | -- | 484 | -- | 484 | ||||||||||||||
| Net income | -- | -- | -- | -- | 18,929 | 18,929 | ||||||||||||||
| Total comprehensive income | 19,413 | |||||||||||||||||||
| Balance at September 30, 2004 | $ | 458 | $ | 290,060 | $ | (265,786 | ) | $ | 1,084 | $ | 427,558 | $ | 453,374 | |||||||
See accompanying notes to consolidated financial statements.
5
| Ethan Allen Interiors Inc. (the “Company”) is a Delaware corporation incorporated on May 25, 1989. The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiary Ethan Allen Inc. (“Ethan Allen”), and Ethan Allen’s subsidiaries. All of Ethan Allen’s capital stock is owned by the Company. The Company has no assets or operating results other than those associated with its investment in Ethan Allen. |
| All intercompany accounts and transactions have been eliminated in the consolidated financial statements. In the opinion of the Company, all adjustments, consisting only of normal recurring accruals necessary for fair presentation, have been included in the consolidated financial statements. The results of operations for the three months ended September 30, 2004 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 the Company’s Annual Report on Form 10-K for the year ended June 30, 2004. |
| Certain reclassifications have been made to prior years’ financial statements in order to conform to the current year’s presentation. These changes were made for disclosure purposes only and did not have any impact on previously reported results of operations or shareholders’ equity. |
| The Company’s 1992 Stock Option Plan (the “Plan”) is accounted for in accordance with the recognition and measurement provisions of Accounting Principles Board Opinion (“APB”) No. 25, Accounting for Stock Issued to Employees, and related interpretations, which employs the intrinsic value method of measuring compensation cost. Accordingly, compensation expense is not recognized for fixed stock options if the exercise price of the option equals the fair value of the underlying stock at the grant date. For certain stock-based awards, where the exercise price is equal to zero, the fair value of the award, measured at the grant date, is amortized to compensation expense on a straight-line basis over the vesting period. In addition, other stock-based award programs provided for under the Plan may also result in the recognition of compensation expense (benefit) to the extent they are deemed to be variable (as that term is defined in APB No. 25) in nature. |
| Statement of Financial Accounting Standards (“SFAS”) No. 123, Accounting for Stock-Based Compensation, encourages recognition of the fair value of all stock-based awards on the date of grant as expense over the vesting period. However, as permitted by SFAS No. 123, the Company continues to apply the intrinsic value-based method of accounting prescribed by APB Opinion No. 25 and discloses certain pro-forma amounts as if the fair value approach of SFAS No. 123 had been applied. |
| In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure, an amendment of SFAS No. 123, to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, this standard amends the disclosure requirements of SFAS No. 123 by requiring more prominent pro-forma disclosures in both the annual and interim financial statements. The following table, which addresses the disclosure requirements of SFAS No. 148, illustrates the effect on net income and earnings per share if the fair value recognition provisions of SFAS No. 123 had been applied to all outstanding and unvested awards in each period. |
6