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©2006 Ethan Allen Global, Inc.
financial highlights(cid:2)
$1,066.4
$949.0
$955.1
$907.3
$892.3
Amounts in thousands, except per share
data. Fiscal Years ended June 30
Statement of Operations Data
Net sales
Gross profit
Operating income (a)
Net income (a)
2006
1,066,390
540,982
142,672
85,682
2005
2004
949,012
461,054
128,978
79,338
955,107
461,035
126,404
79,478
Per Share Data
Net income per diluted share (a)
Diluted weighted average
common shares outstanding
Balance Sheet Data
Working capital
Current ratio
Total assets
Total debt, including capital lease obligations
Shareholders’ equity
Debt as % of equity
(a) Includes the effects of pre-tax restruc-
turing and impairment charges totaling
$4.2 million and $12.5 million in fiscal years
2006 and 2004 respectively.
2.51
2.19
2.08
34,086
36,193
38,295
278,038
2.91
812,241
202,787
417,442
48.6%
130,423
1.97
628,386
12,510
434,068
2.9%
161,772
2.18
658,367
9,221
456,140
2.0%
$2.51
$2.19
$2.08
$1.93
$2.05
$85.7
$79.3
$79.5
$81.9
$74.6
2005
2006
Net Income Per Diluted Share
2004
2002
2003
2005
2006
Net Income (in millions)
2004
2003
2002
2005
2006
Net Sales (in millions)
2004
2003
2002
Dear Fellow
shareholders
I am pleased to report
performance was strong and, more important, we continued to take
steps to positively differentiate Ethan Allen.
that in Fiscal 2006, our financial
We achieved record sales of $1.1 billion and a strong net income of $85.7
million in a challenging year for the retail industry, especially the home
furnishings segment. These strong results were due to the many changes
we have brought about during the last several years. At Ethan Allen, our
mission is simple: While life can be overwhelming, decorating solutions
should not be. As we approach our 75th birthday, our reach to consumers
continues to expand. We make it easier for our clients to decorate their
homes and create the lifestyles they want.
This fiscal year, we focused on improving the professionalism of the
design consultants in our retail network. The work of over 3,000 design
consultants was further strengthened by promoting more than 200 of our
qualified design consultants to the position of project manager; these
project managers provide another level of service to our clients and guid-
ance to our design consultants. We have brought on 1,000 new design
consultants during the past year, as well, and we feel that this will continue
to differentiate us in providing solutions and service to our clients.
In Fiscal 2006, we expanded our training and solutions programs for the
design consultants and the management teams in our Design Centers.
(You will notice that we now refer to our stores as Design Centers, to
better reflect our current strategies.)
We also continued to strengthen the diversity of our products and
programs. Our focus continues to be the development of stylish,
high-quality products at good value. We introduced two new product
collections—Maison by Ethan Allen, embodying the attitudes of French
Country; and American Classics, reflecting eighteenth century English-
influenced designs.
Our retail network was further strengthened by the opening of twelve
new Design Centers in the U.S. and four new international locations.
Our goal has been to relocate to prime, high-traffic locations. The
U.S. Design Centers were opened in important markets, including
Chicago, Phoenix, Philadelphia, Los Angeles, and Nashville.
The implementation of our “Mission Possible” initiative took place this
fiscal year as well. I am pleased to say that we have substantially reduced
the delivery times of our products to our customers. By June 2006,
we were shipping to our retail network, on the average, 80% of our
products within 30 days, cutting our delivery time by about 30% from
the previous fiscal year.
Precision targeting has made our marketing stronger and more efficient.
By zeroing in on specific demographics, our direct mail magazine now
reaches more than six million well-qualified customers per quarter, and
our marketing message reflects the inspirational/aspirational appeal of
Ethan Allen. In support of this direct mail initiative, we have also
expanded our television presence by increasing the number of on-air
weeks for our national campaign.
At Ethan Allen we continue to strengthen the basics: motivated and
knowledgeable associates; stylish and high-quality products; one-stop
decorating solutions; a national network of more than 300 Design
Centers; and a vertically integrated operating structure that takes our
programs and products from their conception to their final delivery to
the customer.
We look forward to maintaining our competitive edge and to further
evolving the way we do business to ensure the best possible return—
clients for life.
Farooq Kathwari
Chairman of the Board,
President and CEO,
Ethan Allen Interiors Inc.
excellence in service
the new luxury
Today’s clients have more shopping
choices than ever before, challenging retailers to become more
inventive in the way they do business. At Ethan Allen, we provide much
more than just furniture. Our stores offer an individual approach to
design, and the luxury of superior service that clients crave. Our more
than 3,000 design consultants forge important relationships with their
clients, so this year we have been especially focused on ensuring the
strength and commitment of those relationships. The more expertise
our associates have, the better experience our clients will have.
We began by creating teams led by Senior Project Managers and
Project Managers. With these team leaders as partners, our design con-
sultants are able to focus on the design process and on providing the
personal service for which we are known. These teams have increased
productivity among our
design consultants and
overall, we’ve seen a
twelve percent increase
in sales—a notable
accomplishment during
such challenging
economic times.
Then, we established new recruiting standards for our design consult-
ants. In addition to having a committee oversee this process, our
President and CEO, Farooq Kathwari, personally reviews all resumes.
Potential candidates must possess a strong background in design, and
to ensure that they are knowledgeable about Ethan Allen product and
programs, we have created an extensive training program for them to
participate in once they are hired. These new initiatives have proven
successful—our employee turnover has been reduced and the new
hires “hit the ground running” with strong sales.
However, our free design service is just one example of our commit-
ment to providing exceptional service. Our in-house customer service
department handles any post-delivery issues and our complimentary
white glove delivery service inspects and preps each piece of furniture,
delivers it to the client’s home, and places it in the room. These services
which we provide with no charge to our clients, give us a competitive
advantage in the marketplace.
Giving clients what they want in a way that makes the shopping
experience special and rewarding, and then ensuring their satisfaction,
is simply smart business sense.
Our new project management teams have helped the retail division increase sales by 12%
When clients shop with us, they get a wide array
of choices, including the hundreds of fabrics
we offer. This ability to customize a look is
what helps to differentiate Ethan Allen in
the marketplace.
this fiscal year saw the birth of two
exciting new collections, american
classics by ethan allen and maison by
ethan allen (shown here).
new to market
enhancing our e≈ciency and eΩectiveness
This year we continued to strengthen
our New Classics business, having redefined our casual side last year.
Since 2002, more than 70% of our home furnishings are new.
Our two latest collections, Maison by Ethan Allen and American
Classics by Ethan Allen, reflect our commitment to providing designs
that appeal to a broad demographic. The popular European country
look can be found in the charming silhouettes of Maison by Ethan Allen.
American Classics by Ethan Allen pays homage to the rich history of
American furniture design. The latter is a cross-generation collection,
with appeal ranging from baby boomers to young clients seeking to
make their first serious furniture purchase. Both collections have coordi-
nating upholstery and accent designs.
In an effort to better serve our clients and increase the efficiency of our
manufacturing and distribution system, we instituted a 30-day “Mission:
Possible” shipping initiative this year. The implementation of this plan
was greatly aided by our vertical infrastructure: we oversee all aspects of
our business from concept through delivery, and we are able to monitor
costs and inventory levels more closely. In the past, lead times for delivery
could be as much as twelve weeks. By the close of this fiscal year, we
were shipping 85% of our case goods, 75% of our upholstery, and 88%
of our accents within 30 days.
We currently manufacture and/or assemble approximately 60% of our
home furnishings domestically. We have maintained a strategic balance
between United States manufac-
turing and foreign outsourcing
through carefully selected
vendors, and we continue to
invest in technology at all levels
of our infrastructure to improve
our business and efficiency.
More than 70%of our home furnishings are new within the last few years.
our new voice
precision marketing at its best
At Ethan Allen we embrace change.
As we continue our evolution from a furniture retailer to an “interior
design center,” we reach out to more consumers to convey our simple yet
powerful message: Ethan Allen is a shopping experience like no other.
Ethan Allen is an authority on style and we always strive to inspire our
clients. This year, we developed a new, three-tiered campaign that
expresses Ethan Allen’s unique position as an aspirational yet attainable
brand. Our new magazine more effectively reflects our leadership in the
home fashion business and the tremendous value we offer. Published
quarterly, it reaches approximately six million consumers and is our most
visually evocative direct mail piece to date. In an effort to further
improve our return on investment, our magazine mailings are based on a
database analysis of which consumers are most likely to purchase our
brand and of those who did make purchases following receipt of previ-
ous magazines. Our email newsletter, Ethan Allen Inside Style, keeps
subscribers aware of current style trends and what’s new with the brand,
and offers myriad design
and decorating tips. Our
new national television
campaign, “Inspired by
Summer...Designed By
Ethan Allen,” mirrors
the magazine and first
aired during Memorial
Day weekend.
Our everyday pricing, “no sale” strategy, instituted two years ago, has
proven enormously successful. This year, our sales surpassed the $1 billion
mark. Our clients appreciate that they no longer have to wait for a sale
and they know they can shop with confidence at Ethan Allen because we
offer them our best prices everyday. As a companion to everyday pricing,
we launched an everyday financing program during the first quarter of this
fiscal year. This offer is available to our clients any day of the week and
gives them a 6 months no payment/deferred interest option. Clients also
still have the option of our Simple Finance Plan, which lets them decorate
on a budget with fixed monthly payments at a fixed interest rate for up to
60 months.
We continue to recognize and act on the importance of store location.
We are always on the lookout for the best, high-traffic locations for new
stores and for the relocation of existing stores. We have been able to
help retiring retailers by acquiring their stores and have been able to
support independent retailers as they foster the growth of their stores,
thereby ensuring the continued success of the Ethan Allen brand.
What remains the same in the face of any changes we undertake is our
mission: to make decorating fun, easy, and affordable for our clients.
This year, our sales surpassed 1 billion dollars.
i n s p i r e d b y
SUMMER
d e s i g n e d b y
This year’s magazine design
confirms our position as experts
in home decorating and showcases
all that we have to offer. Our email
newsletter informs subscribers of
current style trends.
E T H A N A L L E N
B OA R D O F D I R E C T O R S
Top row from left:
Clinton A. Clark
Richard A. Sandberg
Horace G. McDonell
Frank G. Wisner
Bottom row from left:
Farooq Kathwari
Kristin Gamble
Edward H. Meyer(cid:2)
cor(cid:2)orate data(cid:3)
officers an(cid:2)
D I R E C T O R S
M. Farooq Kathwari
CHAIRMAN OF THE BOARD, PRESIDENT,
AND CHIEF EXECUTIVE OFFICER
Clinton A. Clark
PRESIDENT AND SOLE STOCKHOLDER OF
CAC INVESTMENTS, INC.
Kristin Gamble
PRESIDENT, FLOOD GAMBLE ASSOCIATES, INC.
Horace G. McDonell
FORMER CHAIRMAN AND CHIEF EXECUTIVE OFFICER,
PERKIN ELMER CORPORATION
Edward H. Meyer
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE
OFFICER, GREY GLOBAL GROUP, INC.
Richard A. Sandberg
CHIEF FINANCIAL OFFICER, MATRITECH
Ambassador Frank G. Wisner
VICE CHAIRMAN, EXTERNAL AFFAIRS,
AMERICAN INTERNATIONAL GROUP, INC.
O F F I C E R S
M. Farooq Kathwari
Jack Moll
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
Pamela A. Banks
VICE PRESIDENT, GENERAL COUNSEL
AND SECRETARY
Kelly A. Bean
VICE PRESIDENT, ADVERTISING
Jack DeKorne
VICE PRESIDENT, RETAILER RELATIONS
Charles J. Farfaglia
VICE PRESIDENT, HUMAN RESOURCES
Don Garrett
VICE PRESIDENT, CASE GOODS MANUFACTURING
Jeffrey Hoyt
VICE PRESIDENT, FINANCE AND TREASURER
Henry Kapteina
DIRECTOR, INTERNAL AUDIT
Sandra Lamenza
GENERAL MANAGER, ETHAN ALLEN HOTEL
Margaret W. Lupton
DIRECTOR, INVESTOR RELATIONS
AND ASSISTANT SECRETARY
James D. McCreary
VICE PRESIDENT, PRODUCT SOURCING
GENERAL MANAGER, PHYSICAL DISTRIBUTION
Nora Murphy
VICE PRESIDENT, STYLE
Kenneth Musante
MANUFACTURING CONTROLLER
Tracy Paccione
VICE PRESIDENT, MERCHANDISING,
UPHOLSTERY AND ACCENTS PROGRAMS
Craig Stout
VICE PRESIDENT, CASE GOODS MERCHANDISING
Edward Teplitz
VICE PRESIDENT, RETAIL DIVISION
EXECUTIVE VICE PRESIDENT,
ETHAN ALLEN RETAIL, INC.
Clifford Thorn
VICE PRESIDENT,
UPHOLSTERY MANUFACTURING
Corey Whitely
VICE PRESIDENT, OPERATIONS
EXECUTIVE VICE PRESIDENT,
ETHAN ALLEN OPERATIONS, INC.
Ann M. Zaccaria
VICE PRESIDENT, BUSINESS DEVELOPMENT
C O R P O R AT E D ATA
Corporate Headquarters
Ethan Allen Interiors Inc.
Ethan Allen Drive
Danbury, CT 06811
203.743.8000
www.ethanallen.com
Transfer Agent
Computershare Investor Services, LLC
2 North LaSalle Street
P.O. Box A3504
Chicago, IL 60690-3504
312.360.5196
Independent Certified
Public Accountants
KPMG LLP
3001 Summer Street
Stamford, CT 06905
203.356.9800
Stock Exchange Listing
New York Stock Exchange
Ethan Allen Interiors Inc.
Trading Symbol: (ETH)
Investor Relations
203.743.8234
plupton@ethanalleninc.com
Design
Ethan Allen Global, Inc.
E T H A N A L L E N
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a n n u a l r e p o r t
2006
©2006 Ethan Allen Global, Inc.