A N N U A L
R E P O R T
2019 statement of operations data
2019
2018
2017
Net sales
$746,684
$766,784
$763,385
Adjusted gross margin (a)
Adjusted operating income (a)
Adjusted net income (a)
Adjusted diluted EPS (a)
55.1%
$55,051
$41,632
$1.56
54.2%
$50,145
$37,306
$1.35
55.8%
$64,960
$40,643
$1.45
balance sheet data
Cash and cash equivalents
$20,824
$22,363
$65,031
Total assets
Long-term debt
Total liabilities
Shareholders’ equity
Working capital
key metrics
Adjusted return on equity (a)
$510,351
$530,433
$568,222
$516
$146,422
$363,929
$93,464
$1,096
$146,563
$383,870
$93,165
$11,608
$167,326
$400,896
$116,653
11.13%
9.51%
10.25%
Current ratio
1.76 TO 1
1.77 TO 1
1.92 TO 1
Long-term debt to equity ratio
0.1%
0.3%
2.9%
Common shares outstanding
26,586,945
26,529,294
27,447,215
cash returned to shareholders
Dividends paid
$29,509
$46,990
Dividend yield
Cost of shares repurchased
Number of shares repurchased
3.61%
$0
0
3.10%
$22,019
950,484
$20,031
2.29%
$10,246
357,363
Amounts in thousands, except share and per share data.
(a) See reconciliation of U.S. GAAP to adjusted key financial measures in the back of this annual report.
s
t
h
g
i
l
h
g
i
h
l
a
i
c
n
a
n
2 fi
dear fellow shareholders
expanded offerings
& marketing
We have continued to expand our product
selection with a focus on classic styles with
a modern perspective. Over the past three
years, we have refreshed about 70% of our
entire product line and further diversified
our assortment to reach a vast and varied
consumer base.
Our marketing remains focused on our
core messages of interior design service,
style, quality, and value with an emphasis
on personal service and the Design Center
experience. In FY 2019, we enhanced our
marketing initiatives further, harnessing our
CRM tools to implement targeted marketing
strategies. We focused our advertising,
utilizing multiple mediums including
broadcast, direct mail, print, and digital.
combining technology
with personal service
In FY 2019, we continued to strengthen our
exceptional personal service, combining
state-of-the-art technology with our
complimentary design service to deliver
a dynamic brand experience.
In FY 2019, we continued to reposition
our global network of about 185 Design
Centers in North America and about 120
internationally with modern projections and
smaller footprints. Nineteen percent of our
Design Centers have been relocated within
the past five years, and 65 percent within the
past fifteen years. Our new locations average
less than 10,000 square feet and incorporate
technology to accelerate the design and
selling processes.
Our Premier In-Home Delivery service is
another component of our business that sets
us apart. Offered at one national price, it is
a major competitive advantage, and ensures
clients receive excellent service and value
throughout the Ethan Allen brand experience.
environmental &
social responsibility
Our vertically integrated business
model allows us to maintain a steadfast
commitment to environmental stewardship
and social responsibility. We have increased
emphasis on sustainability practices
throughout all parts of our business.
talent
This year, we debuted our 3D room planner
We continued to strengthen our
in all Design Centers to further enhance
unwavering leadership in all facets of our
designer-client relationships and increase
business, particularly in our retail network,
conversions by showing clients photo-
realistic previews of their room designs.
We also continued to expand our
manufacturing, and logistics. Today, we
have approximately 1,500 interior design
professionals throughout our global
EA inHome™ augmented reality app,
network of 144 company-operated and
adding thousands of products and
enhancing search functionality.
158 independently owned Design Centers.
The commitment and achievements
Additionally, we made major enhancements
of all our talented associates have
to our e-commerce sites, especially our
been instrumental in maintaining our
mobile experience, and continue to support
foundational strengths. I would like to
our successful Live Chat, which allows visitors
thank all of them, as well as our clients and
to ethanallen.com to experience personal
shareholders, for their continued support
service from our designers anywhere, anytime.
as we look forward to a successful FY 2020.
customer experience
that differentiates us
In FY 2019, we continued to focus on
strategic initiatives to reinforce our unique
value and competitive advantage, including
strengthening our vertically integrated
business, innovating and expanding
our product selection, continuing our
retail transformation, and enhancing our
advertising efforts with increased digital
initiatives and technology. We also made
infrastructure investments to increase our
supply chain efficiency and continued our
commitment to social responsibility and
sustainability.
We achieved net sales for FY 2019 of $746.7
million and generated adjusted earnings
per diluted share of $1.56, an increase of
15.6%. We also returned $47.0 million to
shareholders in regular and special dividends.
Our strategic focus continues to center
on creating an omnichannel experience
The exceptional experience and design
that “wows” the customer, and we are well
service found in our Design Centers
positioned to grow in FY 2020.
remains a key focus of our business.
farooq kathwari
Chairman, President and CEO
Ethan Allen Interiors Inc.
statement of operations data
2019
2018
2017
Net sales
$746,684
$766,784
$763,385
Adjusted gross margin (a)
Adjusted operating income (a)
Adjusted net income (a)
Adjusted diluted EPS (a)
55.1%
$55,051
$41,632
$1.56
54.2%
$50,145
$37,306
$1.35
55.8%
$64,960
$40,643
$1.45
balance sheet data
Cash and cash equivalents
$20,824
$22,363
$65,031
Total assets
Long-term debt
Total liabilities
Shareholders’ equity
Working capital
key metrics
$510,351
$530,433
$568,222
$516
$146,422
$363,929
$93,464
$1,096
$146,563
$383,870
$93,165
$11,608
$167,326
$400,896
$116,653
Adjusted return on equity (a)
11.13%
9.51%
10.25%
Current ratio
1.76 TO 1
1.77 TO 1
1.92 TO 1
Long-term debt to equity ratio
0.1%
0.3%
2.9%
Common shares outstanding
26,586,945
26,529,294
27,447,215
cash returned to shareholders
Dividends paid
Dividend yield
Cost of shares repurchased
Number of shares repurchased
$46,990
3.61%
$0
0
$29,509
3.10%
$22,019
950,484
$20,031
2.29%
$10,246
357,363
Amounts in thousands, except share and per share data.
(a) See reconciliation of U.S. GAAP to adjusted key financial measures in the back of this annual report.
s
t
h
g
i
l
h
g
i
h
l
a
i
c
n
a
n
2 fi
dear fellow shareholders
expanded offerings
& marketing
We have continued to expand our product
selection with a focus on classic styles with
a modern perspective. Over the past three
years, we have refreshed about 70% of our
entire product line and further diversified
our assortment to reach a vast and varied
consumer base.
Our marketing remains focused on our
core messages of interior design service,
style, quality, and value with an emphasis
on personal service and the Design Center
experience. In FY 2019, we enhanced our
marketing initiatives further, harnessing our
CRM tools to implement targeted marketing
strategies. We focused our advertising,
utilizing multiple mediums including
broadcast, direct mail, print, and digital.
combining technology
with personal service
In FY 2019, we continued to strengthen our
exceptional personal service, combining
state-of-the-art technology with our
complimentary design service to deliver
a dynamic brand experience.
This year, we debuted our 3D room planner
in all Design Centers to further enhance
designer-client relationships and increase
conversions by showing clients photo-
realistic previews of their room designs.
We also continued to expand our
EA inHome™ augmented reality app,
adding thousands of products and
enhancing search functionality.
Additionally, we made major enhancements
to our e-commerce sites, especially our
mobile experience, and continue to support
our successful Live Chat, which allows visitors
to ethanallen.com to experience personal
service from our designers anywhere, anytime.
customer experience
that differentiates us
The exceptional experience and design
service found in our Design Centers
remains a key focus of our business.
In FY 2019, we continued to reposition
our global network of about 185 Design
Centers in North America and about 120
internationally with modern projections and
smaller footprints. Nineteen percent of our
Design Centers have been relocated within
the past five years, and 65 percent within the
past fifteen years. Our new locations average
less than 10,000 square feet and incorporate
technology to accelerate the design and
selling processes.
Our Premier In-Home Delivery service is
another component of our business that sets
us apart. Offered at one national price, it is
a major competitive advantage, and ensures
clients receive excellent service and value
throughout the Ethan Allen brand experience.
environmental &
social responsibility
Our vertically integrated business
model allows us to maintain a steadfast
commitment to environmental stewardship
and social responsibility. We have increased
emphasis on sustainability practices
throughout all parts of our business.
talent
We continued to strengthen our
unwavering leadership in all facets of our
business, particularly in our retail network,
manufacturing, and logistics. Today, we
have approximately 1,500 interior design
professionals throughout our global
network of 144 company-operated and
158 independently owned Design Centers.
The commitment and achievements
of all our talented associates have
been instrumental in maintaining our
foundational strengths. I would like to
thank all of them, as well as our clients and
shareholders, for their continued support
as we look forward to a successful FY 2020.
farooq kathwari
Chairman, President and CEO
Ethan Allen Interiors Inc.
In FY 2019, we continued to focus on
strategic initiatives to reinforce our unique
value and competitive advantage, including
strengthening our vertically integrated
business, innovating and expanding
our product selection, continuing our
retail transformation, and enhancing our
advertising efforts with increased digital
initiatives and technology. We also made
infrastructure investments to increase our
supply chain efficiency and continued our
commitment to social responsibility and
sustainability.
We achieved net sales for FY 2019 of $746.7
million and generated adjusted earnings
per diluted share of $1.56, an increase of
15.6%. We also returned $47.0 million to
shareholders in regular and special dividends.
Our strategic focus continues to center
on creating an omnichannel experience
that “wows” the customer, and we are well
positioned to grow in FY 2020.
Ethan Allen is a leader in the home furnishings
industry, renowned for incomparable quality,
exceptional craftsmanship, variety of style,
and personal service. These values, and
our longstanding commitment to a strong
vertically integrated business model, continue
to differentiate us and guide our growth.
2
3
2019 Ethan Allen is a leader in the home furnishings
industry, renowned for incomparable quality,
exceptional craftsmanship, variety of style,
and personal service. These values, and
our longstanding commitment to a strong
vertically integrated business model, continue
to differentiate us and guide our growth.
2
3
2019 Exceptional service sets us apart; it’s an
essential part of the Ethan Allen experience.
With a global network of 1,500 designers
and state-of-the-art design tools, we continue
to find innovative ways to combine technology
with personal service.
COMPLIMENTARY
DESIGN SERVICE
For most clients, the Ethan Allen experience
begins as a conversation with one of our
talented designers. Many of our designers
trained in the world’s finest institutes; many
owned their own design firms before joining
Ethan Allen. They lend us their talents and
their extraordinary eyes for style, and in
exchange, we provide them all the tools they
need to succeed, including an extraordinary
selection of products backed by our
reputation for exceptional quality.
As the primary ambassadors for our brand,
our global network of 1,500 designers
assists clients in Design Centers, during
in-home appointments, and via online
consultations. We help our designers connect
with an expanded client base by featuring each
designer’s bio and portfolio on our website.
This year, we’ve strengthened our designers’
portfolio pages and made it easier for clients
to connect with them online. We’ve also made
it possible for clients to contact designers
directly from the EA inHome™ app, and we’ve
continued to offer online Live Chat with
designers via ethanallen.com.
4
5
personalservice
Exceptional service sets us apart; it’s an
essential part of the Ethan Allen experience.
With a global network of 1,500 designers
and state-of-the-art design tools, we continue
to find innovative ways to combine technology
with personal service.
COMPLIMENTARY
DESIGN SERVICE
For most clients, the Ethan Allen experience
begins as a conversation with one of our
talented designers. Many of our designers
trained in the world’s finest institutes; many
owned their own design firms before joining
Ethan Allen. They lend us their talents and
their extraordinary eyes for style, and in
exchange, we provide them all the tools they
need to succeed, including an extraordinary
selection of products backed by our
reputation for exceptional quality.
As the primary ambassadors for our brand,
our global network of 1,500 designers
assists clients in Design Centers, during
in-home appointments, and via online
consultations. We help our designers connect
with an expanded client base by featuring each
designer’s bio and portfolio on our website.
This year, we’ve strengthened our designers’
portfolio pages and made it easier for clients
to connect with them online. We’ve also made
it possible for clients to contact designers
directly from the EA inHome™ app, and we’ve
continued to offer online Live Chat with
designers via ethanallen.com.
4
5
personalservice
Our longstanding commitment to excellent
craftsmanship continues to set us apart in
the marketplace. As we carry on tried-and-
true techniques that define us, we’ve also
embraced state-of-the-art technologies and
new ways of operating to strengthen our
position and viability.
Approximately 75% of our products
are manufactured in our plants in North
America. When we seek out partnerships
with international suppliers and vendors, we
look for artisans who use traditional methods,
source local materials, and have a reputation
for being the best at what they do.
Our manufacturing plant in Silao, Guanajuato,
Mexico, for example, is located in an area
with a rich historical tradition of leather
craftsmanship. Our clients receive leather
furnishings custom-made by people
who’ve honed their skills over a lifetime,
many from families who have passed those
skills down through the generations.
Over half of our domestic wood furniture
production happens at our Vermont
facilities, and 50% of the wood furniture we
manufacture domestically is crafted from
logs received in our Beecher Falls, Vermont,
manufacturing plant and sawmill. More than
20% of our Vermont associates have invested
over 30 years in their work for Ethan Allen.
Many of those associates are from families
with members from multiple generations
who’ve worked for us.
In addition to having exceptional wood-
working skills, many of our craftspeople
harness their mathematics and computing
skills to operate modern CNC machinery,
which helps to increase productivity within
our facilities. Our craftspeople are also on
the front lines of our efforts to manufacture
products in an environmentally sustainable
way. Many of the initiatives we’ve developed
to cut landfill waste, boost recycling, and use
electricity more efficiently were created from
the ground up by the talented people who
work in our plants.
6
7
exceptional craftsmanship
Our longstanding commitment to excellent
Over half of our domestic wood furniture
craftsmanship continues to set us apart in
production happens at our Vermont
the marketplace. As we carry on tried-and-
facilities, and 50% of the wood furniture we
true techniques that define us, we’ve also
manufacture domestically is crafted from
embraced state-of-the-art technologies and
logs received in our Beecher Falls, Vermont,
new ways of operating to strengthen our
manufacturing plant and sawmill. More than
position and viability.
20% of our Vermont associates have invested
over 30 years in their work for Ethan Allen.
Approximately 75% of our products
Many of those associates are from families
are manufactured in our plants in North
with members from multiple generations
America. When we seek out partnerships
who’ve worked for us.
with international suppliers and vendors, we
look for artisans who use traditional methods,
In addition to having exceptional wood-
source local materials, and have a reputation
working skills, many of our craftspeople
for being the best at what they do.
harness their mathematics and computing
skills to operate modern CNC machinery,
Our manufacturing plant in Silao, Guanajuato,
which helps to increase productivity within
Mexico, for example, is located in an area
our facilities. Our craftspeople are also on
with a rich historical tradition of leather
the front lines of our efforts to manufacture
craftsmanship. Our clients receive leather
products in an environmentally sustainable
furnishings custom-made by people
way. Many of the initiatives we’ve developed
who’ve honed their skills over a lifetime,
to cut landfill waste, boost recycling, and use
many from families who have passed those
electricity more efficiently were created from
skills down through the generations.
the ground up by the talented people who
work in our plants.
6
7
exceptional craftsmanship
OUR NEW NOD HILL OUTDOOR COLLECTION: STYLISH,
SCALED FOR COMFORT, AND DESIGNED TO LAST.
To attract top design talent, and to keep up with
the evolving tastes of consumers, Ethan Allen
maintains an incredible portfolio of furnishings.
In FY 2019, our product design teams, drawing
on our “classic design, modern perspective”
ethos, developed two new projections and
a selection of new outdoor looks designed
to appeal to today’s tastes and lifestyles.
MIDCENTURY MODERN,
REIMAGINED
Fiscal 2019 saw the debut of an expansive line
of midcentury-inspired furnishings, updated
with vibrant colors, sleek silhouettes, and an
incredible mix of materials. Designed for
maximum quality at an attractive price point,
these pieces have a signature style that appeals
to a new generation of clients.
Although more modern in aesthetic, the look
gets incredible warmth and energy from a large
selection of decorative accents in shades of
citron, teal, and fire. The look also features a range
of inventive lighting, including table lamps crafted
from materials like Sukhothai clay and concrete,
slender floor lamps with lustrous metal finishes,
and industrial-inspired chandeliers and pendants.
In addition to a beautiful assortment of framed
giclée art prints and photographs, we premiered
a range of 3D wall art pieces in this introduction,
including both wall sculptures and beautifully
textured paper art crafted in the Philippines.
A wide range of new bedcoverings, decorative
pillows and throws, and eye-catching rugs
add even more vivid color and touchable texture.
8
9
style OUR NEW NOD HILL OUTDOOR COLLECTION: STYLISH,
SCALED FOR COMFORT, AND DESIGNED TO LAST.
To attract top design talent, and to keep up with
the evolving tastes of consumers, Ethan Allen
maintains an incredible portfolio of furnishings.
In FY 2019, our product design teams, drawing
on our “classic design, modern perspective”
ethos, developed two new projections and
a selection of new outdoor looks designed
to appeal to today’s tastes and lifestyles.
MIDCENTURY MODERN,
REIMAGINED
Fiscal 2019 saw the debut of an expansive line
of midcentury-inspired furnishings, updated
with vibrant colors, sleek silhouettes, and an
incredible mix of materials. Designed for
maximum quality at an attractive price point,
these pieces have a signature style that appeals
to a new generation of clients.
Although more modern in aesthetic, the look
gets incredible warmth and energy from a large
selection of decorative accents in shades of
citron, teal, and fire. The look also features a range
of inventive lighting, including table lamps crafted
from materials like Sukhothai clay and concrete,
slender floor lamps with lustrous metal finishes,
and industrial-inspired chandeliers and pendants.
In addition to a beautiful assortment of framed
giclée art prints and photographs, we premiered
a range of 3D wall art pieces in this introduction,
including both wall sculptures and beautifully
textured paper art crafted in the Philippines.
A wide range of new bedcoverings, decorative
pillows and throws, and eye-catching rugs
add even more vivid color and touchable texture.
8
9
style RELAXED MODERN
Our relaxed modern styles, which debuted in 2019, are simple,
elegant pieces made remarkable by beautiful hand-applied
finishes and an innovative mix of materials.
Hand-tailored seating is crafted with
meticulous attention to detail yet
communicates a look of casual couture.
Wood furnishings crafted from oak, with
finishes wire-brushed by hand to bring out
the grain, combine chic silhouettes with
welcoming textures. The mix of materials—
oak, canvas, capiz shells, steel, seeded glass
and more—adds drama to the minimalist
contours of each piece.
The look comes together in a beautiful
array of pillows, throws, and bedcoverings,
presented in a palette of sand and sky.
Texture and dimension speak volumes,
both in soft goods and across the line,
where an air of effortless elegance reigns.
Breathtaking lighting drawn from multiple
design eras, from midcentury to art deco to
Old Hollywood, takes the most glamorous
elements of each period and presents them
with fresh, up-to-date sophistication.
10
11
RELAXED MODERN
Our relaxed modern styles, which debuted in 2019, are simple,
elegant pieces made remarkable by beautiful hand-applied
finishes and an innovative mix of materials.
Hand-tailored seating is crafted with
The look comes together in a beautiful
meticulous attention to detail yet
array of pillows, throws, and bedcoverings,
communicates a look of casual couture.
presented in a palette of sand and sky.
Wood furnishings crafted from oak, with
Texture and dimension speak volumes,
finishes wire-brushed by hand to bring out
both in soft goods and across the line,
the grain, combine chic silhouettes with
where an air of effortless elegance reigns.
welcoming textures. The mix of materials—
Breathtaking lighting drawn from multiple
oak, canvas, capiz shells, steel, seeded glass
design eras, from midcentury to art deco to
and more—adds drama to the minimalist
Old Hollywood, takes the most glamorous
contours of each piece.
elements of each period and presents them
with fresh, up-to-date sophistication.
10
11
V I S I T A D E S I G N C E N T E R TO E X P E R I E N C E T H E E T H A N A L L E N D I F F E R E N C E
make it
PERSONAL
I N T R O D U C I N G
N E W R E L A X E D M O D E R N S T Y L E S
PROJECTIONS THROUGHOUT OUR DIRECT
MAIL MAGAZINES REINFORCED THE “MAKE
IT PERSONAL” MESSAGE, SHOWCASING
OUR PRODUCTS IN SETTINGS THAT APPEAL
TO THE DISTINCT TASTES AND LIFESTYLES
OF VARIOUS DEMOGRAPHICS.
*Discounts are taken off our Everyday Best Prices. Prior reductions may have been taken. Offer excludes clearance items, Ethan Allen | Disney products, DREAM eazzzTM mattresses, Simple Life® foundations and platform bed bases,
and adjustable motion bases. Offer cannot be applied to prior purchases, pending deliveries, sales tax, shipping and delivery charges, gift cards, or furniture protection plans and cannot be combined with any other savings offers,
sales, discounts, coupons, or promotions except applicable financing offers. Please ask a designer or visit ethanallen.com for sale details. Offer ends July 31, 2019. Prices in this magazine reflect up to 20% savings rounded to the
next whole dollar. Full savings will be given at time of purchase. Visit a Design Center or ethanallen.com for details. All information is current as of June 1, 2019, and is subject to change without notice. We are not responsible for
typographical errors. For current information, visit ethanallen.com or your local Design Center. Prices and services are optional for each retailer. All items may not be displayed at every Design Center. Final products may vary from
display. Certain names and marks are proprietary and owned by Ethan Allen Global, Inc. The paper used for this catalog comes from certified forests that are managed in a sustainable way to meet the social, economic, and
environmental needs of present and future generations. ©2019 Ethan Allen Global, Inc., Danbury, CT. ©Disney. All rights reserved. Printed in USA. (A)
†No Interest for 36 Months with Equal Payments: Gift card purchases are not eligible for promotional financing. 0% APR from date of eligible purchase until paid in full. Monthly payment is the purchase amount divided by the
number of months in the offer. Last payment may vary due to rounding. On-time payments will pay off the promotional balance. Advertised monthly payment amount excludes taxes, delivery, or other charges. Other transactions
and charges affect total monthly payment amount. Prior purchases excluded. Account must be in good standing. Offer expires July 31, 2019. Standard account terms apply to purchases that do not qualify. New accounts: Standard
Purchase APR 29.99%. Minimum interest charge $1. Existing accounts, see your credit agreement for applicable terms. Subject to credit approval. Ethan Allen financing account issued by TD Bank, N.A.
Front cover: NEW Channing 64" Sofas 207058 starting at $1799 ea. NOW $1439 ea. as shown $2379 ea. NOW $1899 ea. NEW Printed
Silk Ogee Pillows 065664 $129 ea. NOW $103 ea. NEW Printed Silk Ladder Pillows 065663 $129 ea. NOW $103 ea. Sequined
Velvet Pillow, seaglass 065750 $174 NOW $139 Heron Round Coffee Table 139271 $1269 NOW $1009 NEW Bensen Accent Table
421834 $469 NOW $375 NEW Starburst Chandelier, nickel 093621 $1799 NOW $1439 NEW Surfaces Artwork 075083 $999
NOW $799 NEW Nudes I Artwork 073761A $829 NOW $663 NEW White Goddess Vases: medium 432060B $99 NOW $79, small
432060C $89 NOW $71 NEW Small Jacey Ceramic Vase 432065B $79 NOW $63 NEW Lotus Tealight Holders, set of 2 432051
$79 NOW $63 Peach Blossom Watergarden 446629 $1209 NOW $967 Custom window treatments available in Design Centers
Cozy Chalet Rug, shimmer 046065 $2179–$2849 NOW $1743–$2279 Custom rug sizes available in Design Centers
S AV E U P T O 2 0 %*
PLUS, ENJOY SPECIAL FINANCING † WITH THE NEW
ETHAN ALLEN PL ATINUM CARD
†Restrictions apply. See back cover for details.
US
181043_June2019_DirectMail_Final.indd 1
4/30/19 1:59 PM
As the world changes, one thing remains the same at
Ethan Allen: We stand for quality, service, craftsmanship,
value, and classic design with a modern attitude. Our marketing
efforts communicate our core brand messages and value
propositions consistently and cohesively across all advertising
platforms, from digital and broadcast to direct mail and print.
MAKE IT PERSONAL
In FY 2019, we emphasized our
personalized service and the details
about our brand that set us apart:
craftsmanship, quality, style, and
sustainability. We introduced a
“Make It Personal” campaign
promoting the exclusive experience
you can only find in our Design
Centers. Our tagline, “Every Detail
Matters,” remained as part of our
core branding message, reinforcing
our exceptional attention to detail in
every facet of our business model.
Print advertising and direct mail
magazines remain important
mediums for reaching our core clients
and building awareness among new
target audiences. The “Make It Personal”
message was reflected on the cover and
pages of our direct mail pieces, as well as
in local print and broadcast advertising.
12
©Disney
13
EASTVIEW MALL TEXT 585.466.0196 FOR A COMPLIMENTARY DESIGN CONSULTATIONSale going on for a limited time. Exclusions apply. Ask a designer or visit ethanallen.com for details. ©2019 Ethan Allen Global, Inc.SPECIAL SAVINGS GOING ON NOWVISIT YOUR LOCAL DESIGN CENTER TO EXPERIENCE THE ETHAN ALLEN DIFFERENCE.MAKE IT PERSONALWATER MILL 1054 MONTAUK HIGHWAY 631.726.4652BRING THIS AD TO RECEIVE A FREE GIFT WITH PURCHASE — WHILE SUPPLIES LAST.make itPERSONALSAVE UP TO 20% STARTING TOMORROW**Discounts are taken off our Everyday Best Prices. Prior reductions may have been taken. Exclusions apply. Visit a Design Center or ethanallen.com for details. Offer ends July 31, 2019. ©2019 Ethan Allen Global, Inc.INTRODUCING NEW RELAXED MODERN STYLESmarketing make it
PERSONAL
V I S I T A D E S I G N C E N T E R TO E X P E R I E N C E T H E E T H A N A L L E N D I F F E R E N C E
I N T R O D U C I N G
N E W R E L A X E D M O D E R N S T Y L E S
PROJECTIONS THROUGHOUT OUR DIRECT
MAIL MAGAZINES REINFORCED THE “MAKE
IT PERSONAL” MESSAGE, SHOWCASING
OUR PRODUCTS IN SETTINGS THAT APPEAL
TO THE DISTINCT TASTES AND LIFESTYLES
OF VARIOUS DEMOGRAPHICS.
*Discounts are taken off our Everyday Best Prices. Prior reductions may have been taken. Offer excludes clearance items, Ethan Allen | Disney products, DREAM eazzzTM mattresses, Simple Life® foundations and platform bed bases,
and adjustable motion bases. Offer cannot be applied to prior purchases, pending deliveries, sales tax, shipping and delivery charges, gift cards, or furniture protection plans and cannot be combined with any other savings offers,
sales, discounts, coupons, or promotions except applicable financing offers. Please ask a designer or visit ethanallen.com for sale details. Offer ends July 31, 2019. Prices in this magazine reflect up to 20% savings rounded to the
next whole dollar. Full savings will be given at time of purchase. Visit a Design Center or ethanallen.com for details. All information is current as of June 1, 2019, and is subject to change without notice. We are not responsible for
typographical errors. For current information, visit ethanallen.com or your local Design Center. Prices and services are optional for each retailer. All items may not be displayed at every Design Center. Final products may vary from
display. Certain names and marks are proprietary and owned by Ethan Allen Global, Inc. The paper used for this catalog comes from certified forests that are managed in a sustainable way to meet the social, economic, and
environmental needs of present and future generations. ©2019 Ethan Allen Global, Inc., Danbury, CT. ©Disney. All rights reserved. Printed in USA. (A)
†No Interest for 36 Months with Equal Payments: Gift card purchases are not eligible for promotional financing. 0% APR from date of eligible purchase until paid in full. Monthly payment is the purchase amount divided by the
number of months in the offer. Last payment may vary due to rounding. On-time payments will pay off the promotional balance. Advertised monthly payment amount excludes taxes, delivery, or other charges. Other transactions
and charges affect total monthly payment amount. Prior purchases excluded. Account must be in good standing. Offer expires July 31, 2019. Standard account terms apply to purchases that do not qualify. New accounts: Standard
Purchase APR 29.99%. Minimum interest charge $1. Existing accounts, see your credit agreement for applicable terms. Subject to credit approval. Ethan Allen financing account issued by TD Bank, N.A.
Front cover: NEW Channing 64" Sofas 207058 starting at $1799 ea. NOW $1439 ea. as shown $2379 ea. NOW $1899 ea. NEW Printed
Silk Ogee Pillows 065664 $129 ea. NOW $103 ea. NEW Printed Silk Ladder Pillows 065663 $129 ea. NOW $103 ea. Sequined
Velvet Pillow, seaglass 065750 $174 NOW $139 Heron Round Coffee Table 139271 $1269 NOW $1009 NEW Bensen Accent Table
421834 $469 NOW $375 NEW Starburst Chandelier, nickel 093621 $1799 NOW $1439 NEW Surfaces Artwork 075083 $999
NOW $799 NEW Nudes I Artwork 073761A $829 NOW $663 NEW White Goddess Vases: medium 432060B $99 NOW $79, small
432060C $89 NOW $71 NEW Small Jacey Ceramic Vase 432065B $79 NOW $63 NEW Lotus Tealight Holders, set of 2 432051
$79 NOW $63 Peach Blossom Watergarden 446629 $1209 NOW $967 Custom window treatments available in Design Centers
Cozy Chalet Rug, shimmer 046065 $2179–$2849 NOW $1743–$2279 Custom rug sizes available in Design Centers
S AV E U P T O 2 0 %*
PLUS, ENJOY SPECIAL FINANCING † WITH THE NEW
ETHAN ALLEN PL ATINUM CARD
†Restrictions apply. See back cover for details.
181043_June2019_DirectMail_Final.indd 1
US
4/30/19 1:59 PM
As the world changes, one thing remains the same at
Ethan Allen: We stand for quality, service, craftsmanship,
value, and classic design with a modern attitude. Our marketing
efforts communicate our core brand messages and value
propositions consistently and cohesively across all advertising
platforms, from digital and broadcast to direct mail and print.
MAKE IT PERSONAL
In FY 2019, we emphasized our
our exceptional attention to detail in
personalized service and the details
every facet of our business model.
about our brand that set us apart:
craftsmanship, quality, style, and
Print advertising and direct mail
sustainability. We introduced a
magazines remain important
“Make It Personal” campaign
mediums for reaching our core clients
promoting the exclusive experience
and building awareness among new
you can only find in our Design
target audiences. The “Make It Personal”
Centers. Our tagline, “Every Detail
message was reflected on the cover and
Matters,” remained as part of our
pages of our direct mail pieces, as well as
core branding message, reinforcing
in local print and broadcast advertising.
12
©Disney
13
EASTVIEW MALL TEXT 585.466.0196 FOR A COMPLIMENTARY DESIGN CONSULTATIONSale going on for a limited time. Exclusions apply. Ask a designer or visit ethanallen.com for details. ©2019 Ethan Allen Global, Inc.SPECIAL SAVINGS GOING ON NOWVISIT YOUR LOCAL DESIGN CENTER TO EXPERIENCE THE ETHAN ALLEN DIFFERENCE.MAKE IT PERSONALWATER MILL 1054 MONTAUK HIGHWAY 631.726.4652BRING THIS AD TO RECEIVE A FREE GIFT WITH PURCHASE — WHILE SUPPLIES LAST.make itPERSONALSAVE UP TO 20% STARTING TOMORROW**Discounts are taken off our Everyday Best Prices. Prior reductions may have been taken. Exclusions apply. Visit a Design Center or ethanallen.com for details. Offer ends July 31, 2019. ©2019 Ethan Allen Global, Inc.INTRODUCING NEW RELAXED MODERN STYLESmarketing DIGITAL MARKETING/E-COMMERCE
Online and mobile shopping are
increasingly critical components of the
retail experience. We’ve continued to
improve our website user experience
and to invest in both paid and
organic marketing strategies to
build awareness.
activity on our site, and we use social
advertising to drive awareness of both
monthly promotions and periodic
promotional drivers.
Increased investment in our organic
social media campaigns has broadened
awareness of the Ethan Allen brand
and introduced our products to a more
demographically diverse client base.
We use these channels to showcase
best-selling products, to reinforce our
position as a leading interior design
company, and to promote new product
introductions and promotions that are
relevant to our clients.
In FY 2019, we’ve enhanced our digital
advertising efforts with a variety of
strategies to build online awareness
and retarget clients who’ve visited our
website. We display personalized room
projections and product assortments
based on user demographics and prior
14
We’ve also worked to improve
the visibility and experience
of ethanallen.com to meet the
expectations of the online shopper.
We have expanded and refined our
search engine optimization strategies
to drive qualified traffic to our website.
We have also continued to invest in
our successful Live Chat in the U.S.,
enabling clients to consult our designers
online and reinforce our exceptional
service message.
15
DIGITAL MARKETING/E-COMMERCE
Online and mobile shopping are
activity on our site, and we use social
We’ve also worked to improve
increasingly critical components of the
advertising to drive awareness of both
the visibility and experience
retail experience. We’ve continued to
monthly promotions and periodic
of ethanallen.com to meet the
improve our website user experience
promotional drivers.
and to invest in both paid and
expectations of the online shopper.
We have expanded and refined our
organic marketing strategies to
Increased investment in our organic
search engine optimization strategies
build awareness.
social media campaigns has broadened
to drive qualified traffic to our website.
awareness of the Ethan Allen brand
We have also continued to invest in
In FY 2019, we’ve enhanced our digital
and introduced our products to a more
our successful Live Chat in the U.S.,
advertising efforts with a variety of
demographically diverse client base.
enabling clients to consult our designers
strategies to build online awareness
We use these channels to showcase
online and reinforce our exceptional
and retarget clients who’ve visited our
best-selling products, to reinforce our
service message.
website. We display personalized room
position as a leading interior design
projections and product assortments
company, and to promote new product
based on user demographics and prior
introductions and promotions that are
relevant to our clients.
14
15
n
o
i
t
a
r
g
e
t
n
i
l
a
c
i
t
r
e
v
One of Ethan Allen’s greatest competitive strengths is our
vertically integrated business structure. Because we design,
source, and manufacture the majority of our products and
then distribute, market, and deliver them, we are able to
maintain quality, control costs, and develop an assortment
of home furnishings for diverse demographics.
DESIGN & SOURCING
Ethan Allen’s reputation for diversity
of style and quality is rooted in our
strategic design development. Our
in-house design team develops product
lines that appeal to a wide range of
audiences. Our product designers
are immersed in the Ethan Allen
brand ethos of classic design, modern
perspective, and continually draw on
the past and present to develop home
furnishings that are relevant and
competitive in today’s marketplace.
We also work with artisans all over the
world to enhance our exceptional product
offerings. We have exclusive partnerships
with specialized vendors whose artistry and
workmanship meet our exacting quality
standards. Some of our partners include
porcelain makers in the Jiangxi region
of China, a woman-owned workshop
that crafts Vietnamese lacquerware, and
ceramicists in Venice who’ve practiced
their craft for generations.
MANUFACTURING
In FY 2019, we made changes to
our infrastructure to strengthen our
supply chain and build a stronger,
more efficient business model. We’ve
transformed our Old Fort, North Carolina,
facility into a distribution center for our
rapidly expanding U.S. government
contract business. We are also investing
and deliver furnishings of superior quality
In-Home Delivery service is integral to
at an extraordinary value. Many of our
the Ethan Allen experience. Our delivery
best-selling products are produced in our
specialists bring furnishings into each
Vermont and Maiden workshops; they
client’s home, carefully remove protective
exemplify the exceptional handcrafted
wrappings, place the furnishings where
artistry and quality that define us.
clients want them to go, and perform
DISTRIBUTION
& DELIVERY
in the expansion of our Maiden, North
With four national distribution centers
Carolina, facility to accommodate
and 27 retail division service centers,
increased manufacturing volume. Our
we ensure exceptional service to the very
production capabilities allow us to craft
end of the purchase cycle. Our Premier
assembly when needed. Once clients
are happy with their furniture placement,
our specialists remove all packaging,
ensuring the experience is satisfactory
from start to finish.
16
17
n
o
i
t
a
r
g
e
t
n
i
l
a
c
i
t
r
e
v
One of Ethan Allen’s greatest competitive strengths is our
vertically integrated business structure. Because we design,
source, and manufacture the majority of our products and
then distribute, market, and deliver them, we are able to
maintain quality, control costs, and develop an assortment
of home furnishings for diverse demographics.
DESIGN & SOURCING
Ethan Allen’s reputation for diversity
of style and quality is rooted in our
strategic design development. Our
in-house design team develops product
lines that appeal to a wide range of
audiences. Our product designers
are immersed in the Ethan Allen
brand ethos of classic design, modern
perspective, and continually draw on
the past and present to develop home
furnishings that are relevant and
competitive in today’s marketplace.
We also work with artisans all over the
world to enhance our exceptional product
offerings. We have exclusive partnerships
with specialized vendors whose artistry and
workmanship meet our exacting quality
standards. Some of our partners include
porcelain makers in the Jiangxi region
of China, a woman-owned workshop
that crafts Vietnamese lacquerware, and
ceramicists in Venice who’ve practiced
their craft for generations.
MANUFACTURING
In FY 2019, we made changes to
our infrastructure to strengthen our
supply chain and build a stronger,
more efficient business model. We’ve
transformed our Old Fort, North Carolina,
facility into a distribution center for our
rapidly expanding U.S. government
contract business. We are also investing
in the expansion of our Maiden, North
Carolina, facility to accommodate
increased manufacturing volume. Our
production capabilities allow us to craft
and deliver furnishings of superior quality
at an extraordinary value. Many of our
best-selling products are produced in our
Vermont and Maiden workshops; they
exemplify the exceptional handcrafted
artistry and quality that define us.
DISTRIBUTION
& DELIVERY
With four national distribution centers
and 27 retail division service centers,
we ensure exceptional service to the very
end of the purchase cycle. Our Premier
In-Home Delivery service is integral to
the Ethan Allen experience. Our delivery
specialists bring furnishings into each
client’s home, carefully remove protective
wrappings, place the furnishings where
clients want them to go, and perform
assembly when needed. Once clients
are happy with their furniture placement,
our specialists remove all packaging,
ensuring the experience is satisfactory
from start to finish.
16
17
302 DESIGN CENTERS
144 COMPANY OPERATED
158 INDEPENDENTLY OPERATED
39%
INTERNATIONAL
Living Room B
C O N T E M P O R A R Y
CLIN
ITEM# QTY
DESCRIPTION
5101
902114
ARCATA 75" SOFA
5102
902111
ARCATA CHAIR
5103
288042
END TABLE
5104
288040
COFFEE TABLE
5105
289045
MEDIA CREDENZA
5106
289067
BOOKCASE
1
2
2
1
1
1
2
5107
097040
5108
092100
1
JAGGER TABLE LAMP
(SEE STUDENT, OUTDOOR &
LIGHTING CATALOG)
FIONA FLOOR LAMP
(SEE STUDENT, OUTDOOR &
LIGHTING CATALOG)
Department of State
W O R L D W I D E R E S I D E N T I A L F U R N I T U R E P R O G R A M
Contemporary Collection
SHOWN IN COLOR SCHEME SOFT BLUE
ALSO AVAILABLE IN NEUTRAL BRONZE,
CHARCOAL/RED, AND WARM WHEAT.
4
CONTEMPORARY COLLECTI ON 5
CAS E G OODS
CAS E G OODS
CO FFEE TA BL E
EN D TAB LE
ACCESSO RY TABL E
CL IN: 5104, 5504, 6106, 6605,
CL IN: 5103, 5503, 6105, 6604
CL IN: 6107, 7106 I TEM: 288046
7104, 7605 I TEM: 288040
ITEM: 288042
Saber legs
40"w x 20"d x 17"h
One drawer, one shelf
20"w x 25"d x 24" h
One shelf
20"dia. x 24"h
(51cm dia. x 61cm h)
(102cm w x 51cm d x 43cm h)
(51cm w x 64cm d x 61cm h)
Finishes: Khaki (light), Cocoa (dark)
Finishes: Khaki (light), Cocoa (dark)
Finishes: Khaki (light), Cocoa (dark)
WO OD FR AME MIR ROR
CL IN: ACC -0070, ACC- 0071
WO OD FR AME GILT MIRR OR
CL IN: EA -0275 ITEM: 289061
ITEM: 289060
Beveled glass
24"w x 14"d x 72"h
(61cm w x 36cm d x 183cm h)
Finishes: Khaki (light), Cocoa (dark)
Beveled glass
24"w x 14"d x 72"h
Finish: Vegas
CO RNER MEDIA CO NSOLE
CL IN: EA -0276, EA -0277
ITEM: 289065
One fixed shelf, wire access, levelers
(110cm w x 51cm d x 51cm h)
Finishes: Khaki (light), Cocoa (dark)
(61cm w x 36cm d x 183cm h)
43.25"w x 20"d x 20"h
© 20 17 E THA N AL LEN G LOBA L, I NC.
N ESTI NG EN D TAB LES
TABL E DESK
SMALL END TAB LE/N IGHT TABL E
C LI N: 7105, 7604 ITEM: 288063
CL IN: EA -0278, EA -0279
C LI N: 7304, 7404, 7504
Two tables
18"w x 14"d x 22"h
(46cm w x 36cm d x 56cm h)
13.5"w x 13.5"d x 19"h
(34cm w x 34cm d x 48cm h)
Finishes: Khaki (light), Cocoa (dark)
ITEM: 288065
One keyboard drawer
40"w x 21"d x 30"h
(102cm w x 53cm d x 76cm h)
ITEM: 288066
One drawer, tapered legs
16"w x 18"d x 24"h
(41cm w x 46cm d x 61cm h)
Finishes: Khaki (light), Cocoa (dark)
Finishes: Khaki (light), Cocoa (dark)
STACKI NG CABI NET B ASE
C LI N: E A-0281, E A-0282
ITEM: 289070
STACKING DRAWER CABINET
BUFFET CHINA/BASE
C LI N: E A-0283, E A-0284
C LI N: 7205 I TEM: 289071G
ITEM: 289071
Levelers; may be paired with Stacking
One drawer, two doors, one shelf
Cabinets 289071, and 289072
32"w x 17"d x 5.75"h
(81cm w x 43cm d x 15cm h)
behind doors, levelers
32"w x 17"d x 27.25"h
(81cm w x 43cm d x 69cm h)
Kit containing Stacking Cabinet Base (289070) &
Stacking Drawer Cabinet (289071). One drawer,
two doors, one shelf behind doors, levelers
32"w x 17"d x 33"h
(81cm w x 43cm d x 84cm h)
Finishes: Khaki (light), Cocoa (dark)
Finishes: Khaki (light), Cocoa (dark)
Finishes: Khaki (light), Cocoa (dark)
SOFA TAB LE
C LI N: 7607 I TEM: 288067
Tapered legs
56"w x 21"d x 30.25"h
(142cm w x 53cm d x 77cm h)
Finishes: Khaki (light), Cocoa (dark)
CO MPUT ER DESK
CL IN: 5506, 6607 I TEM: 289040
Two storage drawers, one file drawer,
one keyboard drawer, saber legs
44"w x 25"d x 30"h
(112cm w x 64cm d x 76cm h)
Finishes: Khaki (light), Cocoa (dark)
MEDIA CREDEN ZA
CL IN: 5105, 5505, 6108, 6606,
7108, 7606 I TEM : 289045
Open shelf with wire access, two
drawers, levelers, two adjustable
shelves behind each door
52"w x 22"d x 31"h
(132cm w x 56cm d x 79cm h)
Finishes: Khaki (light), Cocoa (dark)
STACKI NG DOO R CA BI NET
C LI N: 7204, E A-0285, E A-0286
ITEM: 289072
STACKI NG OPEN -SH ELF CAB IN ET
B OOKCASE
C LI N: E A-0287, E A-0288
ITEM: 289073
CL IN: 5106, 5508, 6109, 6609,
7107, 7609 I TEM: 289067
Shown with Stacking Cabinet Base (289070)
Shown with Stacking Cabinet Base (289070)
Two wood-framed glass doors, one shelf
32"w x 17"d x 27.25"h
(81cm w x 43cm d x 69cm h)
Finishes: Khaki (light), Cocoa (dark)
One adjustable shelf
32"w x 17"d x 27.25"h
(81cm w x 43cm d x 69cm h)
(61cm w x 36cm d x 183cm h)
Finishes: Khaki (light), Cocoa (dark)
Finishes: Khaki (light), Cocoa (dark)
Three adjustable shelves, one
fixed center shelf, levelers
24"w x 14"d x 72"h
32
CONTEMPORARY COLLECTI ON 33
CONTRACT GROWTH
In FY 2019, we continued to build our thriving
contract business, which includes a growing
number of projects with the U.S. government.
We also launched our EA+ Hospitality
brand to strengthen our unique competitive
advantage, drawing on our custom
capabilities and our vertically integrated
infrastructure to offer start-to-finish design
and project management solutions.
2%
CANADA
l
i
a
t
e
r
59%
UNITED
STATES
While e-commerce is an important facet of our business, our global
network of approximately 300 Design Centers sets us apart
and continues to be a focal point of our brand. Our retail showrooms
offer a highly personalized level of service, where clients can
experience firsthand the quality and breadth of products we offer.
In FY 2019, we modernized and strengthened
our retail network. Our Design Centers have
state-of-the-art technology and smaller
footprints that enhance our projections
and our in-store experience.
This fiscal year, we have relocated several
Design Centers in key markets, with stronger
demographic profiles and greater visibility.
These include Albany, New York; Superior,
Colorado; Ann Arbor, Michigan; and Kenwood,
Ohio, a major shopping destination in the
Cincinnati area. These Design Centers now
exist in thriving communities and lifestyle
centers, enabling them to prosper in today’s
retail environment.
We also continued our focus on expanding
Ethan Allen’s retail presence around the globe.
In FY 2019, we opened new Design Centers
in Cambodia, China, and Thailand. We have
also made great strides in establishing new
opportunities in viable, untapped global markets
in Europe, Asia, and other regions where
Ethan Allen is well positioned to thrive.
18
ETHAN ALLEN PLUS:
HOSPITALITY
Introducing
Ethan Allen+:
Hospitality
YOUR ONE SOURCE FOR
TOP-QUALITY, ON-BRAND, ON-TIME
FURNISHINGS FULFILLMENT.
A STREAMLINED, SUPPORTIVE, AND
AGILE DESIGN PROCESS.
FULL ACCOUNTABILITY, FROM
THE MATERIALS USED, TO DELIVERY
AND INSTALLATION, AND BEYOND.
EA+ Hospitality
At a glance
QUALITY
CUSTOMIZATION
COMPETITIVE PRICING
CONCIERGE-LEVEL SERVICE
ADAPTABILITY —NIMBLE AND RESPONSIVE
DEPTH OF RESOURCES
START-TO-FINISH PROJECT MANAGEMENT
19
302 DESIGN CENTERS
144 COMPANY OPERATED
158 INDEPENDENTLY OPERATED
39%
INTERNATIONAL
Living Room B
C O N T E M P O R A R Y
CL IN
ITEM# Q TY
DESC RIPTION
5101
902114
5102
902111
5103
288042
5104
288040
5105
289045
5106
289067
5107
097040
1
2
2
1
1
1
2
5108
092100
1
ARCATA 75" SOFA
ARCATA CHAIR
END TABLE
COFFEE TABLE
MEDIA CREDENZA
BOOKCASE
JAGGER TABLE LAMP
(SEE STUDENT, OUTDOOR &
LIGHTING CATALOG)
FIONA FLOOR LAMP
(SEE STUDENT, OUTDOOR &
LIGHTING CATALOG)
Department of State
W O R L D W I D E R E S I D E N T I A L F U R N I T U R E P R O G R A M
Contemporary Collection
SHOWN IN COLOR SCHEME SOFT BLUE
ALSO AVAILABLE IN NEUTRAL BRONZE,
CHARCOAL/RED, AND WARM WHEAT.
4
CONTEMPORARY COLLECTION 5
CASE GOODS
CASE GOODS
COFFEE TABLE
CLIN: 5 104 , 5 504 , 61 06, 6 605 ,
71 04, 760 5 ITEM: 2 880 40
Saber legs
40"w x 20"d x 17"h
(102cm w x 51cm d x 43cm h)
Finishes: Khaki (light), Cocoa (dark)
END TABLE
CLIN: 5 103 , 55 03, 61 05, 660 4
ITEM: 288 042
One drawer, one shelf
20"w x 25"d x 24" h
(51cm w x 64cm d x 61cm h)
Finishes: Khaki (light), Cocoa (dark)
ACCESSORY TABLE
CLIN: 6 107 , 7 106 ITEM: 28 804 6
One shelf
20"dia. x 24"h
(51cm dia. x 61cm h)
Finishes: Khaki (light), Cocoa (dark)
WOO D FRAME MIRRO R
CLI N: ACC- 0 070, ACC-007 1
ITEM: 289 060
Beveled glass
24"w x 14"d x 72"h
(61cm w x 36cm d x 183cm h)
Finishes: Khaki (light), Cocoa (dark)
WOO D FRAME G ILT MIRRO R
CLI N: EA -0 2 75 ITEM: 28 9 061
Beveled glass
24"w x 14"d x 72"h
(61cm w x 36cm d x 183cm h)
Finish: Vegas
CORNER MEDI A CONS OLE
CLI N: EA -0 2 76, E A- 0 277
ITEM: 289 065
One fixed shelf, wire access, levelers
43.25"w x 20"d x 20"h
(110cm w x 51cm d x 51cm h)
Finishes: Khaki (light), Cocoa (dark)
©2017 ETHAN ALLEN GLOBAL, INC.
NESTING END TABLES
CLIN: 7105, 7604 ITEM: 2 880 63
Two tables
18"w x 14"d x 22"h
(46cm w x 36cm d x 56cm h)
13.5"w x 13.5"d x 19"h
(34cm w x 34cm d x 48cm h)
Finishes: Khaki (light), Cocoa (dark)
TABLE DES K
CLIN: EA-027 8, EA-02 79
ITEM: 288 065
One keyboard drawer
40"w x 21"d x 30"h
(102cm w x 53cm d x 76cm h)
Finishes: Khaki (light), Cocoa (dark)
SMA LL END TABLE/NIGHT TA BL E
CLIN: 7304, 7404, 7 504
ITEM: 288 066
One drawer, tapered legs
16"w x 18"d x 24"h
(41cm w x 46cm d x 61cm h)
Finishes: Khaki (light), Cocoa (dark)
STACKING CABI NET BASE
CLIN : EA-0281, EA-0282
ITEM: 289 070
Levelers; may be paired with Stacking
Cabinets 289071, and 289072
32"w x 17"d x 5.75"h
(81cm w x 43cm d x 15cm h)
Finishes: Khaki (light), Cocoa (dark)
STACKING DRAWER CABINET
CLIN : EA-0283, EA-0284
ITEM: 289071
One drawer, two doors, one shelf
behind doors, levelers
32"w x 17"d x 27.25"h
(81cm w x 43cm d x 69cm h)
Finishes: Khaki (light), Cocoa (dark)
BUFFET CHINA/BASE
CLIN : 7205 I T EM : 289071G
Kit containing Stacking Cabinet Base (289070) &
Stacking Drawer Cabinet (289071). One drawer,
two doors, one shelf behind doors, levelers
32"w x 17"d x 33"h
(81cm w x 43cm d x 84cm h)
Finishes: Khaki (light), Cocoa (dark)
SOFA TABLE
CLIN: 7607 ITEM: 28 806 7
Tapered legs
56"w x 21"d x 30.25"h
(142cm w x 53cm d x 77cm h)
Finishes: Khaki (light), Cocoa (dark)
COMPUTER DES K
CLIN: 5 506 , 6 607 ITEM: 28 904 0
Two storage drawers, one file drawer,
one keyboard drawer, saber legs
44"w x 25"d x 30"h
(112cm w x 64cm d x 76cm h)
Finishes: Khaki (light), Cocoa (dark)
MEDIA CR EDEN ZA
CLIN: 5 105 , 55 05, 6108 , 6 606 ,
71 08, 7 606 ITEM: 28 9045
Open shelf with wire access, two
drawers, levelers, two adjustable
shelves behind each door
52"w x 22"d x 31"h
(132cm w x 56cm d x 79cm h)
Finishes: Khaki (light), Cocoa (dark)
STACKING D OOR CABINET
CLIN : 7204, E A-0285, E A -0286
ITEM: 289 072
Shown with Stacking Cabinet Base (289070)
Two wood-framed glass doors, one shelf
32"w x 17"d x 27.25"h
(81cm w x 43cm d x 69cm h)
Finishes: Khaki (light), Cocoa (dark)
STACKING OPEN-S HEL F CAB INET
CLIN : EA-0287, EA-0288
ITEM: 289 073
Shown with Stacking Cabinet Base (289070)
One adjustable shelf
32"w x 17"d x 27.25"h
(81cm w x 43cm d x 69cm h)
Finishes: Khaki (light), Cocoa (dark)
BO OKCAS E
CLI N: 51 0 6, 550 8 , 6109 , 6609,
7 107, 7 6 09 ITEM: 289 0 67
Three adjustable shelves, one
fixed center shelf, levelers
24"w x 14"d x 72"h
(61cm w x 36cm d x 183cm h)
Finishes: Khaki (light), Cocoa (dark)
32
CONTEMPORARY COLLECTION 33
CONTRACT GROWTH
In FY 2019, we continued to build our thriving
contract business, which includes a growing
number of projects with the U.S. government.
We also launched our EA+ Hospitality
brand to strengthen our unique competitive
advantage, drawing on our custom
capabilities and our vertically integrated
infrastructure to offer start-to-finish design
and project management solutions.
2%
CANADA
l
i
a
t
e
r
59%
UNITED
STATES
While e-commerce is an important facet of our business, our global
network of approximately 300 Design Centers sets us apart
and continues to be a focal point of our brand. Our retail showrooms
offer a highly personalized level of service, where clients can
experience firsthand the quality and breadth of products we offer.
In FY 2019, we modernized and strengthened
demographic profiles and greater visibility.
our retail network. Our Design Centers have
These include Albany, New York; Superior,
state-of-the-art technology and smaller
Colorado; Ann Arbor, Michigan; and Kenwood,
footprints that enhance our projections
Ohio, a major shopping destination in the
and our in-store experience.
Cincinnati area. These Design Centers now
exist in thriving communities and lifestyle
This fiscal year, we have relocated several
centers, enabling them to prosper in today’s
Design Centers in key markets, with stronger
retail environment.
We also continued our focus on expanding
Ethan Allen’s retail presence around the globe.
In FY 2019, we opened new Design Centers
in Cambodia, China, and Thailand. We have
also made great strides in establishing new
opportunities in viable, untapped global markets
in Europe, Asia, and other regions where
Ethan Allen is well positioned to thrive.
18
ETHAN ALLEN PLUS:
HOSPITALITY
Introducing
Ethan Allen+:
Hospitality
YOUR ONE SOURCE FOR
TOP-QUALITY, ON-BRAND, ON-TIME
FURNISHINGS FULFILLMENT.
A STREAMLINED, SUPPORTIVE, AND
AGILE DESIGN PROCESS.
FULL ACCOUNTABILITY, FROM
THE MATERIALS USED, TO DELIVERY
AND INSTALLATION, AND BEYOND.
EA+ Hospitality
At a glance
QUALITY
CUSTOMIZATION
COMPETITIVE PRICING
CONCIERGE-LEVEL SERVICE
ADAPTABILITY —NIMBLE AND RESPONSIVE
DEPTH OF RESOURCES
START-TO-FINISH PROJECT MANAGEMENT
19
consolidated sales
& operating margin
Consolidated Net Sales
Adjusted Operating Margin (a)
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Millions
$680
$700
$720
$740
$760
$780
$800
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
2019
2018
2017
$746.7
7.4%
6.5%
$766.8
8.5%
$763.4
0%
2%
4%
6%
8%
10%
12%
(a) See reconciliation of U.S. GAAP to adjusted key financial measures in the back of this annual report.
total special & regular
dividends paid
Cash Dividends Paid—Total
Dividend Yield
Millions
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
Securities registered pursuant to Section 12(g) of the Act: None
2019
2018
2017
$47.0
3.6%
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
[ ] Yes
[X] No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [ ] Yes
[X] No
$29.5
3.1%
$20.0
2.3%
0%
.5%
1%
1.5%
2%
2.5%
3%
3.5%
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________________
FORM 10-K
For the fiscal year ended June 30, 2019
OR
For the transition period from
to
Commission file number 1-11692
_________________________________________________
Ethan Allen Interiors Inc.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
Delaware
06-1275288
25 Lake Avenue Ext., Danbury, Connecticut
(Address of principal executive offices)
06811-5286
(Zip Code)
(203) 743-8000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common stock $0.01 par value
ETH
New York Stock Exchange
(Title of each class)
(Trading symbol)
(Name of exchange on which registered)
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 has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). [X] Yes [ ] No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting
company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer
Non-accelerated filer
[ ]
[ ]
Emerging growth company [ ]
Accelerated filer
Smaller reporting company
[X]
[ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act.
[ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). [ ] Yes [X] No
G:\CONSOL\Corporate Accounting\SEC Filings\Form 10-K\2019\10-K 2019 FINAL for PRINT.docx 9/12/2019 7:09 PM
Millions
$680
$700
$720
$740
$760
$780
$800
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________________
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2019
OR
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
(State or other jurisdiction of incorporation or organization)
06-1275288
(I.R.S. Employer Identification No.)
25 Lake Avenue Ext., Danbury, Connecticut
(Address of principal executive offices)
06811-5286
(Zip Code)
(203) 743-8000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common stock $0.01 par value
(Title of each class)
ETH
(Trading symbol)
New York Stock Exchange
(Name of exchange on which registered)
Millions
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
Securities registered pursuant to Section 12(g) of the Act: None
$47.0
3.6%
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
[ ] Yes
[X] No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [ ] Yes
[X] No
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 has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). [X] Yes [ ] No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting
company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act:
[ ]
Large accelerated filer
Non-accelerated filer
[ ]
Emerging growth company [ ]
Accelerated filer
Smaller reporting company
[X]
[ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act.
[ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). [ ] Yes [X] No
G:\CONSOL\Corporate Accounting\SEC Filings\Form 10-K\2019\10-K 2019 FINAL for PRINT.docx 9/12/2019 7:09 PM
consolidated sales
& operating margin
Consolidated Net Sales
Adjusted Operating Margin (a)
2019
2018
2017
2019
2018
2017
$746.7
7.4%
6.5%
$766.8
8.5%
$763.4
0%
2%
4%
6%
8%
10%
12%
(a) See reconciliation of U.S. GAAP to adjusted key financial measures in the back of this annual report.
total special & regular
dividends paid
Cash Dividends Paid—Total
Dividend Yield
$29.5
3.1%
$20.0
2.3%
0%
.5%
1%
1.5%
2%
2.5%
3%
3.5%
The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant on December 31, 2018, the last
business day of the registrant’s most recently completed second fiscal quarter, was approximately $419,386,567. The number of shares
outstanding of the registrant’s common stock, $0.01 par value, as of July 25, 2019 was 26,586,945.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A
for its 2019 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated.
Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended June
30, 2019.
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I
PART II
Item 5.
PART III
PART IV
Item 1.
Business ................................................................................................................................................................... 5
Item 1A.
Risk Factors ............................................................................................................................................................ 11
Item 1B.
Unresolved Staff Comments .................................................................................................................................. 17
Item 2.
Properties............................................................................................................................................................... 18
Item 3.
Legal Proceedings .................................................................................................................................................. 19
Item 4.
Mine Safety Disclosures ......................................................................................................................................... 19
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities ..................................................................................................................................................... 20
Item 6.
Selected Financial Data .......................................................................................................................................... 21
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations .................................. 22
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ................................................................................ 34
Item 8.
Financial Statements and Supplementary Data ..................................................................................................... 35
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ................................. 66
Item 9A.
Controls and Procedures ........................................................................................................................................ 66
Item 9B.
Other Information .................................................................................................................................................. 66
Item 10.
Directors, Executive Officers and Corporate Governance ..................................................................................... 67
Item 11.
Executive Compensation........................................................................................................................................ 67
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .............. 67
Item 13.
Certain Relationships and Related Transactions, and Director Independence ...................................................... 68
Item 14.
Principal Accounting Fees and Services ................................................................................................................. 68
Item 15.
Exhibits, Financial Statement Schedules ................................................................................................................ 68
Item 16.
Form 10-K Summary .............................................................................................................................................. 71
SIGNATURES............................................................................................................................................................................... 72
2
3
The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant on December 31, 2018, the last
business day of the registrant’s most recently completed second fiscal quarter, was approximately $419,386,567. The number of shares
outstanding of the registrant’s common stock, $0.01 par value, as of July 25, 2019 was 26,586,945.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A
for its 2019 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated.
Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended June
30, 2019.
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I
Item 1.
Business ................................................................................................................................................................... 5
Item 1A.
Risk Factors ............................................................................................................................................................ 11
Item 1B.
Unresolved Staff Comments .................................................................................................................................. 17
Item 2.
Properties............................................................................................................................................................... 18
Item 3.
Legal Proceedings .................................................................................................................................................. 19
Item 4.
Mine Safety Disclosures ......................................................................................................................................... 19
PART II
Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities ..................................................................................................................................................... 20
Item 6.
Selected Financial Data .......................................................................................................................................... 21
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations .................................. 22
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ................................................................................ 34
Item 8.
Financial Statements and Supplementary Data ..................................................................................................... 35
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ................................. 66
Item 9A.
Controls and Procedures ........................................................................................................................................ 66
Item 9B.
Other Information .................................................................................................................................................. 66
PART III
Item 10.
Directors, Executive Officers and Corporate Governance ..................................................................................... 67
Item 11.
Executive Compensation........................................................................................................................................ 67
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .............. 67
Item 13.
Certain Relationships and Related Transactions, and Director Independence ...................................................... 68
Item 14.
Principal Accounting Fees and Services ................................................................................................................. 68
PART IV
Item 15.
Exhibits, Financial Statement Schedules ................................................................................................................ 68
Item 16.
Form 10-K Summary .............................................................................................................................................. 71
SIGNATURES............................................................................................................................................................................... 72
2
3
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS (SAFE-HARBOR)
This Annual Report on Form 10-K contains certain statements which may constitute “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Generally,
forward-looking statements give current expectations and projections relating to financial condition, results of operations,
plans, objectives, future performance and business. A reader can identify forward-looking statements by the fact that they
do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,”
“expect,” “project,” “plan,” “intend,” “believe,” “continue,” “may,” “will,” “short-term,” “target,” “outlook,” “forecast,”
“guidance,” “non-recurring,” “one-time,” “unusual,” “should,” “likely” 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.
Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those
that are expected. Ethan Allen Interiors Inc. and its subsidiaries (the “Company”) derive 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. Important factors that could cause actual results to differ materially from the Company’s
expectations, or cautionary statements, are disclosed in Item 1A, Risk Factors, Item 7, Management’s Discussion and Analysis
of Financial Condition and Results of Operations, and elsewhere in this Annual Report Form 10-K. 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 Annual Report on Form 10-K 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 our ability to control or predict.
The forward-looking statements included in this Annual Report on Form 10-K 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.
ITEM 1. BUSINESS
Overview
PART I
Founded in 1932 and incorporated in Delaware in 1989, Ethan Allen Interiors Inc., through its wholly-owned subsidiary, Ethan
Allen Global, Inc., and Ethan Allen Global, Inc.’s subsidiaries (collectively, “we,” “us,” “our,” “Ethan Allen” or the “Company”),
is a leading interior design company, manufacturer and retailer in the home furnishings marketplace. Today we are a global
luxury international home fashion brand that is vertically integrated from design through delivery, which affords our clientele
a value proposition of style, quality and price. We provide complimentary interior design service to our customers and sell a
full range of furniture products and decorative accents through a retail network of approximately 300 design centers in the
United States and abroad as well as online at ethanallen.com. The design centers represent a mix of independent licensees
and Company-owned and operated locations. We own and operate six manufacturing facilities, including three
manufacturing plants and one sawmill in the United States and one upholstery manufacturing plant in Mexico and one case
goods manufacturing plant in Honduras.
Business Strategy
Our strategy has been to position Ethan Allen as a preferred brand offering complimentary design service together with products
of superior style, quality and value to provide consumers with a comprehensive, one-stop shopping solution for their home
furnishing and interior design needs. In carrying out our strategy, we continue to expand our reach to a broader consumer base
through a diverse selection of attractively priced products, designed to complement one another, reflecting current fashion trends
in home decorating. We continuously monitor changes in home fashion trends through attendance at international industry
events and fashion shows, internal market research, and regular communication with our retailers and design center design
consultants who provide valuable input on consumer trends. We believe that the observations and input gathered enable us
to incorporate appropriate style details into our products to react quickly to changing consumer tastes.
Product
The majority of the products we sell are built by artisans in our North American plants. Most upholstery frames are hand-
assembled and stitching is guided by hand. We select international partners who are as committed to quality and social
responsibility as we are. All case goods frames are made with premium lumber and veneers. We use best-in-class construction
techniques, including mortise and tenon joinery and four-corner glued dovetail joinery on drawers. We combine technology with
personal service and maintain an up-to-date broad range of styles and custom options in keeping with today’s home decorating
trends. These factors continue to define Ethan Allen, positioning us as a fashion leader in the home furnishing industry.
The interior of our design centers, which have been substantially refreshed during the past three fiscal years, are organized to
facilitate display of our product offerings, both in room settings that project the category lifestyle and by product grouping to
facilitate comparisons of the styles and tastes of our customers. To further enhance the experience, technology is used to expand
the range of products viewed by including content from our website and 3-D digital images in applications used on large touch-
screen flat panel displays.
Product Development
Using a combination of employees and designers, we design the majority of the products we sell. All of our products are
Ethan Allen branded. This important facet of our vertically integrated business enables us to control the design specifications
and establish consistent levels of quality across all our product programs. In addition to our four United States manufacturing
facilities, we have an upholstery manufacturing facility in Mexico and a case goods manufacturing facility in Honduras.
Approximately 75% of our products are manufactured or assembled in these North American facilities. We selectively
outsource the remaining 25% of our products, primarily from Asia. We carefully select our sourcing partners and require strict
compliance with our specifications and quality standards. We believe that strategic investments in our manufacturing facilities
balanced with outsourcing from foreign and domestic suppliers would enable us to accommodate any significant future sales
growth and allow us to maintain an appropriate degree of control over cost, quality and service to our customers.
Raw Materials and Other Suppliers
The most important raw materials we use in furniture manufacturing are lumber, veneers, plywood, hardware, glue, finishing
materials, glass, laminates, steel, fabrics, foam, and filling material. The various types of wood used in our products include
cherry, ash, oak, maple, prima vera, African mahogany, birch, rubber wood and poplar.
4
5
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS (SAFE-HARBOR)
This Annual Report on Form 10-K contains certain statements which may constitute “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Generally,
forward-looking statements give current expectations and projections relating to financial condition, results of operations,
plans, objectives, future performance and business. A reader can identify forward-looking statements by the fact that they
do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,”
“expect,” “project,” “plan,” “intend,” “believe,” “continue,” “may,” “will,” “short-term,” “target,” “outlook,” “forecast,”
“guidance,” “non-recurring,” “one-time,” “unusual,” “should,” “likely” 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.
Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those
that are expected. Ethan Allen Interiors Inc. and its subsidiaries (the “Company”) derive 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. Important factors that could cause actual results to differ materially from the Company’s
expectations, or cautionary statements, are disclosed in Item 1A, Risk Factors, Item 7, Management’s Discussion and Analysis
of Financial Condition and Results of Operations, and elsewhere in this Annual Report Form 10-K. 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 Annual Report on Form 10-K 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 our ability to control or predict.
The forward-looking statements included in this Annual Report on Form 10-K 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.
ITEM 1. BUSINESS
Overview
PART I
Founded in 1932 and incorporated in Delaware in 1989, Ethan Allen Interiors Inc., through its wholly-owned subsidiary, Ethan
Allen Global, Inc., and Ethan Allen Global, Inc.’s subsidiaries (collectively, “we,” “us,” “our,” “Ethan Allen” or the “Company”),
is a leading interior design company, manufacturer and retailer in the home furnishings marketplace. Today we are a global
luxury international home fashion brand that is vertically integrated from design through delivery, which affords our clientele
a value proposition of style, quality and price. We provide complimentary interior design service to our customers and sell a
full range of furniture products and decorative accents through a retail network of approximately 300 design centers in the
United States and abroad as well as online at ethanallen.com. The design centers represent a mix of independent licensees
and Company-owned and operated locations. We own and operate six manufacturing facilities, including three
manufacturing plants and one sawmill in the United States and one upholstery manufacturing plant in Mexico and one case
goods manufacturing plant in Honduras.
Business Strategy
Our strategy has been to position Ethan Allen as a preferred brand offering complimentary design service together with products
of superior style, quality and value to provide consumers with a comprehensive, one-stop shopping solution for their home
furnishing and interior design needs. In carrying out our strategy, we continue to expand our reach to a broader consumer base
through a diverse selection of attractively priced products, designed to complement one another, reflecting current fashion trends
in home decorating. We continuously monitor changes in home fashion trends through attendance at international industry
events and fashion shows, internal market research, and regular communication with our retailers and design center design
consultants who provide valuable input on consumer trends. We believe that the observations and input gathered enable us
to incorporate appropriate style details into our products to react quickly to changing consumer tastes.
Product
The majority of the products we sell are built by artisans in our North American plants. Most upholstery frames are hand-
assembled and stitching is guided by hand. We select international partners who are as committed to quality and social
responsibility as we are. All case goods frames are made with premium lumber and veneers. We use best-in-class construction
techniques, including mortise and tenon joinery and four-corner glued dovetail joinery on drawers. We combine technology with
personal service and maintain an up-to-date broad range of styles and custom options in keeping with today’s home decorating
trends. These factors continue to define Ethan Allen, positioning us as a fashion leader in the home furnishing industry.
The interior of our design centers, which have been substantially refreshed during the past three fiscal years, are organized to
facilitate display of our product offerings, both in room settings that project the category lifestyle and by product grouping to
facilitate comparisons of the styles and tastes of our customers. To further enhance the experience, technology is used to expand
the range of products viewed by including content from our website and 3-D digital images in applications used on large touch-
screen flat panel displays.
Product Development
Using a combination of employees and designers, we design the majority of the products we sell. All of our products are
Ethan Allen branded. This important facet of our vertically integrated business enables us to control the design specifications
and establish consistent levels of quality across all our product programs. In addition to our four United States manufacturing
facilities, we have an upholstery manufacturing facility in Mexico and a case goods manufacturing facility in Honduras.
Approximately 75% of our products are manufactured or assembled in these North American facilities. We selectively
outsource the remaining 25% of our products, primarily from Asia. We carefully select our sourcing partners and require strict
compliance with our specifications and quality standards. We believe that strategic investments in our manufacturing facilities
balanced with outsourcing from foreign and domestic suppliers would enable us to accommodate any significant future sales
growth and allow us to maintain an appropriate degree of control over cost, quality and service to our customers.
Raw Materials and Other Suppliers
The most important raw materials we use in furniture manufacturing are lumber, veneers, plywood, hardware, glue, finishing
materials, glass, laminates, steel, fabrics, foam, and filling material. The various types of wood used in our products include
cherry, ash, oak, maple, prima vera, African mahogany, birch, rubber wood and poplar.
4
5
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Fabrics and other raw materials are purchased both domestically and outside the United States . We have no significant long-term
supply contracts, and have sufficient alternate sources of supply to prevent disruption in supplying our operations. We maintain
a number of sources for our raw materials, which we believe contribute to our ability to obtain competitive pricing. Lumber prices
and availability fluctuate over time based on factors such as weather and demand. The cost of some of our raw materials such as
foam and shipping costs are dependent on petroleum cost. Higher material prices, cost of petroleum, and costs of sourced
products could have an adverse effect on margins.
Appropriate amounts of lumber and fabric inventory are typically stocked to maintain adequate production levels. We believe
that our sources of supply for these materials are sufficient and that we are not dependent on any one supplier.
We enter into standard purchase agreements with foreign and domestic suppliers to source selected products. The terms of
these arrangements are customary for the industry and do not contain any long-term contractual obligations on our behalf.
We believe we maintain good relationships with our suppliers.
Segments
We have strategically aligned our business into two reportable segments: Wholesale and Retail. These two segments
represent strategic business areas of our vertically integrated enterprise that operate separately and provide their own
distinctive services. This vertical structure enables us to offer our complete line of home furnishings and accents while
controlling quality and cost. We evaluate performance of the respective segments based upon net sales and operating
income. Inter-segment transactions result, primarily, from the wholesale sale of inventory to the retail segment, including
the related profit margin. Financial information, including sales, operating income and long-lived assets related to our
segments are disclosed in Note 19, Segment Information, of the notes to our consolidated financial statements included
under Item 8 of this Annual Report on Form 10-K.
As of June 30, 2019, the Company operated 144 design centers (our retail segment) and our independent retailers operated 158
design centers. Our wholesale segment net sales include sales to our retail segment, which are eliminated in consolidation,
sales to our independent retailers and unaffiliated third parties.
The following charts depict net sales related to our reportable segments.
We believe that the demand for furniture generally reflects sensitivity to overall economic conditions, including consumer
confidence, housing market conditions and unemployment rates. For both our segments, the second and fourth quarters are
historically the seasonally highest-volume sales quarters. However, during fiscal 2019, we experienced our largest sales
volume quarter for our wholesale business during the first quarter while our retail segment had its highest sales volume
during the second quarter. We believe this fiscal 2019 experience was not an indicator that our seasonal trends are changing.
Retail Segment
The retail segment, which accounted for 79% of net sales during fiscal 2019, sells home furnishings and accents to consumers
through a network of Company operated design centers. Retail revenue is generated upon the retail sale and delivery of our
products to our retail customers through our network of service centers. Retail profitability reflects (i) the retail gross margin,
which represents the difference between the retail net sales price and the cost of goods, purchased primarily from the
wholesale segment, and (ii) other operating costs associated with retail segment activities.
We measure the performance of our design centers based on net sales and written orders booked on a comparable period basis.
Comparable design centers are those which have been operating for at least 15 months, including relocated design centers
provided the original and relocated design center location had been operating for at least 15 months on a combined basis. During
the first three months of operations of newly opened design centers, written orders are booked but minimal net sales are achieved
through the delivery of products. Design centers we acquire from independent retailers are included in comparable design center
sales in their 13th full month of Ethan Allen-owned operations. The frequency of our promotional events as well as the timing of
the end of those events can also affect the comparability of orders booked during a given period. Due to the nature of the business
in which the retail segment operates, there are no customer concentration risks.
The retail segment’s product line revenue, expressed as a percentage of net sales, is comprised of approximately 48% in
upholstered products, 30% case goods and the remaining 22% in home accents and other.
During fiscal 2019, we acquired two new design centers in the United States from independent retailers and closed six locations,
which is net of three relocations. The geographic distribution of retail design center locations is disclosed under Item 2, Properties,
contained in Part I of this Annual Report on Form 10-K.
Wholesale Segment
The wholesale segment, which accounted for 21% of net sales during fiscal 2019, is principally involved in the development
of the Ethan Allen brand and encompasses all aspects of design, manufacture, sourcing, marketing, sale and distribution of
our broad range of home furnishings and accents. Wholesale revenue is generated upon the sale and shipment of our
products to our retail network of independently operated design centers, Company operated design centers and other
contract customers. Sales to ten of our largest customers accounted for 21% of revenues within our wholesale segment during
fiscal 2019.
Within the wholesale segment, we maintain revenue information according to each respective product line (i.e. case goods,
upholstery, and home accents). Case goods include items such as beds, dressers, armoires, tables, chairs, buffets,
entertainment units, home office furniture, and wooden accents. Upholstery items include sleepers, recliners and other
motion furniture, chairs, ottomans, custom pillows, sofas, loveseats, cut fabrics and leather. Skilled artisans cut, sew and
upholster custom-designed upholstery items which are available in a variety of frame, fabric and trim options. Home accent
items include window treatments and drapery hardware, wall decor, florals, lighting, clocks, mattresses, bedspreads, throws,
pillows, decorative accents, area rugs, wall coverings and home and garden furnishings.
Wholesale profitability includes (i) the wholesale gross margin, which represents the difference between the wholesale net
sales price and the cost associated with manufacturing and/or sourcing the related product, and (ii) other operating costs
associated with wholesale segment activities.
The wholesale segment’s product line revenue, expressed as a percentage of net sales, is comprised of approximately 50% in
upholstered products, 33% case goods and the remaining 17% in home accents and other.
As of June 30, 2019, our wholesale backlog was $46.4 million (as compared to $56.5 million as of June 30, 2018) which is
anticipated to be serviced in the first quarter of fiscal 2020. Our backlog was down 18.0% as our manufacturing operations
returned to normal throughput as compared to the prior year’s longer production lead-times primarily related to the GSA contract
startup. Our wholesale backlog fluctuates based on the timing of net orders booked, manufacturing schedules and efficiency, the
timing of sourced product receipts, the timing and volume of wholesale shipments, and the timing of various promotional events.
Because orders may be rescheduled and/or canceled and the sourcing timing may change, the measure of backlog at a point in
time is not necessarily indicative of future sales performance.
Our independent retailers are required to enter into license agreements with us, which (i) authorize the use of certain Ethan Allen
trademarks and (ii) require adherence to certain standards of operation, including a requirement to fulfill related warranty service
agreements. We are not subject to any territorial or exclusive retailer agreements in North America.
The geographic distribution of manufacturing and distribution locations is disclosed under Item 2, Properties, contained in Part I
of this Annual Report on Form 10-K.
Talent
Since our founding, we have built a collaborative culture that recognizes and rewards innovation and offers employees a
variety of opportunities and experiences. Our employees are critical to our success and are one of the main reasons we
continue to execute at a high level. We believe our continued focus on making employee engagement a top priority will help
us provide high quality products and services to our customers.
At June 30, 2019 our employee count totaled 4,700, a decrease from 5,200 a year ago, which reflects the impact of restructuring
actions taken to further optimize our manufacturing and logistics operations. The majority of our employees are employed on a
6
7
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Fabrics and other raw materials are purchased both domestically and outside the United States . We have no significant long-term
supply contracts, and have sufficient alternate sources of supply to prevent disruption in supplying our operations. We maintain
a number of sources for our raw materials, which we believe contribute to our ability to obtain competitive pricing. Lumber prices
and availability fluctuate over time based on factors such as weather and demand. The cost of some of our raw materials such as
foam and shipping costs are dependent on petroleum cost. Higher material prices, cost of petroleum, and costs of sourced
products could have an adverse effect on margins.
Appropriate amounts of lumber and fabric inventory are typically stocked to maintain adequate production levels. We believe
that our sources of supply for these materials are sufficient and that we are not dependent on any one supplier.
We enter into standard purchase agreements with foreign and domestic suppliers to source selected products. The terms of
these arrangements are customary for the industry and do not contain any long-term contractual obligations on our behalf.
We believe we maintain good relationships with our suppliers.
Segments
We have strategically aligned our business into two reportable segments: Wholesale and Retail. These two segments
represent strategic business areas of our vertically integrated enterprise that operate separately and provide their own
distinctive services. This vertical structure enables us to offer our complete line of home furnishings and accents while
controlling quality and cost. We evaluate performance of the respective segments based upon net sales and operating
income. Inter-segment transactions result, primarily, from the wholesale sale of inventory to the retail segment, including
the related profit margin. Financial information, including sales, operating income and long-lived assets related to our
segments are disclosed in Note 19, Segment Information, of the notes to our consolidated financial statements included
under Item 8 of this Annual Report on Form 10-K.
As of June 30, 2019, the Company operated 144 design centers (our retail segment) and our independent retailers operated 158
design centers. Our wholesale segment net sales include sales to our retail segment, which are eliminated in consolidation,
sales to our independent retailers and unaffiliated third parties.
The following charts depict net sales related to our reportable segments.
We believe that the demand for furniture generally reflects sensitivity to overall economic conditions, including consumer
confidence, housing market conditions and unemployment rates. For both our segments, the second and fourth quarters are
historically the seasonally highest-volume sales quarters. However, during fiscal 2019, we experienced our largest sales
volume quarter for our wholesale business during the first quarter while our retail segment had its highest sales volume
during the second quarter. We believe this fiscal 2019 experience was not an indicator that our seasonal trends are changing.
Retail Segment
The retail segment, which accounted for 79% of net sales during fiscal 2019, sells home furnishings and accents to consumers
through a network of Company operated design centers. Retail revenue is generated upon the retail sale and delivery of our
products to our retail customers through our network of service centers. Retail profitability reflects (i) the retail gross margin,
which represents the difference between the retail net sales price and the cost of goods, purchased primarily from the
wholesale segment, and (ii) other operating costs associated with retail segment activities.
We measure the performance of our design centers based on net sales and written orders booked on a comparable period basis.
Comparable design centers are those which have been operating for at least 15 months, including relocated design centers
provided the original and relocated design center location had been operating for at least 15 months on a combined basis. During
the first three months of operations of newly opened design centers, written orders are booked but minimal net sales are achieved
through the delivery of products. Design centers we acquire from independent retailers are included in comparable design center
sales in their 13th full month of Ethan Allen-owned operations. The frequency of our promotional events as well as the timing of
the end of those events can also affect the comparability of orders booked during a given period. Due to the nature of the business
in which the retail segment operates, there are no customer concentration risks.
The retail segment’s product line revenue, expressed as a percentage of net sales, is comprised of approximately 48% in
upholstered products, 30% case goods and the remaining 22% in home accents and other.
During fiscal 2019, we acquired two new design centers in the United States from independent retailers and closed six locations,
which is net of three relocations. The geographic distribution of retail design center locations is disclosed under Item 2, Properties,
contained in Part I of this Annual Report on Form 10-K.
Wholesale Segment
The wholesale segment, which accounted for 21% of net sales during fiscal 2019, is principally involved in the development
of the Ethan Allen brand and encompasses all aspects of design, manufacture, sourcing, marketing, sale and distribution of
our broad range of home furnishings and accents. Wholesale revenue is generated upon the sale and shipment of our
products to our retail network of independently operated design centers, Company operated design centers and other
contract customers. Sales to ten of our largest customers accounted for 21% of revenues within our wholesale segment during
fiscal 2019.
Within the wholesale segment, we maintain revenue information according to each respective product line (i.e. case goods,
upholstery, and home accents). Case goods include items such as beds, dressers, armoires, tables, chairs, buffets,
entertainment units, home office furniture, and wooden accents. Upholstery items include sleepers, recliners and other
motion furniture, chairs, ottomans, custom pillows, sofas, loveseats, cut fabrics and leather. Skilled artisans cut, sew and
upholster custom-designed upholstery items which are available in a variety of frame, fabric and trim options. Home accent
items include window treatments and drapery hardware, wall decor, florals, lighting, clocks, mattresses, bedspreads, throws,
pillows, decorative accents, area rugs, wall coverings and home and garden furnishings.
Wholesale profitability includes (i) the wholesale gross margin, which represents the difference between the wholesale net
sales price and the cost associated with manufacturing and/or sourcing the related product, and (ii) other operating costs
associated with wholesale segment activities.
The wholesale segment’s product line revenue, expressed as a percentage of net sales, is comprised of approximately 50% in
upholstered products, 33% case goods and the remaining 17% in home accents and other.
As of June 30, 2019, our wholesale backlog was $46.4 million (as compared to $56.5 million as of June 30, 2018) which is
anticipated to be serviced in the first quarter of fiscal 2020. Our backlog was down 18.0% as our manufacturing operations
returned to normal throughput as compared to the prior year’s longer production lead-times primarily related to the GSA contract
startup. Our wholesale backlog fluctuates based on the timing of net orders booked, manufacturing schedules and efficiency, the
timing of sourced product receipts, the timing and volume of wholesale shipments, and the timing of various promotional events.
Because orders may be rescheduled and/or canceled and the sourcing timing may change, the measure of backlog at a point in
time is not necessarily indicative of future sales performance.
Our independent retailers are required to enter into license agreements with us, which (i) authorize the use of certain Ethan Allen
trademarks and (ii) require adherence to certain standards of operation, including a requirement to fulfill related warranty service
agreements. We are not subject to any territorial or exclusive retailer agreements in North America.
The geographic distribution of manufacturing and distribution locations is disclosed under Item 2, Properties, contained in Part I
of this Annual Report on Form 10-K.
Talent
Since our founding, we have built a collaborative culture that recognizes and rewards innovation and offers employees a
variety of opportunities and experiences. Our employees are critical to our success and are one of the main reasons we
continue to execute at a high level. We believe our continued focus on making employee engagement a top priority will help
us provide high quality products and services to our customers.
At June 30, 2019 our employee count totaled 4,700, a decrease from 5,200 a year ago, which reflects the impact of restructuring
actions taken to further optimize our manufacturing and logistics operations. The majority of our employees are employed on a
6
7
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
full time basis and we believe we maintain good relationships with our employees. None of our employees are represented by
unions or collective bargaining agreements.
Customer Service Offerings
We offer numerous customer service programs, each of which has been developed and introduced to consumers in an effort
to make their shopping experience easier and more enjoyable.
Gift Card. This program allows customers to purchase and redeem gift cards through our website or at any participating retail
design center, which can be used for any of our products or services.
Ethan Allen Consumer Credit. The Ethan Allen Platinum consumer credit program offers customers a menu of custom financing
options. Financing offered through this program is administered by a third-party financial institution and is granted to our
customers on a non-recourse basis to the Company. Customers may apply for an Ethan Allen Platinum card at any participating
design center or online at ethanallen.com.
Marketing
Rooted in the five pillars of our brand – diversity of style, quality and craftsmanship, sustainability, complimentary design service,
and premier in-home delivery – Ethan Allen’s marketing programs are designed to drive traffic to our retail network of
approximately 300 design centers as well as to our e-commerce and social sites.
Our marketing approach begins with a customer experience that exemplifies the Ethan Allen difference. Through interactions in
the design center, monitoring and response to online reviews and social channels, and surveys, we work to incorporate the voices
of our customers into every decision we make. By deploying customer relationship management tools, we are further segmenting
our target markets, creating a more personalized shopping experience and developing more personalized content than ever
before.
Our new Ethan Allen Platinum consumer credit program, designed to make the Ethan Allen brand accessible to everyone, had a
successful national launch and should continue to attract both new prospects and returning customers.
Through both paid and owned channels, we continue to position Ethan Allen as an aspirational yet approachable brand. We deliver
these messages in a variety of ways – locally, nationally, and globally – to connect and engage with our target audience and drive
sales. Direct mail continues to be a critical marketing medium for us. Our magazine, distributed to almost 22 million households,
enables customers and prospects to immerse themselves in inspirational photos of our products; it is also a frequent starting point
for conversations with our designers. We strive to be present at natural connection points with customers, using targeted direct
mail pieces like our new mover's brochure. Along with our magazine, each direct mail piece is distributed to a targeted marketing
segment based on data collected internally and through independent market research.
In addition to newspapers and shelter magazines, local efforts complement and strengthen our national marketing strategy with
many markets increasing their reach through targeted broadcast, streaming radio, local digital and robust social initiatives.
As online shopping takes on increasing importance, we have continued to improve both user experience and conversion
optimization on ethanallen.com and ethanallen.ca. We invest in both paid and organic search engine marketing, and we work to
improve the local search rankings of each design center location. We have also continued to improve our programs for collecting
user-generated content, both from customers and designers, which showcases the way our customers are living with Ethan Allen.
Our new EA InHomeTM mobile app, which utilizes augmented reality, gives customers the ability to preview products in their space
before they make a purchase; our 3-D room planner, available in design centers, offers an even more immersive experience and
helps move customers toward conversion.
Significant growth in our organic social following, including a 25% increase in Instagram followers during the 2018 calendar year,
and paid social campaigns help bring awareness of the Ethan Allen brand to every demographic. We utilize these channels to build
a sense of community, and by extension brand loyalty, among our current and prospective customers.
Competition
We believe the home furnishings industry competes primarily on the basis of product styling and quality, personal service,
prompt delivery, product availability and price. We further believe that we effectively compete on the basis of each of these
factors and that, more specifically under our vertical structure, our complimentary interior design service, direct
manufacturing, white glove delivery service, product presentations, and website create a competitive advantage, further
supporting our mission of providing consumers with a complete home decorating and design solution. We also believe that
we differentiate ourselves further with the quality of our interior design service through our intensive training and the caliber
of our design consultants. Our objective is to continue to develop and strengthen our retail network by (i) expanding the
Company operated retail business through the repositioning and opening of new design centers, (ii) obtaining and retaining
independent retailers, encouraging such retailers to expand their business through the opening or relocation of new design
centers with the objective of increasing the volume of their sales, (iii) further expanding our sales network through our
independent design associates and realtor referral programs, and (iv) further expanding our ecommerce.
At Ethan Allen, our internet strategy is to drive traffic into our design centers by combining technology with excellent personal
service. Though our customers have the opportunity to buy our products online, we take the process further. With so much
of our product customizable, we encourage our website customers to get personal help from our interior design professionals
either in person or by chatting online with one of our qualified design consultants. This complimentary direct contact with
one of our knowledgeable interior designers creates a competitive advantage through our excellent personal service. This
enhances the online experience and regularly leads to internet customers becoming customers of our network of interior
design centers.
Retail Design Centers
We continue to strengthen the Ethen Allen brand with many initiatives, including the opening of new design centers and
relocating or consolidating certain existing design and service centers, regularly updating presentations and floor plans, and
strengthening of the qualifications of our designers through training and certification.
Ethan Allen design centers are typically located in busy retail settings as freestanding destinations or as part of town centers,
lifestyle centers, suburban strip malls or shopping malls, depending upon the real estate opportunities in a particular market.
Our 144 Company operated retail design centers average approximately 15,300 square feet in size with 63% of them ranging
between 10,000 and 20,000 square feet, while 21% being less than 10,000 square feet and the remaining 16% being greater
than 20,000 square feet. During the past 10 years, 37% of our design centers are new or have been relocated.
Combining technology with personal service in our design centers has allowed us to reduce the size of our design centers. In
the past five years, we have either opened or relocated a total of 24 new design centers that have an average size of
approximately 9,000 square feet. These smaller footprint design centers reflect our direction as we move forward in
repositioning our retail design centers. These new and relocated design centers also reflect our shift from destination and
shopping mall locations to lifestyle centers that better project our brand and offer increased traffic opportunities.
We strive to maintain consistency of presentation throughout our retail design centers through a comprehensive set of
standards and display planning assistance. These interior display design standards enable each design center to present a high
quality image by using focused lifestyle settings and select product category groupings to display our products and information
to facilitate design solutions and to educate consumers. We also create a consistent brand projection through our exterior
facades and signage.
Distribution and Logistics
by third parties.
carriers to ship our products.
We distribute our products through four distribution centers, owned by the Company, strategically located in North Carolina,
Oklahoma, and Virginia. These distribution centers provide efficient cross-dock operations to receive and ship product from
our manufacturing facilities and third-party suppliers to our retail network of Company and independently operated retail
service centers. Retail service centers prepare products for delivery into customers’ homes. At June 30, 2019, our Company
operated retail design centers were supported by 13 Company operated retail service centers and 14 service centers operated
While we manufacture to custom order the majority of our products, we also stock certain case goods, upholstery and home
accents to provide for quick delivery of in-stock items and to allow for more efficient production runs. We utilize independent
Our practice has been to sell our products at the same delivered cost to all Company and independently operated design
centers throughout the United States, regardless of their shipping point. This policy creates pricing credibility with our
wholesale customers while providing our retail segment the opportunity to achieve more consistent margins by removing
fluctuations attributable to the cost of shipping. Further, this policy eliminates the need for our independent retailers to carry
significant amounts of inventory in their own warehouses. As a result, we obtain more accurate consumer product demand
information.
8
9
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
full time basis and we believe we maintain good relationships with our employees. None of our employees are represented by
unions or collective bargaining agreements.
Customer Service Offerings
We offer numerous customer service programs, each of which has been developed and introduced to consumers in an effort
to make their shopping experience easier and more enjoyable.
Gift Card. This program allows customers to purchase and redeem gift cards through our website or at any participating retail
design center, which can be used for any of our products or services.
Ethan Allen Consumer Credit. The Ethan Allen Platinum consumer credit program offers customers a menu of custom financing
options. Financing offered through this program is administered by a third-party financial institution and is granted to our
customers on a non-recourse basis to the Company. Customers may apply for an Ethan Allen Platinum card at any participating
design center or online at ethanallen.com.
Marketing
Rooted in the five pillars of our brand – diversity of style, quality and craftsmanship, sustainability, complimentary design service,
and premier in-home delivery – Ethan Allen’s marketing programs are designed to drive traffic to our retail network of
approximately 300 design centers as well as to our e-commerce and social sites.
Our marketing approach begins with a customer experience that exemplifies the Ethan Allen difference. Through interactions in
the design center, monitoring and response to online reviews and social channels, and surveys, we work to incorporate the voices
of our customers into every decision we make. By deploying customer relationship management tools, we are further segmenting
our target markets, creating a more personalized shopping experience and developing more personalized content than ever
before.
Our new Ethan Allen Platinum consumer credit program, designed to make the Ethan Allen brand accessible to everyone, had a
successful national launch and should continue to attract both new prospects and returning customers.
Through both paid and owned channels, we continue to position Ethan Allen as an aspirational yet approachable brand. We deliver
these messages in a variety of ways – locally, nationally, and globally – to connect and engage with our target audience and drive
sales. Direct mail continues to be a critical marketing medium for us. Our magazine, distributed to almost 22 million households,
enables customers and prospects to immerse themselves in inspirational photos of our products; it is also a frequent starting point
for conversations with our designers. We strive to be present at natural connection points with customers, using targeted direct
mail pieces like our new mover's brochure. Along with our magazine, each direct mail piece is distributed to a targeted marketing
segment based on data collected internally and through independent market research.
In addition to newspapers and shelter magazines, local efforts complement and strengthen our national marketing strategy with
many markets increasing their reach through targeted broadcast, streaming radio, local digital and robust social initiatives.
As online shopping takes on increasing importance, we have continued to improve both user experience and conversion
optimization on ethanallen.com and ethanallen.ca. We invest in both paid and organic search engine marketing, and we work to
improve the local search rankings of each design center location. We have also continued to improve our programs for collecting
user-generated content, both from customers and designers, which showcases the way our customers are living with Ethan Allen.
Our new EA InHomeTM mobile app, which utilizes augmented reality, gives customers the ability to preview products in their space
before they make a purchase; our 3-D room planner, available in design centers, offers an even more immersive experience and
helps move customers toward conversion.
Significant growth in our organic social following, including a 25% increase in Instagram followers during the 2018 calendar year,
and paid social campaigns help bring awareness of the Ethan Allen brand to every demographic. We utilize these channels to build
a sense of community, and by extension brand loyalty, among our current and prospective customers.
Competition
We believe the home furnishings industry competes primarily on the basis of product styling and quality, personal service,
prompt delivery, product availability and price. We further believe that we effectively compete on the basis of each of these
factors and that, more specifically under our vertical structure, our complimentary interior design service, direct
manufacturing, white glove delivery service, product presentations, and website create a competitive advantage, further
supporting our mission of providing consumers with a complete home decorating and design solution. We also believe that
we differentiate ourselves further with the quality of our interior design service through our intensive training and the caliber
of our design consultants. Our objective is to continue to develop and strengthen our retail network by (i) expanding the
Company operated retail business through the repositioning and opening of new design centers, (ii) obtaining and retaining
independent retailers, encouraging such retailers to expand their business through the opening or relocation of new design
centers with the objective of increasing the volume of their sales, (iii) further expanding our sales network through our
independent design associates and realtor referral programs, and (iv) further expanding our ecommerce.
At Ethan Allen, our internet strategy is to drive traffic into our design centers by combining technology with excellent personal
service. Though our customers have the opportunity to buy our products online, we take the process further. With so much
of our product customizable, we encourage our website customers to get personal help from our interior design professionals
either in person or by chatting online with one of our qualified design consultants. This complimentary direct contact with
one of our knowledgeable interior designers creates a competitive advantage through our excellent personal service. This
enhances the online experience and regularly leads to internet customers becoming customers of our network of interior
design centers.
Retail Design Centers
We continue to strengthen the Ethen Allen brand with many initiatives, including the opening of new design centers and
relocating or consolidating certain existing design and service centers, regularly updating presentations and floor plans, and
strengthening of the qualifications of our designers through training and certification.
Ethan Allen design centers are typically located in busy retail settings as freestanding destinations or as part of town centers,
lifestyle centers, suburban strip malls or shopping malls, depending upon the real estate opportunities in a particular market.
Our 144 Company operated retail design centers average approximately 15,300 square feet in size with 63% of them ranging
between 10,000 and 20,000 square feet, while 21% being less than 10,000 square feet and the remaining 16% being greater
than 20,000 square feet. During the past 10 years, 37% of our design centers are new or have been relocated.
Combining technology with personal service in our design centers has allowed us to reduce the size of our design centers. In
the past five years, we have either opened or relocated a total of 24 new design centers that have an average size of
approximately 9,000 square feet. These smaller footprint design centers reflect our direction as we move forward in
repositioning our retail design centers. These new and relocated design centers also reflect our shift from destination and
shopping mall locations to lifestyle centers that better project our brand and offer increased traffic opportunities.
We strive to maintain consistency of presentation throughout our retail design centers through a comprehensive set of
standards and display planning assistance. These interior display design standards enable each design center to present a high
quality image by using focused lifestyle settings and select product category groupings to display our products and information
to facilitate design solutions and to educate consumers. We also create a consistent brand projection through our exterior
facades and signage.
Distribution and Logistics
We distribute our products through four distribution centers, owned by the Company, strategically located in North Carolina,
Oklahoma, and Virginia. These distribution centers provide efficient cross-dock operations to receive and ship product from
our manufacturing facilities and third-party suppliers to our retail network of Company and independently operated retail
service centers. Retail service centers prepare products for delivery into customers’ homes. At June 30, 2019, our Company
operated retail design centers were supported by 13 Company operated retail service centers and 14 service centers operated
by third parties.
While we manufacture to custom order the majority of our products, we also stock certain case goods, upholstery and home
accents to provide for quick delivery of in-stock items and to allow for more efficient production runs. We utilize independent
carriers to ship our products.
Our practice has been to sell our products at the same delivered cost to all Company and independently operated design
centers throughout the United States, regardless of their shipping point. This policy creates pricing credibility with our
wholesale customers while providing our retail segment the opportunity to achieve more consistent margins by removing
fluctuations attributable to the cost of shipping. Further, this policy eliminates the need for our independent retailers to carry
significant amounts of inventory in their own warehouses. As a result, we obtain more accurate consumer product demand
information.
8
9
Environmental Sustainability and Social Responsibility
Information about our Executive Officers
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
We continue to be focused on environmental and social responsibility while incorporating uniform social, environmental,
health and safety programs into our global manufacturing standards.
Our environmental (green) initiatives include but are not limited to the use of responsibly harvested Appalachian woods, and
water-based finishes and measuring our carbon footprint, greenhouse gases and recycled materials from our operations. We
have eliminated the use of heavy metals and hydrochlorofluorocarbons in all packaging. Our mattresses and custom
upholstery use foam made without harmful chemicals and substances. We have implemented the Enhancing Furniture’s
Environmental Culture (“EFEC”) environmental management system sponsored by the American Home Furnishing Alliance
(“AHFA”) at all our domestic manufacturing, distribution and service center facilities, and have expanded these efforts to our
retail design centers, which have now been registered in EFEC. Our Mexico and Honduras facilities are also registered under
the AHFA's EFEC program. Our United States manufacturing, distribution and service centers have also achieved Sustainable
by Design (“SBD”) registration status under the EFEC program. SBD provides a framework for home furnishings companies to
create and maintain a corporate culture of conservation and environmental stewardship by integrating socio-economic
policies and sustainable business practices into their manufacturing operations and sourcing strategies.
The Company requires its sourcing facilities that manufacture Ethan Allen branded products to implement a labor compliance
program and meet or exceed the standards established for preventing child labor, involuntary labor, coercion and
harassment, discrimination, and restrictions to freedom of association. These facilities are also required to provide a safe and
healthy environment in all workspaces, compliance with all local wage and hour laws and regulations, compliance with all
applicable environmental laws and regulations, and are required to authorize Ethan Allen or its designated agents (including
third-party auditing companies) to engage in monitoring activities to confirm compliance.
We work to ensure our products are safe in our customers’ homes through responsible use of chemicals and manufacturing
substances.
Intellectual Property
We currently hold, or have registration applications pending for, numerous trademarks, service marks and copyrights for the
Ethan Allen name, logos and designs in a broad range of classes for both products and services in the United States and in
many foreign countries. In addition, we have registered, or have applications pending for certain of our slogans utilized in
connection with promoting brand awareness, retail sales and other services and certain collection names. We view such
trademarks and service marks as valuable assets and have an ongoing program to diligently monitor and defend, through
appropriate action, against their unauthorized use.
Government Regulation
The Company is subject to reporting requirements, disclosure obligations and other recordkeeping requirements of the
Securities and Exchange Commission (“SEC”) and the various local authorities that regulate each location in which we
operate.
Corporate Contact Information
Ethan Allen’s principal executive office is in Danbury, Connecticut.
• Mailing address of the Company’s headquarters: 25 Lake Avenue Ext., Danbury, Connecticut 06811
•
• Website address: ethanallen.com
Telephone number: +1 (203) 743-8000
Available Information
Information contained in our Investor Relations section of our website at ethanallen.com/investors is not part of this Annual
Report on Form 10-K. Information that we furnish or file with the SEC, including our Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K or exhibits included in these reports are available for download, free of
charge, on our website soon after such reports are filed with or furnished to the SEC. Our SEC filings, including exhibits filed
therewith, are available on the SEC’s website at sec.gov.
Listed below are the name, age, and current position for each of our executive officers as of the date of this Annual Report
on Form 10-K. If they have not held the positions for at least five years, their former positions during that period are listed.
M. Farooq Kathwari*, age 74
Daniel M. Grow, age 73
Chairman of the Board, President and Chief Executive Officer since 1988
Senior Vice President, Business Development since February 2015
• Vice President, Business Development from 2009 to 2015
Eric D. Koster, age 72
• Vice President, General Counsel and Secretary since April 2013
Private practice prior to joining the Company in April 2013
Christopher Robertson, age 50
• Vice President, Logistics and Service since January 2016
• Director, Operations Support since May 2011
• Vice President, Upholstery Manufacturing since May 2001
Clifford Thorn, age 67
Corey Whitely, age 59
•
•
•
•
•
Michael Worth, age 52
• Vice President, Case Goods Manufacturing since December 2016
• Regional Operations Manager, Case Goods since February 2004
Executive Vice President, Administration, Chief Financial Officer and Treasurer since July 2014
Executive Vice President, Operations from October 2007 through July 2014
* Mr. Kathwari is the only one of our executive officers who operates under a written employment agreement.
Additional Information
by reference:
Additional information with respect to the Company’s business is included in the following pages and is incorporated herein
Five-Year Summary of Selected Financial Data……………………………………………………………………………………………
Management’s Discussion and Analysis of Financial Condition and Results of Operations………………………….
Quantitative and Qualitative Disclosures about Market Risk………………………………………………………………………
Note 1 to Consolidated Financial Statements entitled Organization and Nature of Business………………………
Note 19 to Consolidated Financial Statements entitled Segment Information……………………………………………
Page
21
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34
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ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Information about our Executive Officers
Listed below are the name, age, and current position for each of our executive officers as of the date of this Annual Report
on Form 10-K. If they have not held the positions for at least five years, their former positions during that period are listed.
M. Farooq Kathwari*, age 74
•
Chairman of the Board, President and Chief Executive Officer since 1988
Daniel M. Grow, age 73
Senior Vice President, Business Development since February 2015
•
• Vice President, Business Development from 2009 to 2015
Eric D. Koster, age 72
• Vice President, General Counsel and Secretary since April 2013
•
Private practice prior to joining the Company in April 2013
Christopher Robertson, age 50
• Vice President, Logistics and Service since January 2016
• Director, Operations Support since May 2011
Clifford Thorn, age 67
• Vice President, Upholstery Manufacturing since May 2001
Corey Whitely, age 59
•
•
Executive Vice President, Administration, Chief Financial Officer and Treasurer since July 2014
Executive Vice President, Operations from October 2007 through July 2014
Michael Worth, age 52
• Vice President, Case Goods Manufacturing since December 2016
• Regional Operations Manager, Case Goods since February 2004
* Mr. Kathwari is the only one of our executive officers who operates under a written employment agreement.
Additional Information
Additional information with respect to the Company’s business is included in the following pages and is incorporated herein
by reference:
Five-Year Summary of Selected Financial Data……………………………………………………………………………………………
Management’s Discussion and Analysis of Financial Condition and Results of Operations………………………….
Quantitative and Qualitative Disclosures about Market Risk………………………………………………………………………
Note 1 to Consolidated Financial Statements entitled Organization and Nature of Business………………………
Note 19 to Consolidated Financial Statements entitled Segment Information……………………………………………
Page
21
22
34
43
61
Environmental Sustainability and Social Responsibility
We continue to be focused on environmental and social responsibility while incorporating uniform social, environmental,
health and safety programs into our global manufacturing standards.
Our environmental (green) initiatives include but are not limited to the use of responsibly harvested Appalachian woods, and
water-based finishes and measuring our carbon footprint, greenhouse gases and recycled materials from our operations. We
have eliminated the use of heavy metals and hydrochlorofluorocarbons in all packaging. Our mattresses and custom
upholstery use foam made without harmful chemicals and substances. We have implemented the Enhancing Furniture’s
Environmental Culture (“EFEC”) environmental management system sponsored by the American Home Furnishing Alliance
(“AHFA”) at all our domestic manufacturing, distribution and service center facilities, and have expanded these efforts to our
retail design centers, which have now been registered in EFEC. Our Mexico and Honduras facilities are also registered under
the AHFA's EFEC program. Our United States manufacturing, distribution and service centers have also achieved Sustainable
by Design (“SBD”) registration status under the EFEC program. SBD provides a framework for home furnishings companies to
create and maintain a corporate culture of conservation and environmental stewardship by integrating socio-economic
policies and sustainable business practices into their manufacturing operations and sourcing strategies.
The Company requires its sourcing facilities that manufacture Ethan Allen branded products to implement a labor compliance
program and meet or exceed the standards established for preventing child labor, involuntary labor, coercion and
harassment, discrimination, and restrictions to freedom of association. These facilities are also required to provide a safe and
healthy environment in all workspaces, compliance with all local wage and hour laws and regulations, compliance with all
applicable environmental laws and regulations, and are required to authorize Ethan Allen or its designated agents (including
third-party auditing companies) to engage in monitoring activities to confirm compliance.
We work to ensure our products are safe in our customers’ homes through responsible use of chemicals and manufacturing
substances.
Intellectual Property
We currently hold, or have registration applications pending for, numerous trademarks, service marks and copyrights for the
Ethan Allen name, logos and designs in a broad range of classes for both products and services in the United States and in
many foreign countries. In addition, we have registered, or have applications pending for certain of our slogans utilized in
connection with promoting brand awareness, retail sales and other services and certain collection names. We view such
trademarks and service marks as valuable assets and have an ongoing program to diligently monitor and defend, through
The Company is subject to reporting requirements, disclosure obligations and other recordkeeping requirements of the
Securities and Exchange Commission (“SEC”) and the various local authorities that regulate each location in which we
appropriate action, against their unauthorized use.
Government Regulation
operate.
Corporate Contact Information
•
Telephone number: +1 (203) 743-8000
• Website address: ethanallen.com
Available Information
Ethan Allen’s principal executive office is in Danbury, Connecticut.
• Mailing address of the Company’s headquarters: 25 Lake Avenue Ext., Danbury, Connecticut 06811
Information contained in our Investor Relations section of our website at ethanallen.com/investors is not part of this Annual
Report on Form 10-K. Information that we furnish or file with the SEC, including our Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K or exhibits included in these reports are available for download, free of
charge, on our website soon after such reports are filed with or furnished to the SEC. Our SEC filings, including exhibits filed
therewith, are available on the SEC’s website at sec.gov.
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ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ITEM 1A. RISK FACTORS
The following risks could materially and adversely affect our business, financial condition, cash flows, results of operations
and the trading price of our common stock could decline. These risk factors do not identify all risks that we face; our
operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial
to our operations. Investors should also refer to the other information set forth in this Annual Report on Form 10‐K, including
Management’s Discussion and Analysis of Financial Condition and Results of Operations and our financial statements including
the related notes. Investors should carefully consider all risks, including those disclosed, before making an investment
decision.
A volatile retail environment and changing economic conditions may further adversely affect consumer demand and
spending.
General economic factors that are beyond the Company’s control could impact our forecasts and actual performance. These
factors include housing markets, recession, inflation, deflation, consumer credit availability, consumer debt levels, fuel and
energy costs, interest rates, tax rates and policy, unemployment trends, the impact of natural disasters, civil disturbances
and terrorist activities, foreign currency exchange rate fluctuations, conditions affecting the retail environment for products
sold by the Company and other matters that influence consumer spending. Changes in the economic climate could adversely
affect the Company’s performance.
Historically, the home furnishings industry has been subject to cyclical variations in the general economy and to uncertainty
regarding future economic prospects. Should the current economic recovery falter or the current recovery in housing starts
to stall, consumer confidence and demand for home furnishings could deteriorate, which could adversely affect our business
through its impact on the performance of our Company‐owned design centers, as well as on our independent licensees and
the ability of a number of them to meet their obligations to us.
Our business and results of operations are affected by international, national and regional economic conditions. Regional
economic conditions in the United States and in other regions of the world where we have a concentration of design centers
such as Canada or China, may have a greater impact on the Company compared to economic conditions in other parts of the
world where we have lesser concentration of design centers. An economic downturn of significance or extended duration
could adversely affect consumer demand and discretionary spending habits and, as a result, our business performance,
profitability, and cash flows. Our international net sales accounted for 6.8% of our consolidated net sales during fiscal 2019.
Global and local economic uncertainty may materially adversely affect our manufacturing operations or sources of
merchandise and international operations.
The current economic challenges in China, including global economic ramifications of the softening of the Chinese economy
and trade agreement negotiations, may continue to put pressure on global economic conditions. This economic uncertainty,
as well as other variations in global economic conditions such as fuel costs, wage and benefit inflation, and currency
fluctuations, may cause inconsistent and unpredictable consumer spending habits, while increasing our own input costs.
These risks resulting from global and local economic uncertainty could also severely disrupt our manufacturing operations,
which could have a material adverse affect on our financial performance. We import a portion of our merchandise from
foreign countries and operate manufacturing plants in Mexico and Honduras and retail design centers in Canada. As a result,
our ability to obtain adequate supplies or to control our costs may be adversely affected by events affecting international
commerce and businesses located outside the United States, including natural disasters, changes in international trade
including tariffs, central bank actions, changes in the relationship of the United States dollar versus other currencies, labor
availability and cost, and other governmental policies of the United States and the countries from which we import our
merchandise or in which we operate facilities.
Disruptions of our supply chain could have a material adverse affect on our operating and financial results.
Disruption of the Company’s supply chain capabilities due to trade restrictions, political instability, weather, natural disaster,
terrorism, product recalls, labor supply or stoppages, the financial and/or operational instability of key suppliers and carriers,
or other reasons could impair the Company’s ability to distribute its products. To the extent we are unable to mitigate the
likelihood or potential impact of such events, there could be a material adverse affect on our operating and financial results.
Changes in United States trade and tax policy could materially adversely affect our business and results of operations.
Changes in the political environment in the United States may require us to modify our current business practices. Because we
manufacture components and finished goods in Mexico and Honduras and purchase components and finished goods manufactured
in foreign countries, including China, we are subject to risks relating to increased tariffs on United States imports, changes in the North
American Free Trade Agreement, and other changes affecting imports. Recently, the United States administration considered
enacting certain tariffs on many items sourced from China, including certain furniture, accessories, furniture parts, and raw materials
that are imported into the United States and used in our domestic operations. We may not be able to fully or substantially mitigate
the impact of such tariffs, pass price increases on to our customers, or secure adequate alternative sources of products or materials.
The tariffs, along with any additional tariffs or retaliatory trade restrictions implemented by other countries, could negatively impact
customer sales, including potential delays in product received from our vendors, our cost of goods sold and results of operations.
Approximately 25% of our merchandise is sourced from outside of the United States. The United States government is
considering proposals for substantial changes to its trade and tax policies, which could include import restrictions, increased
import tariffs, changes to or withdrawal from existing trade agreements, and border-adjustment taxes among other possible
measures. Material changes in these policies could increase our tax obligations or require us to increase prices to customers,
which would likely adversely affect sales. Any significant change in United States policy related to imported merchandise
could have a material adverse affect on our business and financial results.
Competition from overseas manufacturers and domestic retailers may adversely materially affect our business, operating
results or financial condition.
Our wholesale business segment is involved in the development of our brand, which encompasses the design, manufacture,
sourcing, sales and distribution of our home furnishings products, and competes with other United States and foreign
manufacturers. Our retail network sells home furnishings to consumers through a network of independently operated and
Company operated design centers, and competes against a diverse group of retailers ranging from specialty stores to
traditional furniture and department stores, any of which may operate locally, regionally, nationally or globally, as well as
over the internet. We also compete with these and other retailers for retail locations as well as for qualified design
consultants and management personnel. Such competition could adversely affect our future financial performance.
Industry globalization has led to increased competitive pressures brought about by the increasing volume of imported
finished goods and components, particularly for case good products, and the development of manufacturing capabilities in
other countries, specifically within Asia. The increase in overseas production has created over‐capacity for many
manufacturers, including us, which has led to industry‐wide plant consolidation. In addition, because many foreign
manufacturers are able to maintain substantially lower production costs, including the cost of labor and overhead, imported
product may be capable of being sold at a lower price to consumers, which, in turn, could lead to some measure of further
industry‐wide price deflation.
We cannot provide assurance that we will be able to establish or maintain relationships with sufficient or appropriate
manufacturers, whether foreign or domestic, to supply us with selected case goods, upholstery and home accent items to
enable us to maintain our competitive advantage. In addition, the emergence of foreign manufacturers has served to broaden
the competitive landscape. Some of these competitors produce furniture types not manufactured by us and may have greater
financial resources available to them or lower costs of operating. This competition could materially adversely affect our future
financial performance.
Failure to successfully anticipate or respond to changes in consumer tastes and trends in a timely manner could materially
adversely impact our business, operating results and financial condition.
Sales of our products are dependent upon consumer acceptance of our product designs, styles, quality and price. We
continuously monitor changes in home design trends through attendance at international industry events and fashion shows,
internal marketing research, and regular communication with our retailers and design consultants who provide valuable input
on consumer tendencies. However, as with all retailers, our business is susceptible to changes in consumer tastes and trends.
Such tastes and trends can change rapidly and any delay or failure to anticipate or respond to changing consumer tastes and
trends in a timely manner could materially adversely impact our business, operating results and financial condition.
Inability to maintain and enhance our brand may materially adversely impact our business.
Maintaining and enhancing our brand is critical to our ability to expand our base of customers and may require us to make
substantial investments. Our advertising campaign utilizes television, direct mail, digital, newspapers, magazines and radio
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ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ITEM 1A. RISK FACTORS
The following risks could materially and adversely affect our business, financial condition, cash flows, results of operations
and the trading price of our common stock could decline. These risk factors do not identify all risks that we face; our
operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial
to our operations. Investors should also refer to the other information set forth in this Annual Report on Form 10‐K, including
Management’s Discussion and Analysis of Financial Condition and Results of Operations and our financial statements including
the related notes. Investors should carefully consider all risks, including those disclosed, before making an investment
A volatile retail environment and changing economic conditions may further adversely affect consumer demand and
decision.
spending.
General economic factors that are beyond the Company’s control could impact our forecasts and actual performance. These
factors include housing markets, recession, inflation, deflation, consumer credit availability, consumer debt levels, fuel and
energy costs, interest rates, tax rates and policy, unemployment trends, the impact of natural disasters, civil disturbances
and terrorist activities, foreign currency exchange rate fluctuations, conditions affecting the retail environment for products
sold by the Company and other matters that influence consumer spending. Changes in the economic climate could adversely
affect the Company’s performance.
Historically, the home furnishings industry has been subject to cyclical variations in the general economy and to uncertainty
regarding future economic prospects. Should the current economic recovery falter or the current recovery in housing starts
to stall, consumer confidence and demand for home furnishings could deteriorate, which could adversely affect our business
through its impact on the performance of our Company‐owned design centers, as well as on our independent licensees and
the ability of a number of them to meet their obligations to us.
Our business and results of operations are affected by international, national and regional economic conditions. Regional
economic conditions in the United States and in other regions of the world where we have a concentration of design centers
such as Canada or China, may have a greater impact on the Company compared to economic conditions in other parts of the
world where we have lesser concentration of design centers. An economic downturn of significance or extended duration
could adversely affect consumer demand and discretionary spending habits and, as a result, our business performance,
profitability, and cash flows. Our international net sales accounted for 6.8% of our consolidated net sales during fiscal 2019.
Global and local economic uncertainty may materially adversely affect our manufacturing operations or sources of
merchandise and international operations.
The current economic challenges in China, including global economic ramifications of the softening of the Chinese economy
and trade agreement negotiations, may continue to put pressure on global economic conditions. This economic uncertainty,
as well as other variations in global economic conditions such as fuel costs, wage and benefit inflation, and currency
fluctuations, may cause inconsistent and unpredictable consumer spending habits, while increasing our own input costs.
These risks resulting from global and local economic uncertainty could also severely disrupt our manufacturing operations,
which could have a material adverse affect on our financial performance. We import a portion of our merchandise from
foreign countries and operate manufacturing plants in Mexico and Honduras and retail design centers in Canada. As a result,
our ability to obtain adequate supplies or to control our costs may be adversely affected by events affecting international
commerce and businesses located outside the United States, including natural disasters, changes in international trade
including tariffs, central bank actions, changes in the relationship of the United States dollar versus other currencies, labor
availability and cost, and other governmental policies of the United States and the countries from which we import our
merchandise or in which we operate facilities.
Disruptions of our supply chain could have a material adverse affect on our operating and financial results.
Disruption of the Company’s supply chain capabilities due to trade restrictions, political instability, weather, natural disaster,
terrorism, product recalls, labor supply or stoppages, the financial and/or operational instability of key suppliers and carriers,
or other reasons could impair the Company’s ability to distribute its products. To the extent we are unable to mitigate the
likelihood or potential impact of such events, there could be a material adverse affect on our operating and financial results.
Changes in United States trade and tax policy could materially adversely affect our business and results of operations.
Changes in the political environment in the United States may require us to modify our current business practices. Because we
manufacture components and finished goods in Mexico and Honduras and purchase components and finished goods manufactured
in foreign countries, including China, we are subject to risks relating to increased tariffs on United States imports, changes in the North
American Free Trade Agreement, and other changes affecting imports. Recently, the United States administration considered
enacting certain tariffs on many items sourced from China, including certain furniture, accessories, furniture parts, and raw materials
that are imported into the United States and used in our domestic operations. We may not be able to fully or substantially mitigate
the impact of such tariffs, pass price increases on to our customers, or secure adequate alternative sources of products or materials.
The tariffs, along with any additional tariffs or retaliatory trade restrictions implemented by other countries, could negatively impact
customer sales, including potential delays in product received from our vendors, our cost of goods sold and results of operations.
Approximately 25% of our merchandise is sourced from outside of the United States. The United States government is
considering proposals for substantial changes to its trade and tax policies, which could include import restrictions, increased
import tariffs, changes to or withdrawal from existing trade agreements, and border-adjustment taxes among other possible
measures. Material changes in these policies could increase our tax obligations or require us to increase prices to customers,
which would likely adversely affect sales. Any significant change in United States policy related to imported merchandise
could have a material adverse affect on our business and financial results.
Competition from overseas manufacturers and domestic retailers may adversely materially affect our business, operating
results or financial condition.
Our wholesale business segment is involved in the development of our brand, which encompasses the design, manufacture,
sourcing, sales and distribution of our home furnishings products, and competes with other United States and foreign
manufacturers. Our retail network sells home furnishings to consumers through a network of independently operated and
Company operated design centers, and competes against a diverse group of retailers ranging from specialty stores to
traditional furniture and department stores, any of which may operate locally, regionally, nationally or globally, as well as
over the internet. We also compete with these and other retailers for retail locations as well as for qualified design
consultants and management personnel. Such competition could adversely affect our future financial performance.
Industry globalization has led to increased competitive pressures brought about by the increasing volume of imported
finished goods and components, particularly for case good products, and the development of manufacturing capabilities in
other countries, specifically within Asia. The increase in overseas production has created over‐capacity for many
manufacturers, including us, which has led to industry‐wide plant consolidation. In addition, because many foreign
manufacturers are able to maintain substantially lower production costs, including the cost of labor and overhead, imported
product may be capable of being sold at a lower price to consumers, which, in turn, could lead to some measure of further
industry‐wide price deflation.
We cannot provide assurance that we will be able to establish or maintain relationships with sufficient or appropriate
manufacturers, whether foreign or domestic, to supply us with selected case goods, upholstery and home accent items to
enable us to maintain our competitive advantage. In addition, the emergence of foreign manufacturers has served to broaden
the competitive landscape. Some of these competitors produce furniture types not manufactured by us and may have greater
financial resources available to them or lower costs of operating. This competition could materially adversely affect our future
financial performance.
Failure to successfully anticipate or respond to changes in consumer tastes and trends in a timely manner could materially
adversely impact our business, operating results and financial condition.
Sales of our products are dependent upon consumer acceptance of our product designs, styles, quality and price. We
continuously monitor changes in home design trends through attendance at international industry events and fashion shows,
internal marketing research, and regular communication with our retailers and design consultants who provide valuable input
on consumer tendencies. However, as with all retailers, our business is susceptible to changes in consumer tastes and trends.
Such tastes and trends can change rapidly and any delay or failure to anticipate or respond to changing consumer tastes and
trends in a timely manner could materially adversely impact our business, operating results and financial condition.
Inability to maintain and enhance our brand may materially adversely impact our business.
Maintaining and enhancing our brand is critical to our ability to expand our base of customers and may require us to make
substantial investments. Our advertising campaign utilizes television, direct mail, digital, newspapers, magazines and radio
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ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
to maintain and enhance our existing brand equity. We cannot provide assurance that our marketing, advertising and other
efforts to promote and maintain awareness of our brand will not require us to incur substantial costs. If these efforts are
unsuccessful or we incur substantial costs in connection with these efforts, our business, operating results and financial
condition could be materially adversely affected.
new technology, and related changes in customer behavior, presents a specific risk in the event we are unable to successfully
execute our plans or adjust them over time if needed. Further, unanticipated changes in pricing and other practices of
competitors, including promotional activity, such as thresholds for free shipping and rapid price fluctuation enabled by
technology, may adversely affect our performance.
Our number of manufacturing and logistics sites may increase our exposure to business disruptions and could result in
higher transportation costs.
We rely extensively on information technology systems to process transactions, summarize results, and manage our
business and that of certain independent retailers. Disruptions in both our primary and back-up systems could adversely
We have a limited number of manufacturing sites in our case goods and upholstery operations and consolidated our
distribution network into fewer centers for both wholesale and retail segments. Our upholstery operations consist of two
upholstery plants at our North Carolina campus and one plant in Mexico. The Company operates two manufacturing plants
(Vermont and Honduras) and one sawmill in support of our case goods operations. As a result of the consolidation of our
manufacturing operations into fewer facilities, if any of our manufacturing or logistics sites experience significant business
interruption, our ability to manufacture or deliver our products in a timely manner would likely be impacted. While we have
long‐standing relationships with multiple outside suppliers of our raw materials and commodities, there can be no assurance
of their ability to fulfill our supply needs on a timely basis. The consolidation to fewer locations has resulted in longer distances
for delivery and could result in higher costs to transport products if fuel costs increase significantly.
Fluctuations in the price, availability and quality of raw materials could result in increased costs or cause production delays
which might result in a decline in sales, either of which could materially adversely impact our earnings.
We use various types of wood, foam, fibers, fabrics, leathers, and other raw materials in manufacturing our furniture. Certain
of our raw materials, including fabrics, are purchased domestically as well as outside North America. Fluctuations in the price,
availability and quality of raw materials could result in increased costs or a delay in manufacturing our products, which in turn
could result in a delay in delivering products to our customers. For example, lumber prices fluctuate over time based on
factors such as weather and demand, which, in turn, impact availability. Production delays or upward trends in raw material
prices could result in lower sales or margins, thereby materially adversely impacting our earnings.
In addition, certain suppliers may require extensive advance notice of our requirements in order to produce products in the
quantities we desire. This long lead time may require us to place orders far in advance of the time when certain products will
be offered for sale, thereby exposing us to risks relating to shifts in consumer demand and trends, and any significant
downturn in the United States economy.
Our current and former manufacturing and retail operations and products are subject to increasingly stringent
environmental, health and safety requirements.
We use and generate hazardous substances in our manufacturing and retail operations. In addition, both the manufacturing
properties on which we currently operate and those on which we have ceased operations are and have been used for
industrial purposes. Our manufacturing operations and, to a lesser extent, our retail operations involve risk of personal injury
or death. We are subject to increasingly stringent environmental, health and safety laws and regulations relating to our
products, current and former properties and our current operations. These laws and regulations provide for substantial fines
and criminal sanctions for violations and sometimes require product recalls and/or redesign, the installation of costly
pollution control or safety equipment, or costly changes in operations to limit pollution or decrease the likelihood of injuries.
In addition, we may become subject to potentially material liabilities for the investigation and cleanup of contaminated
properties and to claims alleging personal injury or property damage resulting from exposure to or releases of hazardous
substances or personal injury because of an unsafe workplace.
In addition, noncompliance with, or stricter enforcement of, existing laws and regulations, adoption of more stringent new
laws and regulations, discovery of previously unknown contamination or imposition of new or increased requirements could
require us to incur costs or become the basis of new or increased liabilities that could be material.
We operate in the highly competitive retail business where the use of emerging technologies as well as unanticipated
changes in the pricing and other practices of competitors may adversely affect our performance.
The retail business is highly competitive. We compete for customers, employees, locations, merchandise, technology, services
and other important aspects of the business with many other local, regional and national retailers. Those competitors range
from specialty retailers to department stores and discounters as well as online and multichannel retailers. Specifically, rapidly
evolving technologies are altering the manner in which the Company and its competitors communicate and transact with
customers. Our strategy designed to adapt to these changes, in the context of competitors’ actions, customers adoption of
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15
affect our business and operating results.
Our primary and back‐up information technology systems are subject to damage or interruption from power outages,
computer and telecommunications failures, viruses, phishing attempts, cyber‐attacks, malware and ransomware attacks,
security breaches, natural disasters, and errors by employees. Though losses arising from some of these issues would be
covered by insurance, interruptions of our critical business information technology systems or failure of our back‐up systems
could result in longer production times or negatively impact customers resulting in damage to our reputation and a reduction
in sales. If our critical information technology systems or back‐up systems were damaged or ceased to function properly, we
might have to make a significant investment to repair or replace them.
Product recalls or product safety concerns could materially adversely affect our sales and operating results.
If the Company's merchandise offerings do not meet applicable safety standards or consumers' expectations regarding safety,
the Company could experience decreased sales, increased costs and/or be exposed to legal and reputational risk. Events that
give rise to actual, potential or perceived product safety concerns could expose the Company to government enforcement
action and/or private litigation. Reputational damage caused by real or perceived product safety concerns or product recalls
could negatively affect the Company's business and results of operations.
Successful cyber-attacks and the failure to maintain adequate cyber-security systems and procedures could harm materially
our operations.
In the current environment, there are numerous and evolving risks to cybersecurity and privacy, including criminal hackers,
hacktivists, state‐sponsored intrusions, industrial espionage, employee malfeasance and human or technological error. High‐
profile security breaches at other companies and in government agencies have increased in recent years, and security industry
experts and government officials have warned about the risks of hackers and cyberattacks targeting businesses such as ours.
Cyber‐attacks are becoming more sophisticated and frequent, and in some cases have caused significant harm. Computer
hackers and others routinely attempt to breach the security of technology products, services and systems, and to fraudulently
induce employees, customers, or others to disclose information or unwittingly provide access to systems or data. We operate
many aspects of our business including financial reporting, and customer relationship management through server and
web‐based technologies, and store various types of data on such servers or with third‐parties who in turn store it on servers
and in the “cloud.” Any disruption to the internet or to the Company's or its service providers' global technology
infrastructure, including malware, insecure coding, “Acts of God,” attempts to penetrate networks, data theft or loss and
human error, could have adverse affects on the Company's operations. A cyber‐attack of our systems or networks that impairs
our information technology systems could disrupt our business operations and result in loss of service to customers. The risk
of cyberattacks to our Company also includes attempted breaches of contractors, business partners, vendors and other third
parties. We have a comprehensive cybersecurity program designed to protect and preserve the integrity of our information
technology systems. We have experienced and expect to continue to experience actual or attempted cyber‐attacks of our IT
systems or networks; however, none of these actual or attempted cyber‐attacks had a material impact on our operations or
financial condition.
While we devote significant resources to network security, data encryption and other security measures to protect our
systems and data, including our own proprietary information and the confidential and personally identifiable information of
our customers, employees, and business partners, these measures cannot provide absolute security. The costs to eliminate
or alleviate network security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could
be significant, and our efforts to address these problems may not be successful, resulting potentially in the theft, loss,
destruction or corruption of information we store electronically, as well as unexpected interruptions, delays or cessation of
service, any of which could cause harm to our business operations. Moreover, if a computer security breach or cyber‐attack
affects our systems or results in the unauthorized release of proprietary or personally identifiable information, our reputation
could be materially damaged, our customer confidence could be diminished, and our operations, including technical support
for our devices, could be impaired. We would also be exposed to a risk of loss or litigation and potential liability, which could
have a material adverse affect on our business, results of operations and financial condition.
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
to maintain and enhance our existing brand equity. We cannot provide assurance that our marketing, advertising and other
efforts to promote and maintain awareness of our brand will not require us to incur substantial costs. If these efforts are
unsuccessful or we incur substantial costs in connection with these efforts, our business, operating results and financial
condition could be materially adversely affected.
Our number of manufacturing and logistics sites may increase our exposure to business disruptions and could result in
higher transportation costs.
We have a limited number of manufacturing sites in our case goods and upholstery operations and consolidated our
distribution network into fewer centers for both wholesale and retail segments. Our upholstery operations consist of two
upholstery plants at our North Carolina campus and one plant in Mexico. The Company operates two manufacturing plants
(Vermont and Honduras) and one sawmill in support of our case goods operations. As a result of the consolidation of our
manufacturing operations into fewer facilities, if any of our manufacturing or logistics sites experience significant business
interruption, our ability to manufacture or deliver our products in a timely manner would likely be impacted. While we have
long‐standing relationships with multiple outside suppliers of our raw materials and commodities, there can be no assurance
of their ability to fulfill our supply needs on a timely basis. The consolidation to fewer locations has resulted in longer distances
for delivery and could result in higher costs to transport products if fuel costs increase significantly.
Fluctuations in the price, availability and quality of raw materials could result in increased costs or cause production delays
which might result in a decline in sales, either of which could materially adversely impact our earnings.
We use various types of wood, foam, fibers, fabrics, leathers, and other raw materials in manufacturing our furniture. Certain
of our raw materials, including fabrics, are purchased domestically as well as outside North America. Fluctuations in the price,
availability and quality of raw materials could result in increased costs or a delay in manufacturing our products, which in turn
could result in a delay in delivering products to our customers. For example, lumber prices fluctuate over time based on
factors such as weather and demand, which, in turn, impact availability. Production delays or upward trends in raw material
prices could result in lower sales or margins, thereby materially adversely impacting our earnings.
In addition, certain suppliers may require extensive advance notice of our requirements in order to produce products in the
quantities we desire. This long lead time may require us to place orders far in advance of the time when certain products will
be offered for sale, thereby exposing us to risks relating to shifts in consumer demand and trends, and any significant
downturn in the United States economy.
Our current and former manufacturing and retail operations and products are subject to increasingly stringent
environmental, health and safety requirements.
We use and generate hazardous substances in our manufacturing and retail operations. In addition, both the manufacturing
properties on which we currently operate and those on which we have ceased operations are and have been used for
industrial purposes. Our manufacturing operations and, to a lesser extent, our retail operations involve risk of personal injury
or death. We are subject to increasingly stringent environmental, health and safety laws and regulations relating to our
products, current and former properties and our current operations. These laws and regulations provide for substantial fines
and criminal sanctions for violations and sometimes require product recalls and/or redesign, the installation of costly
pollution control or safety equipment, or costly changes in operations to limit pollution or decrease the likelihood of injuries.
In addition, we may become subject to potentially material liabilities for the investigation and cleanup of contaminated
properties and to claims alleging personal injury or property damage resulting from exposure to or releases of hazardous
substances or personal injury because of an unsafe workplace.
In addition, noncompliance with, or stricter enforcement of, existing laws and regulations, adoption of more stringent new
laws and regulations, discovery of previously unknown contamination or imposition of new or increased requirements could
require us to incur costs or become the basis of new or increased liabilities that could be material.
We operate in the highly competitive retail business where the use of emerging technologies as well as unanticipated
changes in the pricing and other practices of competitors may adversely affect our performance.
The retail business is highly competitive. We compete for customers, employees, locations, merchandise, technology, services
and other important aspects of the business with many other local, regional and national retailers. Those competitors range
from specialty retailers to department stores and discounters as well as online and multichannel retailers. Specifically, rapidly
evolving technologies are altering the manner in which the Company and its competitors communicate and transact with
customers. Our strategy designed to adapt to these changes, in the context of competitors’ actions, customers adoption of
new technology, and related changes in customer behavior, presents a specific risk in the event we are unable to successfully
execute our plans or adjust them over time if needed. Further, unanticipated changes in pricing and other practices of
competitors, including promotional activity, such as thresholds for free shipping and rapid price fluctuation enabled by
technology, may adversely affect our performance.
We rely extensively on information technology systems to process transactions, summarize results, and manage our
business and that of certain independent retailers. Disruptions in both our primary and back-up systems could adversely
affect our business and operating results.
Our primary and back‐up information technology systems are subject to damage or interruption from power outages,
computer and telecommunications failures, viruses, phishing attempts, cyber‐attacks, malware and ransomware attacks,
security breaches, natural disasters, and errors by employees. Though losses arising from some of these issues would be
covered by insurance, interruptions of our critical business information technology systems or failure of our back‐up systems
could result in longer production times or negatively impact customers resulting in damage to our reputation and a reduction
in sales. If our critical information technology systems or back‐up systems were damaged or ceased to function properly, we
might have to make a significant investment to repair or replace them.
Product recalls or product safety concerns could materially adversely affect our sales and operating results.
If the Company's merchandise offerings do not meet applicable safety standards or consumers' expectations regarding safety,
the Company could experience decreased sales, increased costs and/or be exposed to legal and reputational risk. Events that
give rise to actual, potential or perceived product safety concerns could expose the Company to government enforcement
action and/or private litigation. Reputational damage caused by real or perceived product safety concerns or product recalls
could negatively affect the Company's business and results of operations.
Successful cyber-attacks and the failure to maintain adequate cyber-security systems and procedures could harm materially
our operations.
In the current environment, there are numerous and evolving risks to cybersecurity and privacy, including criminal hackers,
hacktivists, state‐sponsored intrusions, industrial espionage, employee malfeasance and human or technological error. High‐
profile security breaches at other companies and in government agencies have increased in recent years, and security industry
experts and government officials have warned about the risks of hackers and cyberattacks targeting businesses such as ours.
Cyber‐attacks are becoming more sophisticated and frequent, and in some cases have caused significant harm. Computer
hackers and others routinely attempt to breach the security of technology products, services and systems, and to fraudulently
induce employees, customers, or others to disclose information or unwittingly provide access to systems or data. We operate
many aspects of our business including financial reporting, and customer relationship management through server and
web‐based technologies, and store various types of data on such servers or with third‐parties who in turn store it on servers
and in the “cloud.” Any disruption to the internet or to the Company's or its service providers' global technology
infrastructure, including malware, insecure coding, “Acts of God,” attempts to penetrate networks, data theft or loss and
human error, could have adverse affects on the Company's operations. A cyber‐attack of our systems or networks that impairs
our information technology systems could disrupt our business operations and result in loss of service to customers. The risk
of cyberattacks to our Company also includes attempted breaches of contractors, business partners, vendors and other third
parties. We have a comprehensive cybersecurity program designed to protect and preserve the integrity of our information
technology systems. We have experienced and expect to continue to experience actual or attempted cyber‐attacks of our IT
systems or networks; however, none of these actual or attempted cyber‐attacks had a material impact on our operations or
financial condition.
While we devote significant resources to network security, data encryption and other security measures to protect our
systems and data, including our own proprietary information and the confidential and personally identifiable information of
our customers, employees, and business partners, these measures cannot provide absolute security. The costs to eliminate
or alleviate network security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could
be significant, and our efforts to address these problems may not be successful, resulting potentially in the theft, loss,
destruction or corruption of information we store electronically, as well as unexpected interruptions, delays or cessation of
service, any of which could cause harm to our business operations. Moreover, if a computer security breach or cyber‐attack
affects our systems or results in the unauthorized release of proprietary or personally identifiable information, our reputation
could be materially damaged, our customer confidence could be diminished, and our operations, including technical support
for our devices, could be impaired. We would also be exposed to a risk of loss or litigation and potential liability, which could
have a material adverse affect on our business, results of operations and financial condition.
14
15
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Loss, corruption and misappropriation of data and information relating to customers could materially adversely affect our
operations.
and secure design center locations.
We may not be able to maintain our current design center locations at current costs. We may also fail to successfully select
We have access to sensitive customer information in the ordinary course of business. If a significant data breach occurred,
our reputation may be adversely affected, customer confidence may be diminished, or we may be subject to legal claims, or
legal proceedings, including regulatory investigations and actions, may have a negative impact on our reputation, may lead
to regulatory enforcement actions against us, and may materially adversely affect our business, operating results and financial
condition. The loss, disclosure or misappropriation of our business information may materially adversely affect our business,
operating results and financial condition. Further, legislative or regulatory action in these areas is evolving, and we may be
unable to adapt our IT systems or to manage the IT systems of third parties to accommodate these changes. Finally, if a
significant data breach occurred, our reputation could be materially and adversely affected, and confidence among our
customers may be diminished.
Our business is dependent on certain key personnel; if we lose key personnel or are unable to hire additional qualified
personnel, our business may be harmed.
The success of our business depends upon our ability to retain continued service of certain key personnel, particularly our
Chairman of the Board, President and Chief Executive Officer, M. Farooq Kathwari, and to attract and retain additional
qualified key personnel in the future. We face risks related to loss of any key personnel and we also face risks related to any
changes that may occur in key senior leadership executive positions. Any disruption in the services of our key personnel could
make it more difficult to successfully operate our business and achieve our business goals and could adversely affect our
results of operation and financial condition. These changes could also increase the volatility of our stock price.
The market for qualified employees and personnel in the retail and manufacturing industries is highly competitive. Our
success depends upon our ability to attract, retain and motivate qualified artisans, professional and clerical employees and
upon the continued contributions of these individuals. We cannot provide assurance that we will be successful in attracting
and retaining qualified personnel. A shortage of qualified personnel may require us to enhance our wage and benefits package
in order to compete effectively in the hiring and retention of qualified employees. Our labor and benefit costs may continue
to increase and such increases may not be recovered. This could have a material adverse affect on our business, operating
results and financial condition.
In addition, as previously announced in April 2019, we are currently executing plans to further improve our vertically
integrated operations with a number of initiatives. As a result of the ongoing evolution of our business, we frequently
implement changes to our organizational design in order to more closely align our management structure with the needs of
the business. In connection with such changes to our retail and wholesale structure, we also implement changes in personnel
and reductions in force as a result of which we may incur severance costs and other reorganization charges and expenses.
Changes in our organizational structure may also have an adverse impact on our ability to retain qualified personnel.
Our total assets include substantial amounts of long-lived assets, principally property and equipment. Changes to estimates
or projections used to assess the fair value of these assets, financial results that are lower than current estimates at certain
design center locations or determinations to close underperforming locations may cause us to incur future impairment
charges, negatively affecting its financial results.
We make certain accounting estimates and projections with regard to individual design center operations as well as overall
Company performance in connection with our impairment analysis for long‐lived assets in accordance with applicable
accounting guidance. An impairment charge may be required if the impairment analysis indicates that the carrying value of
an asset exceeds the sum of the expected undiscounted cash flows of the asset. The projection of future cash flows used in
this analysis requires the use of judgment and a number of estimates and projections of future operating results. If actual
results differ from Company estimates, additional charges for asset impairments may be required in the future. If impairment
charges are significant, our financial results could be negatively affected.
Access to consumer credit could be interrupted as a result of conditions outside of our control, which could reduce sales
and profitability.
Our ability to continue to access consumer credit for our customers could be negatively affected by conditions outside our
control. If capital market conditions have a material negative change, there is a risk that our business partner that issues our
private label credit card program may not be able to fulfill its obligations under that agreement. In addition, the tightening of
credit markets may restrict the ability and willingness of customers to make purchases.
Our design centers are typically located in busy urban settings as freestanding destinations or as part of suburban strip malls
or shopping malls, depending upon the real estate opportunities in a particular market. Our business competes with other
retailers and as a result, our success may be affected by our ability to renew current design center leases and to select and
secure appropriate retail locations for existing and future design centers.
Our business may be materially adversely affected by changes to fiscal and tax policies.
In the ordinary course of business, we are subject to tax examinations by various governmental tax authorities. The global
and diverse nature of our business means that there could be additional examinations by governmental tax authorities and
the resolution of ongoing and other probable audits, which could impose a future risk to the results of our business.
On December 22, 2017, the United States Tax Cuts and Jobs Act, (the “Act”) was signed into law. The Act enacted broad
changes to the existing United States Internal Revenue code, including reducing the federal corporate income tax rate from
35% to 21%, among many other complex provisions. Guidance issued by the SEC provided a measurement period of one year
from the enactment date to finalize the accounting for effects of the Act. In fiscal 2018, we made a provisional estimate of
the effects of the Act on our existing deferred tax balances. In fiscal 2019 the measurement period ended, and no material
adjustments were made to our provisional estimate of the impacts of the Act. The U.S. Treasury Department, the Internal
Revenue Service and other standard‐setting bodies could interpret or issue guidance on how provisions of the Act will be
applied or otherwise administered that is different from our interpretation. Finally, foreign governments may enact tax laws
in response to the Act that could result in further changes to global taxation and materially affect our financial position and
results of operations. The uncertainty surrounding the effect of the reforms on our financial results and business could also
weaken confidence among investors in our financial condition. This could, in turn, have a materially adverse affect on the
price of our common stock.
Our operations present hazards and risks which may not be fully covered by insurance, if insured.
The scope and nature of our operations present a variety of operational hazards and risks that must be managed through
continual oversight and control. As protection against hazards and risks, we maintain insurance against many, but not all,
potential losses or liabilities arising from such risks. Uninsured losses and liabilities from operating risks could reduce the
funds available to us for capital and investment spending and could have a material adverse impact on the results of
operations.
Failure to protect our intellectual property could materially adversely affect us.
We believe that our copyrights, trademarks, service marks, trade secrets, and all of our other intellectual property are
important to our success. We rely on patent, trademark, copyright and trade secret laws, and confidentiality and restricted
use agreements, to protect our intellectual property and may seek licenses to intellectual property of others. Some of our
intellectual property is not covered by any patent, trademark, or copyright or any applications for the same. We cannot
provide assurance that agreements designed to protect our intellectual property will not be breached, that we will have
adequate remedies for any such breach, or that the efforts we take to protect our proprietary rights will be sufficient or
effective. Any significant impairment of our intellectual property rights or failure to obtain licenses of intellectual property
from third parties could harm our business or our ability to compete. Moreover, we cannot provide assurance that the use
of our technology or proprietary “know‐how” or information does not infringe the intellectual property rights of others. If we
have to litigate to protect or defend any of our rights, such litigation could result in significant expense.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
16
17
Loss, corruption and misappropriation of data and information relating to customers could materially adversely affect our
operations.
We have access to sensitive customer information in the ordinary course of business. If a significant data breach occurred,
our reputation may be adversely affected, customer confidence may be diminished, or we may be subject to legal claims, or
legal proceedings, including regulatory investigations and actions, may have a negative impact on our reputation, may lead
to regulatory enforcement actions against us, and may materially adversely affect our business, operating results and financial
condition. The loss, disclosure or misappropriation of our business information may materially adversely affect our business,
operating results and financial condition. Further, legislative or regulatory action in these areas is evolving, and we may be
unable to adapt our IT systems or to manage the IT systems of third parties to accommodate these changes. Finally, if a
significant data breach occurred, our reputation could be materially and adversely affected, and confidence among our
customers may be diminished.
personnel, our business may be harmed.
Our business is dependent on certain key personnel; if we lose key personnel or are unable to hire additional qualified
The success of our business depends upon our ability to retain continued service of certain key personnel, particularly our
Chairman of the Board, President and Chief Executive Officer, M. Farooq Kathwari, and to attract and retain additional
qualified key personnel in the future. We face risks related to loss of any key personnel and we also face risks related to any
changes that may occur in key senior leadership executive positions. Any disruption in the services of our key personnel could
make it more difficult to successfully operate our business and achieve our business goals and could adversely affect our
results of operation and financial condition. These changes could also increase the volatility of our stock price.
The market for qualified employees and personnel in the retail and manufacturing industries is highly competitive. Our
success depends upon our ability to attract, retain and motivate qualified artisans, professional and clerical employees and
upon the continued contributions of these individuals. We cannot provide assurance that we will be successful in attracting
and retaining qualified personnel. A shortage of qualified personnel may require us to enhance our wage and benefits package
in order to compete effectively in the hiring and retention of qualified employees. Our labor and benefit costs may continue
to increase and such increases may not be recovered. This could have a material adverse affect on our business, operating
results and financial condition.
In addition, as previously announced in April 2019, we are currently executing plans to further improve our vertically
integrated operations with a number of initiatives. As a result of the ongoing evolution of our business, we frequently
implement changes to our organizational design in order to more closely align our management structure with the needs of
and reductions in force as a result of which we may incur severance costs and other reorganization charges and expenses.
Changes in our organizational structure may also have an adverse impact on our ability to retain qualified personnel.
Our total assets include substantial amounts of long-lived assets, principally property and equipment. Changes to estimates
or projections used to assess the fair value of these assets, financial results that are lower than current estimates at certain
design center locations or determinations to close underperforming locations may cause us to incur future impairment
charges, negatively affecting its financial results.
We make certain accounting estimates and projections with regard to individual design center operations as well as overall
Company performance in connection with our impairment analysis for long‐lived assets in accordance with applicable
accounting guidance. An impairment charge may be required if the impairment analysis indicates that the carrying value of
an asset exceeds the sum of the expected undiscounted cash flows of the asset. The projection of future cash flows used in
this analysis requires the use of judgment and a number of estimates and projections of future operating results. If actual
results differ from Company estimates, additional charges for asset impairments may be required in the future. If impairment
charges are significant, our financial results could be negatively affected.
Access to consumer credit could be interrupted as a result of conditions outside of our control, which could reduce sales
and profitability.
Our ability to continue to access consumer credit for our customers could be negatively affected by conditions outside our
control. If capital market conditions have a material negative change, there is a risk that our business partner that issues our
private label credit card program may not be able to fulfill its obligations under that agreement. In addition, the tightening of
credit markets may restrict the ability and willingness of customers to make purchases.
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
We may not be able to maintain our current design center locations at current costs. We may also fail to successfully select
and secure design center locations.
Our design centers are typically located in busy urban settings as freestanding destinations or as part of suburban strip malls
or shopping malls, depending upon the real estate opportunities in a particular market. Our business competes with other
retailers and as a result, our success may be affected by our ability to renew current design center leases and to select and
secure appropriate retail locations for existing and future design centers.
Our business may be materially adversely affected by changes to fiscal and tax policies.
In the ordinary course of business, we are subject to tax examinations by various governmental tax authorities. The global
and diverse nature of our business means that there could be additional examinations by governmental tax authorities and
the resolution of ongoing and other probable audits, which could impose a future risk to the results of our business.
On December 22, 2017, the United States Tax Cuts and Jobs Act, (the “Act”) was signed into law. The Act enacted broad
changes to the existing United States Internal Revenue code, including reducing the federal corporate income tax rate from
35% to 21%, among many other complex provisions. Guidance issued by the SEC provided a measurement period of one year
from the enactment date to finalize the accounting for effects of the Act. In fiscal 2018, we made a provisional estimate of
the effects of the Act on our existing deferred tax balances. In fiscal 2019 the measurement period ended, and no material
adjustments were made to our provisional estimate of the impacts of the Act. The U.S. Treasury Department, the Internal
Revenue Service and other standard‐setting bodies could interpret or issue guidance on how provisions of the Act will be
applied or otherwise administered that is different from our interpretation. Finally, foreign governments may enact tax laws
in response to the Act that could result in further changes to global taxation and materially affect our financial position and
results of operations. The uncertainty surrounding the effect of the reforms on our financial results and business could also
weaken confidence among investors in our financial condition. This could, in turn, have a materially adverse affect on the
price of our common stock.
Our operations present hazards and risks which may not be fully covered by insurance, if insured.
The scope and nature of our operations present a variety of operational hazards and risks that must be managed through
continual oversight and control. As protection against hazards and risks, we maintain insurance against many, but not all,
potential losses or liabilities arising from such risks. Uninsured losses and liabilities from operating risks could reduce the
funds available to us for capital and investment spending and could have a material adverse impact on the results of
operations.
the business. In connection with such changes to our retail and wholesale structure, we also implement changes in personnel
Failure to protect our intellectual property could materially adversely affect us.
We believe that our copyrights, trademarks, service marks, trade secrets, and all of our other intellectual property are
important to our success. We rely on patent, trademark, copyright and trade secret laws, and confidentiality and restricted
use agreements, to protect our intellectual property and may seek licenses to intellectual property of others. Some of our
intellectual property is not covered by any patent, trademark, or copyright or any applications for the same. We cannot
provide assurance that agreements designed to protect our intellectual property will not be breached, that we will have
adequate remedies for any such breach, or that the efforts we take to protect our proprietary rights will be sufficient or
effective. Any significant impairment of our intellectual property rights or failure to obtain licenses of intellectual property
from third parties could harm our business or our ability to compete. Moreover, we cannot provide assurance that the use
of our technology or proprietary “know‐how” or information does not infringe the intellectual property rights of others. If we
have to litigate to protect or defend any of our rights, such litigation could result in significant expense.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
16
17
ITEM 2. PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
From time to time, we are subject to legal proceedings, claims and litigation arising in the ordinary course of business. Based
on currently available information, we do not believe that the ultimate outcome of these unresolved matters against Ethan
Allen, individually or in the aggregate, will have a material adverse affect on our consolidated financial position, our annual
results of operations or our annual cash flows. However, these matters are subject to inherent uncertainties and our view of
these matters may change in the future. For additional information regarding legal matters, refer to Note 20, Commitments
and Contingencies, of the notes to our consolidated financial statements included under Item 8 of this Annual Report on Form
10-K.
Regulations issued under the Clean Air Act Amendments of 1990 required the industry to reformulate certain furniture
finishes or institute process changes to reduce emissions of volatile organic compounds. Compliance with many of these
requirements has been facilitated through the introduction of high solids coating technology and alternative formulations. In
addition, we have instituted a variety of technical and procedural controls, including reformulation of finishing materials to
reduce toxicity, implementation of high velocity low pressure spray systems, development of storm water protection plans
and controls, and further development of related inspection/audit teams, all of which have served to reduce emissions per
unit of production. We remain committed to implementing new waste minimization programs and/or enhancing existing
programs with the objective of (i) reducing the total volume of waste, (ii) limiting the liability associated with waste disposal,
and (iii) continuously improving environmental and job safety programs on the factory floor which serve to minimize
emissions and safety risks for employees. To reduce the use of hazardous materials in the manufacturing process, we will
continue to evaluate the most appropriate, cost-effective control technologies for finishing operations and production
methods. We believe that our facilities are in material compliance with all such applicable laws and regulations. Our currently
anticipated capital expenditures for environmental control facility matters are not material.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
Ethan Allen’s 144,000 square foot corporate headquarters building, located in Danbury, Connecticut, is owned by the
Company.
We operate six manufacturing facilities located in the United States, Mexico and Honduras. These facilities are owned by the
Company and include three case goods plants (including one sawmill) totaling 1,300,000 square feet and three upholstery
furniture plants totaling 1,170,000 square feet. Two of our case goods manufacturing facilities are located in Vermont and
one is in Honduras. We have two upholstery manufacturing facilities at our North Carolina campus and one in Mexico. Our
wholesale division also owns and operates four national distribution and fulfillment centers, which are a combined 1,428,000
square feet. Our distribution facilities are located in North Carolina, Oklahoma, and Virginia.
We own three and lease 10 retail service centers, totaling approximately 770,000 square feet. Our retail service centers are
located throughout the United States and Canada and serve to support our various retail design centers.
As of June 30, 2019 there were 144 Company operated retail design centers totaling 2,210,000 square feet, and averaging
approximately 15,300 square feet in size per location. Of the 144 Company operated retail design centers, 50 of the properties
are owned and 94 are leased. We own one and lease six additional retail properties, of which we sublease three to
independent Ethan Allen retailers and four to unaffiliated third parties.
The location activity and geographic distribution of our retail network for fiscal years ended June 30 are as follows:
Fis cal 2019
Fis cal 2018
Independent
retailers
Company‐
operated
Total
Independent
retailers
Company‐
operated
Total
Retail Des ign Center location activity:
Balance at July 1
New locations
Clos ures
Trans fers
Balance at June 30
Relocations (in new and clos ures )
Retail Des ign Center geographic locations :
United States
Canada
China
Other As ia
Europe
Middle Eas t
Total
148
21
(9)
(2)
158
‐
40
‐
100
11
1
6
158
148
3
(9)
2
144
3
138
6
‐
‐
‐
‐
144
296
24
(18)
‐
302
3
178
6
100
11
1
6
302
155
11
(16)
(2)
148
‐
44
‐
87
9
1
7
148
2
(4)
2
148
1
142
6
‐
‐
‐
‐
303
13
(20)
‐
296
1
186
6
87
9
1
7
148
148
296
We believe that all our properties are well maintained and in good condition. We have additional capacity at each facility as we
estimate that our manufacturing plants are currently operating at approximately 50% of capacity based on their current shifts
and staffing. In an effort to further improve and optimize our manufacturing and logistics operations, we are currently
executing the following plans, which we expect to be completed during fiscal 2020: (i) convert our Old Fort, North Carolina
plant into a state‐of‐the‐art distribution center to support our national distribution structure and growing United States
government General Services Administration (“GSA”) contract business; (ii) consolidate United States case goods
manufacturing to Vermont; (iii) expand our Maiden, North Carolina campus with the addition of 80,000 square feet; and (iv)
move the distribution operations from our Passaic, New Jersey facility to our operations in North Carolina and outsource the
art framing operations.
18
19
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ITEM 3. LEGAL PROCEEDINGS
From time to time, we are subject to legal proceedings, claims and litigation arising in the ordinary course of business. Based
on currently available information, we do not believe that the ultimate outcome of these unresolved matters against Ethan
Allen, individually or in the aggregate, will have a material adverse affect on our consolidated financial position, our annual
results of operations or our annual cash flows. However, these matters are subject to inherent uncertainties and our view of
these matters may change in the future. For additional information regarding legal matters, refer to Note 20, Commitments
and Contingencies, of the notes to our consolidated financial statements included under Item 8 of this Annual Report on Form
10-K.
Regulations issued under the Clean Air Act Amendments of 1990 required the industry to reformulate certain furniture
finishes or institute process changes to reduce emissions of volatile organic compounds. Compliance with many of these
requirements has been facilitated through the introduction of high solids coating technology and alternative formulations. In
addition, we have instituted a variety of technical and procedural controls, including reformulation of finishing materials to
reduce toxicity, implementation of high velocity low pressure spray systems, development of storm water protection plans
and controls, and further development of related inspection/audit teams, all of which have served to reduce emissions per
unit of production. We remain committed to implementing new waste minimization programs and/or enhancing existing
programs with the objective of (i) reducing the total volume of waste, (ii) limiting the liability associated with waste disposal,
and (iii) continuously improving environmental and job safety programs on the factory floor which serve to minimize
emissions and safety risks for employees. To reduce the use of hazardous materials in the manufacturing process, we will
continue to evaluate the most appropriate, cost-effective control technologies for finishing operations and production
methods. We believe that our facilities are in material compliance with all such applicable laws and regulations. Our currently
anticipated capital expenditures for environmental control facility matters are not material.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 2. PROPERTIES
Company.
Ethan Allen’s 144,000 square foot corporate headquarters building, located in Danbury, Connecticut, is owned by the
We operate six manufacturing facilities located in the United States, Mexico and Honduras. These facilities are owned by the
Company and include three case goods plants (including one sawmill) totaling 1,300,000 square feet and three upholstery
furniture plants totaling 1,170,000 square feet. Two of our case goods manufacturing facilities are located in Vermont and
one is in Honduras. We have two upholstery manufacturing facilities at our North Carolina campus and one in Mexico. Our
wholesale division also owns and operates four national distribution and fulfillment centers, which are a combined 1,428,000
square feet. Our distribution facilities are located in North Carolina, Oklahoma, and Virginia.
We own three and lease 10 retail service centers, totaling approximately 770,000 square feet. Our retail service centers are
located throughout the United States and Canada and serve to support our various retail design centers.
As of June 30, 2019 there were 144 Company operated retail design centers totaling 2,210,000 square feet, and averaging
approximately 15,300 square feet in size per location. Of the 144 Company operated retail design centers, 50 of the properties
are owned and 94 are leased. We own one and lease six additional retail properties, of which we sublease three to
independent Ethan Allen retailers and four to unaffiliated third parties.
The location activity and geographic distribution of our retail network for fiscal years ended June 30 are as follows:
Fis cal 2019
Fis cal 2018
Independent
retailers
Company‐
operated
Independent
Total
retailers
Company‐
operated
Total
Retail Des ign Center location activity:
Relocations (in new and clos ures )
Retail Des ign Center geographic locations :
Balance at July 1
New locations
Clos ures
Trans fers
Balance at June 30
United States
Canada
China
Other As ia
Europe
Middle Eas t
Total
148
21
(9)
(2)
158
‐
40
‐
100
11
1
6
158
148
(9)
144
138
3
2
3
6
‐
‐
‐
‐
144
296
24
(18)
302
‐
3
178
6
100
11
1
6
302
155
11
(16)
(2)
148
‐
44
‐
87
9
1
7
148
(4)
148
142
2
2
1
6
‐
‐
‐
‐
303
13
(20)
296
‐
1
186
6
87
9
1
7
148
148
296
We believe that all our properties are well maintained and in good condition. We have additional capacity at each facility as we
estimate that our manufacturing plants are currently operating at approximately 50% of capacity based on their current shifts
and staffing. In an effort to further improve and optimize our manufacturing and logistics operations, we are currently
executing the following plans, which we expect to be completed during fiscal 2020: (i) convert our Old Fort, North Carolina
plant into a state‐of‐the‐art distribution center to support our national distribution structure and growing United States
government General Services Administration (“GSA”) contract business; (ii) consolidate United States case goods
manufacturing to Vermont; (iii) expand our Maiden, North Carolina campus with the addition of 80,000 square feet; and (iv)
move the distribution operations from our Passaic, New Jersey facility to our operations in North Carolina and outsource the
art framing operations.
18
19
The following tables set forth, for the periods and at the dates indicated, our selected historical consolidated financial data.
We have derived the selected consolidated financial data for the years ended June 30, 2019, 2018 and 2017, and as of June
30, 2019 and 2018, from our audited consolidated financial statements appearing elsewhere in this report. We have derived
the selected consolidated financial data for the years ended June 30, 2016 and 2015, and as of June 30, 2017, 2016 and 2015
from our consolidated financial statements not appearing elsewhere in this report. Our historical results are not necessarily
indicative of the results we may achieve in any future period.
This financial data should be read in conjunction with Item 7, Management’s Discussion and Analysis of Financial Condition
and Results of Operations and Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
PART II
ITEM 6. SELECTED FINANCIAL DATA
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF
EQUITY SECURITIES
(a) Market Information, Holders of Record, Dividends, Securities Authorized for Issuance and Stock Performance Graph
Market Information. Ethan Allen common stock is traded on the New York Stock Exchange (“NYSE”) under ticker symbol
“ETH”.
Holders of Record. As of July 25, 2019, there were 221 shareholders of record of our common stock, including Cede & Co., the
nominee of the Depository Trust Company. However, because many of our shares of common stock are held by brokers and
other institutions on behalf of shareholders, we are unable to estimate the total number of shareholders represented by
these record holders. The closing price of our common stock on July 25, 2019, was $20.63 per share as reported on the NYSE.
Dividends. The Company’s policy is to issue quarterly dividends, and we expect to continue to declare and pay comparable
quarterly dividends for the foreseeable future, business conditions permitting.
Securities Authorized for Issuance under Equity Compensation Plans. Refer to Part III of this Annual Report on Form 10-K.
Stock Performance Graph. The annual changes for the five-year period shown in the graph below are based on the assumption
that $100 had been invested in our common stock, the Standard & Poor’s 500 Index and the Standard & Poor’s Retail Select
Industry Index (“SPSIRE”) on June 30, 2014. The total cumulative dollar returns shown on the graph represent the value that
such investments would have had on June 30, 2019. Stockholder returns over the indicated period are based on historical
data and should not be considered indicative of future stockholder returns.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Ethan Allen Interiors Inc., the S&P 500 Index,
S&P Retail Select Industry Index (SPSIRE)
$160
$140
$120
$100
$80
6/14
6/15
6/16
6/17
6/18
6/19
Ethan Allen Interiors Inc.
S&P 500®
S&P Retail Select Industry Index (SPSIRE)
*This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that Section, and shall not be deemed
to be incorporated by reference into any filing of Ethan Allen under the Securities Act of 1933, as amended, or the Exchange Act whether
made before or after the date hereof and irrespective of any general incorporation language in any such filing.
(b) Recent Sales of Unregistered Securities
There were no sales of unregistered equity securities during fiscal 2019.
(c) Purchases of Equity Securities by the Issuer
We may from time to time make repurchases in the open market and through privately negotiated transactions, subject to
market conditions, including pursuant to our previously announced repurchase program. There were no share repurchases
under the program during fiscal 2019. At June 30, 2019, we had a remaining Board authorization to repurchase 2,518,046
shares of our common stock pursuant to our program.
20
21
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
PART II
ITEM 6. SELECTED FINANCIAL DATA
The following tables set forth, for the periods and at the dates indicated, our selected historical consolidated financial data.
We have derived the selected consolidated financial data for the years ended June 30, 2019, 2018 and 2017, and as of June
30, 2019 and 2018, from our audited consolidated financial statements appearing elsewhere in this report. We have derived
the selected consolidated financial data for the years ended June 30, 2016 and 2015, and as of June 30, 2017, 2016 and 2015
from our consolidated financial statements not appearing elsewhere in this report. Our historical results are not necessarily
indicative of the results we may achieve in any future period.
This financial data should be read in conjunction with Item 7, Management’s Discussion and Analysis of Financial Condition
and Results of Operations and Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF
(a) Market Information, Holders of Record, Dividends, Securities Authorized for Issuance and Stock Performance Graph
Market Information. Ethan Allen common stock is traded on the New York Stock Exchange (“NYSE”) under ticker symbol
EQUITY SECURITIES
“ETH”.
Holders of Record. As of July 25, 2019, there were 221 shareholders of record of our common stock, including Cede & Co., the
nominee of the Depository Trust Company. However, because many of our shares of common stock are held by brokers and
other institutions on behalf of shareholders, we are unable to estimate the total number of shareholders represented by
these record holders. The closing price of our common stock on July 25, 2019, was $20.63 per share as reported on the NYSE.
Dividends. The Company’s policy is to issue quarterly dividends, and we expect to continue to declare and pay comparable
quarterly dividends for the foreseeable future, business conditions permitting.
Securities Authorized for Issuance under Equity Compensation Plans. Refer to Part III of this Annual Report on Form 10-K.
Stock Performance Graph. The annual changes for the five-year period shown in the graph below are based on the assumption
that $100 had been invested in our common stock, the Standard & Poor’s 500 Index and the Standard & Poor’s Retail Select
Industry Index (“SPSIRE”) on June 30, 2014. The total cumulative dollar returns shown on the graph represent the value that
such investments would have had on June 30, 2019. Stockholder returns over the indicated period are based on historical
data and should not be considered indicative of future stockholder returns.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Ethan Allen Interiors Inc., the S&P 500 Index,
S&P Retail Select Industry Index (SPSIRE)
$160
$140
$120
$100
$80
6/14
6/15
6/16
6/17
6/18
6/19
Ethan Allen Interiors Inc.
S&P 500®
S&P Retail Select Industry Index (SPSIRE)
*This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that Section, and shall not be deemed
to be incorporated by reference into any filing of Ethan Allen under the Securities Act of 1933, as amended, or the Exchange Act whether
made before or after the date hereof and irrespective of any general incorporation language in any such filing.
(b) Recent Sales of Unregistered Securities
There were no sales of unregistered equity securities during fiscal 2019.
(c) Purchases of Equity Securities by the Issuer
We may from time to time make repurchases in the open market and through privately negotiated transactions, subject to
market conditions, including pursuant to our previously announced repurchase program. There were no share repurchases
under the program during fiscal 2019. At June 30, 2019, we had a remaining Board authorization to repurchase 2,518,046
shares of our common stock pursuant to our program.
20
21
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
revolving credit facility and subsequently repaid this borrowing in full by June 30, 2019, using cash generated from operating
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide a
reader of our financial statements with a narrative from the perspective of our management on our financial condition, results
of operations, liquidity and certain other factors that may affect our future results.
The MD&A is based upon, and should be read in conjunction with, our Consolidated Financial Statements and related Notes
included under Item 8 of this Annual Report on Form 10-K.
Executive Overview
Who We Are. We are a leading interior design company and manufacturer and retailer of quality home furnishings. Founded
over 87 years ago, today we are a leading international home fashion brand doing business in North America, Europe, Asia
and the Middle East. We are vertically integrated from design through delivery, affording our clientele a value proposition of
style, quality and price. We offer complementary interior design service to our clients and sell a full range of furniture products
and decorative accents through ethanallen.com and a network of approximately 300 design centers in the United States and
abroad. The design centers represent a mix of independent licensees and our own Company operated retail segment. We
own and operate six manufacturing facilities, including three manufacturing plants and one sawmill in the United States and
one manufacturing plant in Mexico and one in Honduras.
Business Model. Our business model is to maintain continued focus on (i) capitalizing on the strength of our interior design
professionals and management in our retail design centers, (ii) communicating our messages with strong advertising and
marketing campaigns, (iii) utilizing ethanallen.com as a key marketing tool to drive traffic to our design centers, (iv) investing
in new technologies across key aspects of our vertically integrated business, and (v) leveraging the benefits of our vertical
integration by maintaining a strong manufacturing capacity in North America where we manufacture approximately 75% of
our products.
Our competitive advantages arise from:
•
•
•
•
•
providing fashionable high-quality products of the finest craftsmanship;
offering complimentary design service through approximately 2,000 motivated interior design professionals
network-wide;
offering a wide array of custom products across our upholstery, case goods, and accent product categories;
enhancing our technology in all aspects of the business; and
leveraging our vertically integrated structure.
Transformation. We have completed a major transformation of our product offerings, having refreshed over 70% of our
entire product line over the past three years. In the past 12 months, we further strengthened our offerings with relevant new
products featuring a modern perspective on classic designs. During fiscal 2019, we successfully introduced our Relaxed
Modern product line, a casual, livable, inspired by nature, transitional design made of mixed materials as well as expanded
our Home & Garden collection. Our contract sales, including sales to the GSA, hospitality and other commercial businesses,
continue to grow and the GSA has become one of our ten largest customers. Our internet sales, while still a low percentage
of our consolidated sales, are growing at a rate that continues to out-pace our brick and mortar design centers.
Fiscal 2019 Year in Review.(1) Improved adjusted gross margin, cost containment within our expenses and a lower effective
tax rate helped increase our adjusted diluted earnings per share in fiscal 2019 to $1.56, up 15.6%. Consolidated net sales
decreased 2.6% due to a decline of 7.2% within our wholesale segment partially offset by growth in our retail segment of
0.4%. Consolidated international net sales for fiscal 2019 decreased $27.4 million primarily due to lower sales in China and
made up 6.8% of our consolidated net sales compared with 10.2% in the prior year period. Our adjusted gross margin
expanded 90 basis points to 55.1%, driven by a price increase and a change in the retail segment sales mix relative to total
consolidated sales, which was 79.0% compared with 76.6% in the year ago period. Adjusted operating income, which excludes
$21.1 million of pre-tax charges from restructuring initiatives, asset impairments and other corporate actions, rose 9.8%
during the current year due to lower national television advertising costs and a reduction in share-based compensation. The
full year fiscal 2019 effective income tax rate was 24.1% compared with 25.9% in the prior year due to tax law changes
resulting from the Tax Act. As of June 30, 2019, our balance sheet remains strong with cash and cash equivalents of $20.8
million and inventory of $162.4 million. During the fiscal 2019 year we paid $47.0 million in dividends, including a special
dividend payment of $26.7 million, reflecting an annual increase of 59.2%. In addition, during December 2018 we entered
into a five-year, $165 million senior secured revolving credit facility, which amended and restated the previously existing
facility. To partially fund the special cash dividend paid to shareholders in January 2019, we borrowed $16.0 million from the
22
activities.
to adjusted key financial metrics.
(1) Refer to the Regulation G Reconciliation of Non-GAAP Financial Measures section within this MD&A for the reconciliation of U.S. GAAP
Optimization of Manufacturing and Logistics. During April 2019 we announced plans to further improve our vertically
integrated operations with a number of initiatives including converting our case goods manufacturing plant in North Carolina
to a state-of-the-art distribution center, consolidating case goods manufacturing to our Vermont and other plants, adding a
80,000 square foot addition to one of our upholstery plants and moving our distribution operations from New Jersey to North
Carolina. For these actions, we recorded pre-tax restructuring, impairment, and other related charges totaling $8.3 million,
consisting of $3.1 million in impairments of long-lived assets, $2.8 million in employee severance and other payroll and benefit
costs, $2.0 million in inventory write-downs and manufacturing variances and $0.4 million of other associated costs, including
freight and relocation expenses. Consistent with our overall strategy to maximize production efficiencies and maintain
competitive advantage, we have also reduced our employee headcount by approximately 380 positions as part of our efforts
to consolidate our manufacturing and logistics operations.
Retail Segment Impairment Charges. During fiscal 2019 we recorded $12.1 million of impairment and exit charges within the
retail segment. Approximately $9.9 million was an impairment charge for long-lived assets held at the retail design center
level. An additional $2.1 million primarily represented remaining contractual obligations under leased space for which we
A summary of our key operating metrics is presented in the following table ($ in millions, except per share amounts).
2019
% of Sa l es
2018
% of Sa l es
2017
% of Sa l es
Fi s ca l Yea r Ended June 30,
$
746.7
$
409.5
$
411.5
$
33.9
$
55.1
$
25.7
$
41.6
$
0.96
$
1.56
$
55.2
100.0%
54.8%
55.1%
4.5%
7.4%
3.4%
5.6%
$
766.8
$
416.0
$
416.0
$
48.9
$
50.1
$
36.4
$
37.3
$
1.32
$
1.35
$
42.5
100.0%
54.2%
54.2%
6.4%
6.5%
4.7%
4.9%
$
763.4
$
419.7
$
426.1
$
58.0
$
65.0
$
36.2
$
40.6
$
1.29
$
1.45
$
78.6
100.0%
55.0%
55.8%
7.6%
8.5%
4.7%
5.3%
(1) Refer to the Regulation G Reconciliation of Non-GAAP Financial Measures section within this MD&A for the reconciliation of U.S. GAAP
A summary of changes from the applicable periods in the preceding fiscal year is presented in the following table.
ceased using as of June 30, 2019.
Key Operating Metrics
Net s a l es
Gros s profi t
Adjus ted gros s profi t(1)
Opera ti ng i ncome
Adjus ted opera ti ng i ncome (1)
Net i ncome
Adjus ted net i ncome (1)
Di l uted EPS
Adjus ted di l uted EPS (1)
Ca s h fl ow from opera ti ng a cti vi ti es
to adjusted key financial metrics.
Net s a l es
Gros s profi t
Adjus ted gros s profi t(1)
Opera ti ng i ncome
Adjus ted opera ti ng i ncome (1)
Net i ncome
Adjus ted net i ncome (1)
Di l uted EPS
Adjus ted di l uted EPS (1)
Ca s h fl ows from opera ti ng a cti vi tes
to adjusted key financial metrics.
Fi s ca l Yea r Ended June 30,
2019
2018
2017
0.4%
(0.9%)
(2.4%)
(15.7%)
(22.8%)
0.5%
(8.2%)
2.3%
(6.9%)
(46.0%)
(3.9%)
(5.1%)
(3.6%)
(35.0%)
(25.3%)
(36.1%)
(25.4%)
(35.5%)
(24.5%)
34.7%
(2.6%)
(1.6%)
(1.1%)
(30.5%)
9.8%
(29.3%)
11.6%
(27.3%)
15.6%
30.0%
23
(1) Refer to the Regulation G Reconciliation of Non-GAAP Financial Measures section within this MD&A for the reconciliation of U.S. GAAP
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide a
reader of our financial statements with a narrative from the perspective of our management on our financial condition, results
of operations, liquidity and certain other factors that may affect our future results.
The MD&A is based upon, and should be read in conjunction with, our Consolidated Financial Statements and related Notes
included under Item 8 of this Annual Report on Form 10-K.
Executive Overview
Who We Are. We are a leading interior design company and manufacturer and retailer of quality home furnishings. Founded
over 87 years ago, today we are a leading international home fashion brand doing business in North America, Europe, Asia
and the Middle East. We are vertically integrated from design through delivery, affording our clientele a value proposition of
style, quality and price. We offer complementary interior design service to our clients and sell a full range of furniture products
and decorative accents through ethanallen.com and a network of approximately 300 design centers in the United States and
abroad. The design centers represent a mix of independent licensees and our own Company operated retail segment. We
own and operate six manufacturing facilities, including three manufacturing plants and one sawmill in the United States and
one manufacturing plant in Mexico and one in Honduras.
Business Model. Our business model is to maintain continued focus on (i) capitalizing on the strength of our interior design
professionals and management in our retail design centers, (ii) communicating our messages with strong advertising and
marketing campaigns, (iii) utilizing ethanallen.com as a key marketing tool to drive traffic to our design centers, (iv) investing
in new technologies across key aspects of our vertically integrated business, and (v) leveraging the benefits of our vertical
integration by maintaining a strong manufacturing capacity in North America where we manufacture approximately 75% of
our products.
Our competitive advantages arise from:
network-wide;
•
•
•
•
•
providing fashionable high-quality products of the finest craftsmanship;
offering complimentary design service through approximately 2,000 motivated interior design professionals
offering a wide array of custom products across our upholstery, case goods, and accent product categories;
enhancing our technology in all aspects of the business; and
leveraging our vertically integrated structure.
Transformation. We have completed a major transformation of our product offerings, having refreshed over 70% of our
entire product line over the past three years. In the past 12 months, we further strengthened our offerings with relevant new
products featuring a modern perspective on classic designs. During fiscal 2019, we successfully introduced our Relaxed
Modern product line, a casual, livable, inspired by nature, transitional design made of mixed materials as well as expanded
our Home & Garden collection. Our contract sales, including sales to the GSA, hospitality and other commercial businesses,
continue to grow and the GSA has become one of our ten largest customers. Our internet sales, while still a low percentage
of our consolidated sales, are growing at a rate that continues to out-pace our brick and mortar design centers.
Fiscal 2019 Year in Review.(1) Improved adjusted gross margin, cost containment within our expenses and a lower effective
tax rate helped increase our adjusted diluted earnings per share in fiscal 2019 to $1.56, up 15.6%. Consolidated net sales
decreased 2.6% due to a decline of 7.2% within our wholesale segment partially offset by growth in our retail segment of
0.4%. Consolidated international net sales for fiscal 2019 decreased $27.4 million primarily due to lower sales in China and
made up 6.8% of our consolidated net sales compared with 10.2% in the prior year period. Our adjusted gross margin
expanded 90 basis points to 55.1%, driven by a price increase and a change in the retail segment sales mix relative to total
consolidated sales, which was 79.0% compared with 76.6% in the year ago period. Adjusted operating income, which excludes
$21.1 million of pre-tax charges from restructuring initiatives, asset impairments and other corporate actions, rose 9.8%
during the current year due to lower national television advertising costs and a reduction in share-based compensation. The
full year fiscal 2019 effective income tax rate was 24.1% compared with 25.9% in the prior year due to tax law changes
resulting from the Tax Act. As of June 30, 2019, our balance sheet remains strong with cash and cash equivalents of $20.8
million and inventory of $162.4 million. During the fiscal 2019 year we paid $47.0 million in dividends, including a special
dividend payment of $26.7 million, reflecting an annual increase of 59.2%. In addition, during December 2018 we entered
into a five-year, $165 million senior secured revolving credit facility, which amended and restated the previously existing
facility. To partially fund the special cash dividend paid to shareholders in January 2019, we borrowed $16.0 million from the
revolving credit facility and subsequently repaid this borrowing in full by June 30, 2019, using cash generated from operating
activities.
(1) Refer to the Regulation G Reconciliation of Non-GAAP Financial Measures section within this MD&A for the reconciliation of U.S. GAAP
to adjusted key financial metrics.
Optimization of Manufacturing and Logistics. During April 2019 we announced plans to further improve our vertically
integrated operations with a number of initiatives including converting our case goods manufacturing plant in North Carolina
to a state-of-the-art distribution center, consolidating case goods manufacturing to our Vermont and other plants, adding a
80,000 square foot addition to one of our upholstery plants and moving our distribution operations from New Jersey to North
Carolina. For these actions, we recorded pre-tax restructuring, impairment, and other related charges totaling $8.3 million,
consisting of $3.1 million in impairments of long-lived assets, $2.8 million in employee severance and other payroll and benefit
costs, $2.0 million in inventory write-downs and manufacturing variances and $0.4 million of other associated costs, including
freight and relocation expenses. Consistent with our overall strategy to maximize production efficiencies and maintain
competitive advantage, we have also reduced our employee headcount by approximately 380 positions as part of our efforts
to consolidate our manufacturing and logistics operations.
Retail Segment Impairment Charges. During fiscal 2019 we recorded $12.1 million of impairment and exit charges within the
retail segment. Approximately $9.9 million was an impairment charge for long-lived assets held at the retail design center
level. An additional $2.1 million primarily represented remaining contractual obligations under leased space for which we
ceased using as of June 30, 2019.
Key Operating Metrics
A summary of our key operating metrics is presented in the following table ($ in millions, except per share amounts).
Net s a l es
Gros s profi t
Adjus ted gros s profi t(1)
Opera ti ng i ncome
Adjus ted opera ti ng i ncome (1)
Net i ncome
Adjus ted net i ncome (1)
Di l uted EPS
Adjus ted di l uted EPS (1)
Ca s h fl ow from opera ti ng a cti vi ti es
Fi s ca l Yea r Ended June 30,
% of Sa l es
100.0%
54.8%
55.1%
4.5%
7.4%
3.4%
5.6%
2019
$
$
746.7
409.5
$
$
411.5
33.9
$
$
55.1
25.7
$
$
41.6
0.96
$
$
1.56
55.2
% of Sa l es
100.0%
54.2%
54.2%
6.4%
6.5%
4.7%
4.9%
2018
$
$
766.8
416.0
$
$
416.0
48.9
$
$
50.1
36.4
$
$
37.3
1.32
$
$
1.35
42.5
% of Sa l es
100.0%
55.0%
55.8%
7.6%
8.5%
4.7%
5.3%
2017
$
$
763.4
419.7
$
$
426.1
58.0
$
$
65.0
36.2
$
$
40.6
1.29
$
$
1.45
78.6
(1) Refer to the Regulation G Reconciliation of Non-GAAP Financial Measures section within this MD&A for the reconciliation of U.S. GAAP
to adjusted key financial metrics.
A summary of changes from the applicable periods in the preceding fiscal year is presented in the following table.
Net s a l es
Gros s profi t
Adjus ted gros s profi t(1)
Opera ti ng i ncome
Adjus ted opera ti ng i ncome (1)
Net i ncome
Adjus ted net i ncome (1)
Di l uted EPS
Adjus ted di l uted EPS (1)
Ca s h fl ows from opera ti ng a cti vi tes
Fi s ca l Yea r Ended June 30,
2019
2018
2017
(2.6%)
(1.6%)
(1.1%)
(30.5%)
9.8%
(29.3%)
11.6%
(27.3%)
15.6%
30.0%
0.4%
(0.9%)
(2.4%)
(15.7%)
(22.8%)
0.5%
(8.2%)
2.3%
(6.9%)
(46.0%)
(3.9%)
(5.1%)
(3.6%)
(35.0%)
(25.3%)
(36.1%)
(25.4%)
(35.5%)
(24.5%)
34.7%
22
23
(1) Refer to the Regulation G Reconciliation of Non-GAAP Financial Measures section within this MD&A for the reconciliation of U.S. GAAP
to adjusted key financial metrics.
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
The components of consolidated net sales and operating income (loss) by business segment are presented in the following
table ($ in millions):
Results of Operations
Fi s ca l Yea r Ended June 30,
2019
2018
2017
Net s a l es
Whol es a l e s egment
Reta i l s egment
El i mi na ti on of i nters egment s a l es
Cons ol i da ted net s a l es
Opera ti ng i ncome (l os s ):
Whol es a l e s egment
Reta i l s egment
El i mi na ti on of i ntercompa ny profi t(1)
Cons ol i da ted opera ti ng i ncome
$
441.6
589.8
(284.7)
746.7
$
$
475.7
587.5
(296.4)
766.8
$
$
453.3
603.7
(293.6)
763.4
$
$
42.4
(10.5)
2.0
33.9
$
$
48.5
(1.7)
2.1
48.9
$
$
53.5
1.2
3.3
58.0
$
(1) Represents the change in wholesale profit contained in Ethan Allen-operated design center inventory existing at the end of the period.
A summary by business segment changes from the applicable periods in the preceding fiscal year is presented in the following
table:
Fi s ca l Yea r Ended June 30,
2018
2019
2017
Whol es a l e s egment:
Net s a l es
Opera ti ng i ncome
Ba ckl og
(7.2%)
(12.4%)
(18.0%)
4.9%
(9.4%)
19.3%
(7.8%)
(28.1%)
17.6%
Reta i l s egment:
Net s a l es
Compa ra bl e des i gn center net s a l es
Tota l wri tten orders
Compa ra bl e des i gn center wri tten orders
Opera ti ng i ncome
Ba ckl og
0.4%
(0.8%)
(1.4%)
(2.7%)
(505.8%)
(11.0%)
(2.7%)
(3.2%)
(3.1%)
(3.8%)
(245.1%)
(2.3%)
(3.6%)
(4.6%)
(0.9%)
(2.5%)
(92.7%)
(1.0%)
The following table shows selected design center location information.
Fis cal 2019
Fis cal 2018
Independent
retailers
Company-
operated
Total
Independent
retailers
Company-
operated
Total
Retail Des ign Center location activity:
Balance at July 1
New locations
Clos ures
Trans fers
Balance at June 30
Relocations (in new and clos ures )
Retail Des ign Center geographic locations :
United States
Canada
China
Other As ia
Europe
Middle Eas t
Total
148
21
(9)
(2)
158
-
40
-
100
11
1
6
158
155
11
(16)
(2)
148
-
44
-
87
9
1
7
148
2
(4)
2
148
1
142
6
-
-
-
-
303
13
(20)
-
296
1
186
6
87
9
1
7
148
148
296
148
3
(9)
2
144
3
138
6
-
-
-
-
144
296
24
(18)
-
302
3
178
6
100
11
1
6
302
24
For an understanding of the significant factors that influenced our financial performance during the past two fiscal years, the
following discussion should be read in conjunction with the consolidated financial statements and related notes presented
under Item 8 in this Annual Report on Form 10-K ($ in millions, except per share amounts).
Fiscal 2019 Compared to Fiscal 2018
Consolidated net sales for fiscal 2019 were $746.7 million, a decrease of 2.6% compared to the same prior year period. Net
sales decreased by 7.2% for our wholesale segment, which were partly offset by a 0.4% increase in our retail segment. There
was a $27.4 million decrease in international sales from our combined retail and wholesale segments, which was primarily
related to the economic uncertainty surrounding international trade disputes, lower sales in China and a slowing global
economy.
Wholesale net sales decreased by $34.2 million or 7.2%, to $441.6 million. The lower net sales were primarily due to a $22.3
million decline in sales to China and an $18.3 million reduction in sales to our North American independent retail network.
Partially offsetting these declines was growth in contract sales, which grew $19.5 million year over year. The year over year
increase in contract sales was primarily attributable to higher sales from the GSA contract. There were 302 design centers
globally as of June 30, 2019, an increase of six in the past 12 months. Our international net sales to independent retailers was
4.1% of our consolidated net sales compared to 7.0%. Our backlog at June 30, 2019 was down 18.0% compared to the prior
year as our manufacturing operations returned to normal throughput as compared to the prior year’s longer production lead-
times primarily related to the GSA contract startup.
Retail net sales from Ethan Allen operated design centers increased by $2.3 million, or 0.4%, to $589.8 million. There was a
1.2% increase in sales in the United States, while sales from the Canadian design centers decreased 17.3%. Comparative retail
net sales decreased 0.8%. There were 144 Company operated design centers at the end of fiscal 2019, down from 148 at the
beginning of the year. Total written business (new orders booked) decreased 1.4%, with the United States decreasing 0.9%
while Canada declined 13.9%. Comparable design center written business was down 2.7% during fiscal 2019 in total. Regional
economic conditions in Canada, where we have six design centers, were negatively impacted in fiscal 2019 due to the trade
dispute and additional tariffs levied during most of the year. A higher increase in retail net sales relative to written orders is
reflected in the 11.0% decrease in our ending retail order backlog at June 30, 2019.
Gross profit decreased 1.6% to $409.5 million compared to the prior year period due to a 9.1% decline in profit within our
wholesale segment, while our retail segment grew 3.0%. Wholesale gross profit in fiscal 2019 was negatively impacted by
lower sales volume and restructuring actions taken during the year, partially offset by a change in product mix. Our fiscal
2019 gross margin improved to 54.8%, up from 54.2% in the prior year. Retail sales as a percent of total consolidated sales
were 79.0% for the year compared with 76.6% in the prior fiscal year, which sales mix increased our consolidated gross
margin. A price increase during fiscal 2019 improved retail gross profit, while lower wholesale sales volume negatively
impacted gross profit. The restructuring actions, which included the write off of inventory, higher unfavorable manufacturing
variances and incremental freight and relocation costs, negatively impacted our fiscal 2019 gross margin by 30 basis points.
Operating expenses increased $8.4 million or 2.3% to $375.5 million or 50.3% of net sales in fiscal 2019 from $367.1 million
or 47.9% of net sales in fiscal 2018. The increase in operating expenses was due to $18.4 million in restructuring and
impairments charges and higher occupancy and retail management costs partially offset by lower national television
advertising costs of $14.4 million.
Operating income for fiscal 2019 totaled $33.9 million, or 4.5% of net sales, compared to $48.9 million, or 6.4% of net sales,
in the prior fiscal year. The primary causes for the decrease in operating income was lower net sales of $20.1 million and
restructuring charges in the current fiscal year of $18.4 million partially offset by a higher gross margin and a reduction in
national television advertising costs.
Wholesale operating income totaled $42.5 million, or 9.6% of net sales, as compared to $48.5 million, or 10.2% of net sales,
in the prior year. The decrease was largely due to lower sales volumes, restructuring actions which included $2.0 million
within cost of goods sold and $6.3 million within operating expenses during fiscal 2019 and lower margins in upholstery.
These decreases were partially offset by lower advertising costs and improved gross margins in case goods and home accents.
Retail operating loss was $10.5 million, or 1.8% of sales for fiscal 2019, compared to a loss of $1.7 million, or 0.3% of sales,
for fiscal 2018, a decrease of $8.8 million. Restructuring and impairments charges lowered retail operating income by $12.1
million during fiscal 2019. These charges were partially offset by a higher gross margin.
25
The components of consolidated net sales and operating income (loss) by business segment are presented in the following
Results of Operations
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Cons ol i da ted opera ti ng i ncome
$
33.9
$
48.9
$
58.0
(1) Represents the change in wholesale profit contained in Ethan Allen-operated design center inventory existing at the end of the period.
A summary by business segment changes from the applicable periods in the preceding fiscal year is presented in the following
table ($ in millions):
Net s a l es
Whol es a l e s egment
Reta i l s egment
El i mi na ti on of i nters egment s a l es
Cons ol i da ted net s a l es
Opera ti ng i ncome (l os s ):
Whol es a l e s egment
Reta i l s egment
El i mi na ti on of i ntercompa ny profi t(1)
Fi s ca l Yea r Ended June 30,
2019
2018
2017
$
441.6
$
475.7
$
453.3
589.8
(284.7)
587.5
(296.4)
603.7
(293.6)
$
746.7
$
766.8
$
763.4
$
42.4
$
48.5
$
53.5
(10.5)
2.0
(1.7)
2.1
1.2
3.3
table:
Whol es a l e s egment:
Net s a l es
Opera ti ng i ncome
Ba ckl og
Reta i l s egment:
Net s a l es
Fi s ca l Yea r Ended June 30,
2019
2018
2017
(7.2%)
(12.4%)
(18.0%)
4.9%
(9.4%)
19.3%
(7.8%)
(28.1%)
17.6%
Compa ra bl e des i gn center net s a l es
Tota l wri tten orders
Compa ra bl e des i gn center wri tten orders
Opera ti ng i ncome
Ba ckl og
0.4%
(0.8%)
(1.4%)
(2.7%)
(2.7%)
(3.2%)
(3.1%)
(3.8%)
(505.8%)
(11.0%)
(245.1%)
(2.3%)
(3.6%)
(4.6%)
(0.9%)
(2.5%)
(92.7%)
(1.0%)
The following table shows selected design center location information.
Fis cal 2019
Fis cal 2018
Independent
retailers
Company-
operated
Independent
Total
retailers
Company-
operated
Total
Retail Des ign Center location activity:
Relocations (in new and clos ures )
Retail Des ign Center geographic locations :
Balance at July 1
New locations
Clos ures
Trans fers
Balance at June 30
United States
Canada
China
Other As ia
Europe
Middle Eas t
Total
148
21
(9)
(2)
158
-
40
-
100
11
1
6
158
148
(9)
144
138
3
2
3
6
-
-
-
-
144
296
24
(18)
302
-
3
178
6
100
11
1
6
302
24
155
11
(16)
(2)
148
-
44
-
87
9
1
7
148
(4)
148
142
2
2
1
6
-
-
-
-
303
13
(20)
296
-
1
186
6
87
9
1
7
148
148
296
For an understanding of the significant factors that influenced our financial performance during the past two fiscal years, the
following discussion should be read in conjunction with the consolidated financial statements and related notes presented
under Item 8 in this Annual Report on Form 10-K ($ in millions, except per share amounts).
Fiscal 2019 Compared to Fiscal 2018
Consolidated net sales for fiscal 2019 were $746.7 million, a decrease of 2.6% compared to the same prior year period. Net
sales decreased by 7.2% for our wholesale segment, which were partly offset by a 0.4% increase in our retail segment. There
was a $27.4 million decrease in international sales from our combined retail and wholesale segments, which was primarily
related to the economic uncertainty surrounding international trade disputes, lower sales in China and a slowing global
economy.
Wholesale net sales decreased by $34.2 million or 7.2%, to $441.6 million. The lower net sales were primarily due to a $22.3
million decline in sales to China and an $18.3 million reduction in sales to our North American independent retail network.
Partially offsetting these declines was growth in contract sales, which grew $19.5 million year over year. The year over year
increase in contract sales was primarily attributable to higher sales from the GSA contract. There were 302 design centers
globally as of June 30, 2019, an increase of six in the past 12 months. Our international net sales to independent retailers was
4.1% of our consolidated net sales compared to 7.0%. Our backlog at June 30, 2019 was down 18.0% compared to the prior
year as our manufacturing operations returned to normal throughput as compared to the prior year’s longer production lead-
times primarily related to the GSA contract startup.
Retail net sales from Ethan Allen operated design centers increased by $2.3 million, or 0.4%, to $589.8 million. There was a
1.2% increase in sales in the United States, while sales from the Canadian design centers decreased 17.3%. Comparative retail
net sales decreased 0.8%. There were 144 Company operated design centers at the end of fiscal 2019, down from 148 at the
beginning of the year. Total written business (new orders booked) decreased 1.4%, with the United States decreasing 0.9%
while Canada declined 13.9%. Comparable design center written business was down 2.7% during fiscal 2019 in total. Regional
economic conditions in Canada, where we have six design centers, were negatively impacted in fiscal 2019 due to the trade
dispute and additional tariffs levied during most of the year. A higher increase in retail net sales relative to written orders is
reflected in the 11.0% decrease in our ending retail order backlog at June 30, 2019.
Gross profit decreased 1.6% to $409.5 million compared to the prior year period due to a 9.1% decline in profit within our
wholesale segment, while our retail segment grew 3.0%. Wholesale gross profit in fiscal 2019 was negatively impacted by
lower sales volume and restructuring actions taken during the year, partially offset by a change in product mix. Our fiscal
2019 gross margin improved to 54.8%, up from 54.2% in the prior year. Retail sales as a percent of total consolidated sales
were 79.0% for the year compared with 76.6% in the prior fiscal year, which sales mix increased our consolidated gross
margin. A price increase during fiscal 2019 improved retail gross profit, while lower wholesale sales volume negatively
impacted gross profit. The restructuring actions, which included the write off of inventory, higher unfavorable manufacturing
variances and incremental freight and relocation costs, negatively impacted our fiscal 2019 gross margin by 30 basis points.
Operating expenses increased $8.4 million or 2.3% to $375.5 million or 50.3% of net sales in fiscal 2019 from $367.1 million
or 47.9% of net sales in fiscal 2018. The increase in operating expenses was due to $18.4 million in restructuring and
impairments charges and higher occupancy and retail management costs partially offset by lower national television
advertising costs of $14.4 million.
Operating income for fiscal 2019 totaled $33.9 million, or 4.5% of net sales, compared to $48.9 million, or 6.4% of net sales,
in the prior fiscal year. The primary causes for the decrease in operating income was lower net sales of $20.1 million and
restructuring charges in the current fiscal year of $18.4 million partially offset by a higher gross margin and a reduction in
national television advertising costs.
Wholesale operating income totaled $42.5 million, or 9.6% of net sales, as compared to $48.5 million, or 10.2% of net sales,
in the prior year. The decrease was largely due to lower sales volumes, restructuring actions which included $2.0 million
within cost of goods sold and $6.3 million within operating expenses during fiscal 2019 and lower margins in upholstery.
These decreases were partially offset by lower advertising costs and improved gross margins in case goods and home accents.
Retail operating loss was $10.5 million, or 1.8% of sales for fiscal 2019, compared to a loss of $1.7 million, or 0.3% of sales,
for fiscal 2018, a decrease of $8.8 million. Restructuring and impairments charges lowered retail operating income by $12.1
million during fiscal 2019. These charges were partially offset by a higher gross margin.
25
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Income tax expense was $8.2 million for fiscal 2019 and $12.7 million for fiscal 2018. Our effective tax rate for fiscal 2019
was 24.1% compared to 25.9% in fiscal 2018. The effective tax rate of 24.1% primarily includes a provision for income tax on
the current year’s taxable income, including federal, state and local taxes, tax expense on the establishment and maintenance
of a valuation allowance on Canadian deferred tax assets, and tax and interest expense on uncertain tax positions, partially
offset by the reversal of various uncertain tax positions. The decrease from 25.9% in the prior fiscal year to 24.1% in the
current fiscal year was primarily driven by being able to recognize a full year benefit of the Tax Act, which required us to
compute income taxes expense for fiscal 2018 using a blended rate of 28% and 21% while fiscal 2019 was able to utilize the
21% rate for the full year.
Net income for fiscal 2019 was $25.7 million compared with $36.4 million for the prior year period, which resulted in $0.96
per diluted share compared to $1.32 in the prior year period. Fiscal 2019 restructuring and impairment charges of $20.4
million along with other corporate actions during the year totaled $0.7 million, which lowered diluted EPS by $0.60. Fiscal
2018 was negatively impacted by organizational changes and other exit costs of $0.03 per diluted share.
Fiscal 2018 Compared to Fiscal 2017
For a comparison of our results of operations for the fiscal years ended June 30, 2018 and 2017, see Item 7, Management’s
Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal
year ended June 30, 2018, filed with the SEC on August 2, 2018.
Regulation G Reconciliations of Non-GAAP Financial Measures
To supplement the financial measures prepared in accordance with U.S. GAAP, we use 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
generally accepted accounting principles in the U.S., or U.S. GAAP. We believe these non-GAAP measures provide a
meaningful comparison of our results to others in our industry and our prior year results. Investors should consider these
non-GAAP financial measures in addition to, and not as a substitute for, our financial performance measures prepared in
Moreover, these non-GAAP financial measures have limitations in that they do not reflect all the
accordance with U.S. GAAP.
items associated with the operations of the business as determined in accordance with U.S. GAAP. Other companies may
calculate similarly titled non-GAAP financial measures differently than we do, limiting the usefulness of those measures for
comparative purposes.
(cid:3)
Despite the limitations of these non-GAAP financial measures, we believe these adjusted financial measures and the
information they provide are useful in viewing our performance using the same tools that management uses to assess
progress in achieving our goals. Adjusted measures may also facilitate comparisons to our historical performance.
The following tables below show a reconciliation of non-GAAP financial measures used in this filing to the most directly
comparable GAAP financial measures (in thousands, except per share data).
Consolidated Adjusted Gross Profit / Gross Margin
GAAP Gross profit
Adjustments (pre-tax) *
Adjusted gross profit *
Adjusted gross margin *
Adjusted Operating Income / Operating Margin
GAAP Operating income
Adjustments (pre-tax) *
Adjusted operating income *
Net sales
GAAP Operating margin
Adjusted operating margin *
Fiscal Year Ended June 30,
2019
2018
% Change
(1.6%)
(1.1%)
(30.5%)
9.8%
$409,491
1,994
$411,485
55.1%
$33,947
21,104
$55,051
$746,684
4.5%
7.4%
26
$415,964
-
$415,964
54.2%
$48,867
1,278
$50,145
$766,784
6.4%
6.5%
Adjusted Net Income / Adjusted Diluted EPS
GAAP Net income
Adjustments, net of tax *
Adjusted net income
Diluted weighted average common shares
GAAP Diluted EPS
Adjusted diluted EPS *
$25,698
15,934
$41,632
26,751
$0.96
$1.56
$42,481
8,498
$50,979
$36,371
935
$37,306
27,625
$1.32
$1.35
$48,499
1,035
$49,534
(29.3%)
11.6%
(27.3%)
15.6%
(12.4%)
2.9%
Wholesale Adjusted Operating Income / Adjusted Operating Margin
Wholesale GAAP operating income
Adjustments (pre-tax) *
Adjusted wholesale operating income *
Wholesale net sales
Wholesale GAAP operating margin
Adjusted wholesale operating margin *
$441,551
$475,731
9.6%
11.5%
10.2%
10.4%
Retail Adjusted Operating Income / Adjusted Operating Margin
Retail GAAP operating income
Adjustments (pre-tax) *
Adjusted retail operating income *
($10,529)
($1,738)
(505.8%)
12,606
$2,077
243
($1,495)
238.9%
Retail net sales
Retail GAAP operating margin
Adjusted retail operating margin *
$589,829
$587,502
(1.8%)
0.4%
(0.3%)
(0.3%)
Inventory write-downs and manufacturing overhead costs
Adjustments to gross profit
Restructuring charges, including inventory write-downs (wholesale)
Impairment of long-lived assets, including lease exit costs (retail)
Contingent legal claim (wholesale)
Wholesale other exit costs (wholesale)
Retail acquisition and other exit costs (retail)
Adjustments to operating income
Early debt extinguishment
Adjustments to income before income taxes
Related income tax effects(1)
Adjustments to net income
Fiscal Year Ended June 30,
2019
2018
$1,994
$1,994
$8,324
12,050
-
174
556
-
$21,104
(5,170)
$15,934
$-
$-
$-
-
500
535
243
67
$1,345
(410)
$935
$21,104
$1,278
* Adjustments to reported U.S. GAAP financial measures including gross profit and margin, operating income and margin, net
income, and diluted EPS have been adjusted by the following (in thousands):
(1) Calculated using an effective tax rate of 24.5% in fiscal 2019 and 30.5% in fiscal 2018.
Liquidity
At June 30, 2019, we held cash and equivalents of $20.8 million compared with $22.4 million at June 30, 2018. Our principal
sources of liquidity include cash and cash equivalents, cash flow from operations and amounts available under our credit
facility. Cash and cash equivalents aggregated to 4.1% of our total assets at June 30, 2019, compared with 4.2% of our total
assets a year ago. Our cash and cash equivalents decreased $1.5 million during fiscal 2019 due to $47.0 million in dividend
payments and $9.1 million of capital expenditures partially offset by net cash provided by operating activities of $55.2 million.
27
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Income tax expense was $8.2 million for fiscal 2019 and $12.7 million for fiscal 2018. Our effective tax rate for fiscal 2019
was 24.1% compared to 25.9% in fiscal 2018. The effective tax rate of 24.1% primarily includes a provision for income tax on
the current year’s taxable income, including federal, state and local taxes, tax expense on the establishment and maintenance
of a valuation allowance on Canadian deferred tax assets, and tax and interest expense on uncertain tax positions, partially
offset by the reversal of various uncertain tax positions. The decrease from 25.9% in the prior fiscal year to 24.1% in the
current fiscal year was primarily driven by being able to recognize a full year benefit of the Tax Act, which required us to
compute income taxes expense for fiscal 2018 using a blended rate of 28% and 21% while fiscal 2019 was able to utilize the
21% rate for the full year.
Net income for fiscal 2019 was $25.7 million compared with $36.4 million for the prior year period, which resulted in $0.96
per diluted share compared to $1.32 in the prior year period. Fiscal 2019 restructuring and impairment charges of $20.4
million along with other corporate actions during the year totaled $0.7 million, which lowered diluted EPS by $0.60. Fiscal
2018 was negatively impacted by organizational changes and other exit costs of $0.03 per diluted share.
Fiscal 2018 Compared to Fiscal 2017
For a comparison of our results of operations for the fiscal years ended June 30, 2018 and 2017, see Item 7, Management’s
Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal
year ended June 30, 2018, filed with the SEC on August 2, 2018.
Regulation G Reconciliations of Non-GAAP Financial Measures
To supplement the financial measures prepared in accordance with U.S. GAAP, we use 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
generally accepted accounting principles in the U.S., or U.S. GAAP. We believe these non-GAAP measures provide a
meaningful comparison of our results to others in our industry and our prior year results. Investors should consider these
non-GAAP financial measures in addition to, and not as a substitute for, our financial performance measures prepared in
accordance with U.S. 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 U.S. GAAP. Other companies may
calculate similarly titled non-GAAP financial measures differently than we do, limiting the usefulness of those measures for
(cid:3)
comparative purposes.
Despite the limitations of these non-GAAP financial measures, we believe these adjusted financial measures and the
information they provide are useful in viewing our performance using the same tools that management uses to assess
progress in achieving our goals. Adjusted measures may also facilitate comparisons to our historical performance.
The following tables below show a reconciliation of non-GAAP financial measures used in this filing to the most directly
comparable GAAP financial measures (in thousands, except per share data).
Consolidated Adjusted Gross Profit / Gross Margin
GAAP Gross profit
Adjustments (pre-tax) *
Adjusted gross profit *
Adjusted gross margin *
Adjusted Operating Income / Operating Margin
GAAP Operating income
Adjustments (pre-tax) *
Adjusted operating income *
Net sales
GAAP Operating margin
Adjusted operating margin *
Fiscal Year Ended June 30,
2019
2018
% Change
$415,964
(1.6%)
$409,491
1,994
$411,485
55.1%
$33,947
21,104
$55,051
-
$415,964
54.2%
$48,867
1,278
$50,145
$746,684
$766,784
4.5%
7.4%
6.4%
6.5%
26
(1.1%)
(30.5%)
9.8%
Adjusted Net Income / Adjusted Diluted EPS
GAAP Net income
Adjustments, net of tax *
Adjusted net income
Diluted weighted average common shares
GAAP Diluted EPS
Adjusted diluted EPS *
$25,698
15,934
$41,632
26,751
$0.96
$1.56
Wholesale Adjusted Operating Income / Adjusted Operating Margin
Wholesale GAAP operating income
Adjustments (pre-tax) *
Adjusted wholesale operating income *
$42,481
8,498
$50,979
Wholesale net sales
Wholesale GAAP operating margin
Adjusted wholesale operating margin *
$441,551
9.6%
11.5%
Retail Adjusted Operating Income / Adjusted Operating Margin
Retail GAAP operating income
Adjustments (pre-tax) *
Adjusted retail operating income *
($10,529)
12,606
$2,077
Retail net sales
Retail GAAP operating margin
Adjusted retail operating margin *
$589,829
(1.8%)
0.4%
(29.3%)
11.6%
(27.3%)
15.6%
(12.4%)
2.9%
(505.8%)
238.9%
$36,371
935
$37,306
27,625
$1.32
$1.35
$48,499
1,035
$49,534
$475,731
10.2%
10.4%
($1,738)
243
($1,495)
$587,502
(0.3%)
(0.3%)
* Adjustments to reported U.S. GAAP financial measures including gross profit and margin, operating income and margin, net
income, and diluted EPS have been adjusted by the following (in thousands):
Inventory write-downs and manufacturing overhead costs
Adjustments to gross profit
Restructuring charges, including inventory write-downs (wholesale)
Impairment of long-lived assets, including lease exit costs (retail)
Contingent legal claim (wholesale)
Wholesale other exit costs (wholesale)
Retail acquisition and other exit costs (retail)
Adjustments to operating income
Early debt extinguishment
Adjustments to income before income taxes
Related income tax effects(1)
Adjustments to net income
Fiscal Year Ended June 30,
2019
2018
$1,994
$1,994
$8,324
12,050
-
174
556
$21,104
-
$21,104
(5,170)
$15,934
$-
$-
$-
-
500
535
243
$1,278
67
$1,345
(410)
$935
(1) Calculated using an effective tax rate of 24.5% in fiscal 2019 and 30.5% in fiscal 2018.
Liquidity
At June 30, 2019, we held cash and equivalents of $20.8 million compared with $22.4 million at June 30, 2018. Our principal
sources of liquidity include cash and cash equivalents, cash flow from operations and amounts available under our credit
facility. Cash and cash equivalents aggregated to 4.1% of our total assets at June 30, 2019, compared with 4.2% of our total
assets a year ago. Our cash and cash equivalents decreased $1.5 million during fiscal 2019 due to $47.0 million in dividend
payments and $9.1 million of capital expenditures partially offset by net cash provided by operating activities of $55.2 million.
27
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
A summary of net cash provided by (used in) operating, investing and financing activities for each of the last three fiscal years
is provided below (in millions):
Capital Resources
2017
2019
Fis cal Year Ended June 30,
2018
Cas h provided by (us ed in) operating activities
Net income plus other non-cas h items
Change in working capital
Total provided by operating activities
Cas h provided by (us ed in) inves ting activities
Capital expenditures
Acquis itions , net of cas h acquired
Other inves ting activities
Total (us ed in) inves ting activities
Cas h provided by (us ed in) financing activities
Payments on borrowings and capital leas e obligations
Borrowings from revolving credit facility
Purchas es and retirements of company s tock
Payment of cas h dividends
Other financing activities
Total (us ed in) financing activities
$
60.2
(5.0)
$
57.0
(14.5)
$
62.1
16.5
$
55.2
$
42.5
$
78.6
$
(9.1)
(0.5)
0.1
$
(12.5)
(6.3)
0.6
$
(17.6)
(0.7)
1.4
$
(9.5)
$
(18.2)
$
(16.9)
$
(16.6)
16.0
-
(47.0)
0.3
$
(14.5)
-
(23.1)
(29.5)
0.2
$
(28.4)
-
(10.2)
(20.0)
1.3
$
(47.3)
$
(66.9)
$
(57.3)
Cash Provided By (Used in) Operating Activities. In fiscal 2019 cash generated from operations totaled $55.2 million, an
increase of $12.7 million. This was largely due to $9.5 million in working capital improvements as fiscal 2018 experienced a
significant inventory increase to support the order backlog and the expansion of our GSA business. In fiscal 2019, our
inventory levels declined by $0.6 million while the year ago balance grew by $13.5 million. Partially offsetting the benefits of
reduced inventory amounts was a reduction in customer deposits of $4.5 million, which negatively impacted cash flow. Lower
customer deposits were due to written orders in the fourth quarter of fiscal 2019 being 4.0% lower than the year ago fourth
quarter.
Cash Provided by (Used in) Investing Activities. In fiscal 2019, cash of $9.5 million was used in investing activities, a decrease
of $8.7 million due to lower capital expenditures and design center acquisitions. Cash paid to acquire design centers from our
independent retailers in an arm’s length transaction totaled $0.5 million during fiscal 2019 compared with $6.3 million a year
ago. Effective July 1, 2018, and further described in Note 5 to the consolidated financial statements included under Part II,
Item 8 of this Annual Report on Form 10-K, we consider restricted cash as a component of cash and cash equivalents as
presented on our consolidated statement of cash flows. Previously the net change in restricted cash was considered an
investing activity. Prior periods have been reclassified to conform to current year presentation.
Cash Provided By (Used in) Financing Activities. In fiscal 2019, $47.3 million was used in financing activities, which is $19.6
million less cash used than the $66.9 million of cash used in the prior year comparable period. The decrease year over year
was primarily due to $23.1 million in share repurchases during fiscal 2018 (which included $22.0 million under our existing
share repurchase program) compared to none in fiscal 2019. During fiscal 2019 we paid cash dividends of $47.0 million
compared with $29.5 million in the prior year to date period. In November 2018, we declared a $1.00 per share special cash
dividend, which was paid in January 2019, in addition to the regular quarterly dividend of $0.19 per share. We have
continuously paid regular quarterly dividends for every quarter since 1996 and expect to continue to do so as economic
conditions and liquidity permit. This year our total dividends paid to shareholders grew by 59.2%.
We believe that our cash flow from operations, together with our other available sources of liquidity including the credit
facility, will be sufficient to fund changes in working capital, necessary capital expenditures, acquisition activity, repayment
of debt, the payment of dividends and other cash requirements.
For a discussion of our liquidity and capital resources as of and our cash flow activities for the fiscal year ended June 30, 2018
and 2017, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual
Report on Form 10-K for the fiscal year ended June 30, 2018, filed with the SEC on August 2, 2018.
28
29
Capital Expenditures. Capital expenditures in fiscal 2019 were $9.1 million compared with $12.5 million in the prior year
period. The decrease of $3.4 million from the prior year related primarily to less spending on retail design center
improvements. In fiscal 2019, approximately 65% of our total capital expenditures related to opening new and relocating
design centers in desirable locations, updating presentations and floor plans and the consolidation of certain design centers
and service centers. In fiscal 2018, approximately 75% of our capital expenditures were within the retail segment. We
anticipate that cash from operations will be sufficient to fund future capital expenditures.
Capital Needs. During December 2018 we entered into a five-year, $165 million senior secured revolving credit facility, which
amended and restated the previously existing facility. To partially fund the special cash dividend paid to shareholders in
January 2019, we borrowed $16.0 million from the revolving credit facility. By June 30, 2019, we had repaid 100% of the total
borrowed from cash generated from operating activities. For a detailed discussion of revolving credit facility, our debt
obligations and timing of our related cash payments see Note 11 to the consolidated financial statements included under
Part II, Item 8 of this Annual Report on Form 10-K.
Letters of Credit. At June 30, 2019 and 2018, there was $6.1 million and $6.2 million, respectively, of standby letters of credit
outstanding under the revolving credit facility.
Total availability under the revolving credit facility was $158.9 million at June 30, 2019 and $108.8 million at June 30, 2018.
At both June 30, 2019 and 2018, respectively, we were in compliance with all the covenants under the revolving credit facility.
For a discussion of our liquidity and capital resources as of and our cash flow activities for the fiscal year ended June 30, 2018
and 2017, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual
Report on Form 10-K for the fiscal year ended June 30, 2018, filed with the SEC on August 2, 2018.
Share Repurchase Program
We may from time to time make repurchases in the open market and through privately negotiated transactions, subject to
market conditions, including pursuant to our previously announced repurchase program. There were no share repurchases
under the program during fiscal 2019. During fiscal 2018, we repurchased 950,484 shares for $22.0 million under the existing
share repurchase program. At June 30, 2019, we had a remaining Board authorization to repurchase 2,518,046 shares of our
common stock pursuant to our program.
Contractual Obligations
Fluctuations in our operating results, levels of inventory on hand, the timing of tax and other payments as well as necessary
capital expenditures to support growth of our operations will impact our liquidity and cash flows in future periods. The impact
of our contractual obligations on our liquidity and capital resources in future periods should be considered in conjunction
with the factors mentioned here. As of June 30, 2019, we had total contractual obligations of $207.0 million, which was
comparable to the prior year commitments of $218.0 million, reflecting no material changes during fiscal 2019.
The following table summarizes our significant contractual obligations as of June 30, 2019 and the corresponding impact that
these obligations will have on our liquidity and cash flows in future periods (in millions):
Long-term debt obl i ga ti ons (1)
Ca pi ta l l ea s e obl i ga ti ons (2)
Opera ti ng l ea s e obl i ga ti ons (3)
Purcha s e obl i ga ti ons (4)
Other l ong-term l i a bi l i ti es
Tota l contra ctua l obl i ga ti ons (5)
Tota l
Les s tha n
1 Yea r
1-3
Yea rs
4-5
Yea rs
More tha n
5 Yea rs
$
-
$
-
$
-
$
-
$
-
Pa yments Due by Peri od
1.1
169.9
35.8
0.2
0.6
33.8
32.0
-
0.5
57.0
3.8
-
35.6
-
-
-
-
-
43.5
0.2
$
207.0
$
66.4
$
61.3
$
35.6
$
43.7
(1)
Long-term debt obligations mean all payment obligations under long-term borrowings. As of June 30, 2019, we did not have any outstanding
borrowings under our revolving credit facility. Further discussion of our contractual obligations associated with long-term debt can be found in Note
11, Debt, in the notes to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
(2) Capital lease amounts include all future payment obligations under a lease classified as a capital lease pursuant to FASB ASC Topic 840.
(3) Operating lease amounts include future minimum lease payments under all our non-cancelable operating leases with an initial term in excess of one
year. For more information on our operating leases, see Note 20, Commitments and Contingencies, in the notes to the Consolidated Financial
Statements included in Item 8 of this Annual Report on Form 10-K.
A summary of net cash provided by (used in) operating, investing and financing activities for each of the last three fiscal years
Capital Resources
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
is provided below (in millions):
Cas h provided by (us ed in) operating activities
Net income plus other non-cas h items
Change in working capital
Total provided by operating activities
Cas h provided by (us ed in) inves ting activities
Capital expenditures
Acquis itions , net of cas h acquired
Other inves ting activities
Total (us ed in) inves ting activities
Fis cal Year Ended June 30,
2019
2018
2017
$
60.2
$
57.0
$
62.1
(5.0)
(14.5)
16.5
$
55.2
$
42.5
$
78.6
$
(9.1)
$
(12.5)
$
(17.6)
(0.5)
0.1
(6.3)
0.6
(0.7)
1.4
$
(9.5)
$
(18.2)
$
(16.9)
Cas h provided by (us ed in) financing activities
Payments on borrowings and capital leas e obligations
$
(16.6)
$
(14.5)
$
(28.4)
Borrowings from revolving credit facility
Purchas es and retirements of company s tock
Payment of cas h dividends
Other financing activities
16.0
-
(47.0)
0.3
-
(23.1)
(29.5)
0.2
-
(10.2)
(20.0)
1.3
Total (us ed in) financing activities
$
(47.3)
$
(66.9)
$
(57.3)
Cash Provided By (Used in) Operating Activities. In fiscal 2019 cash generated from operations totaled $55.2 million, an
increase of $12.7 million. This was largely due to $9.5 million in working capital improvements as fiscal 2018 experienced a
significant inventory increase to support the order backlog and the expansion of our GSA business. In fiscal 2019, our
inventory levels declined by $0.6 million while the year ago balance grew by $13.5 million. Partially offsetting the benefits of
reduced inventory amounts was a reduction in customer deposits of $4.5 million, which negatively impacted cash flow. Lower
customer deposits were due to written orders in the fourth quarter of fiscal 2019 being 4.0% lower than the year ago fourth
quarter.
Cash Provided by (Used in) Investing Activities. In fiscal 2019, cash of $9.5 million was used in investing activities, a decrease
of $8.7 million due to lower capital expenditures and design center acquisitions. Cash paid to acquire design centers from our
independent retailers in an arm’s length transaction totaled $0.5 million during fiscal 2019 compared with $6.3 million a year
ago. Effective July 1, 2018, and further described in Note 5 to the consolidated financial statements included under Part II,
Item 8 of this Annual Report on Form 10-K, we consider restricted cash as a component of cash and cash equivalents as
presented on our consolidated statement of cash flows. Previously the net change in restricted cash was considered an
investing activity. Prior periods have been reclassified to conform to current year presentation.
Cash Provided By (Used in) Financing Activities. In fiscal 2019, $47.3 million was used in financing activities, which is $19.6
million less cash used than the $66.9 million of cash used in the prior year comparable period. The decrease year over year
was primarily due to $23.1 million in share repurchases during fiscal 2018 (which included $22.0 million under our existing
share repurchase program) compared to none in fiscal 2019. During fiscal 2019 we paid cash dividends of $47.0 million
compared with $29.5 million in the prior year to date period. In November 2018, we declared a $1.00 per share special cash
dividend, which was paid in January 2019, in addition to the regular quarterly dividend of $0.19 per share. We have
continuously paid regular quarterly dividends for every quarter since 1996 and expect to continue to do so as economic
conditions and liquidity permit. This year our total dividends paid to shareholders grew by 59.2%.
We believe that our cash flow from operations, together with our other available sources of liquidity including the credit
facility, will be sufficient to fund changes in working capital, necessary capital expenditures, acquisition activity, repayment
of debt, the payment of dividends and other cash requirements.
For a discussion of our liquidity and capital resources as of and our cash flow activities for the fiscal year ended June 30, 2018
and 2017, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual
Report on Form 10-K for the fiscal year ended June 30, 2018, filed with the SEC on August 2, 2018.
Capital Expenditures. Capital expenditures in fiscal 2019 were $9.1 million compared with $12.5 million in the prior year
period. The decrease of $3.4 million from the prior year related primarily to less spending on retail design center
improvements. In fiscal 2019, approximately 65% of our total capital expenditures related to opening new and relocating
design centers in desirable locations, updating presentations and floor plans and the consolidation of certain design centers
and service centers. In fiscal 2018, approximately 75% of our capital expenditures were within the retail segment. We
anticipate that cash from operations will be sufficient to fund future capital expenditures.
Capital Needs. During December 2018 we entered into a five-year, $165 million senior secured revolving credit facility, which
amended and restated the previously existing facility. To partially fund the special cash dividend paid to shareholders in
January 2019, we borrowed $16.0 million from the revolving credit facility. By June 30, 2019, we had repaid 100% of the total
borrowed from cash generated from operating activities. For a detailed discussion of revolving credit facility, our debt
obligations and timing of our related cash payments see Note 11 to the consolidated financial statements included under
Part II, Item 8 of this Annual Report on Form 10-K.
Letters of Credit. At June 30, 2019 and 2018, there was $6.1 million and $6.2 million, respectively, of standby letters of credit
outstanding under the revolving credit facility.
Total availability under the revolving credit facility was $158.9 million at June 30, 2019 and $108.8 million at June 30, 2018.
At both June 30, 2019 and 2018, respectively, we were in compliance with all the covenants under the revolving credit facility.
For a discussion of our liquidity and capital resources as of and our cash flow activities for the fiscal year ended June 30, 2018
and 2017, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual
Report on Form 10-K for the fiscal year ended June 30, 2018, filed with the SEC on August 2, 2018.
Share Repurchase Program
We may from time to time make repurchases in the open market and through privately negotiated transactions, subject to
market conditions, including pursuant to our previously announced repurchase program. There were no share repurchases
under the program during fiscal 2019. During fiscal 2018, we repurchased 950,484 shares for $22.0 million under the existing
share repurchase program. At June 30, 2019, we had a remaining Board authorization to repurchase 2,518,046 shares of our
common stock pursuant to our program.
Contractual Obligations
Fluctuations in our operating results, levels of inventory on hand, the timing of tax and other payments as well as necessary
capital expenditures to support growth of our operations will impact our liquidity and cash flows in future periods. The impact
of our contractual obligations on our liquidity and capital resources in future periods should be considered in conjunction
with the factors mentioned here. As of June 30, 2019, we had total contractual obligations of $207.0 million, which was
comparable to the prior year commitments of $218.0 million, reflecting no material changes during fiscal 2019.
The following table summarizes our significant contractual obligations as of June 30, 2019 and the corresponding impact that
these obligations will have on our liquidity and cash flows in future periods (in millions):
Long-term debt obl i ga ti ons (1)
Ca pi ta l l ea s e obl i ga ti ons (2)
Opera ti ng l ea s e obl i ga ti ons (3)
Purcha s e obl i ga ti ons (4)
Other l ong-term l i a bi l i ti es
Tota l contra ctua l obl i ga ti ons (5)
Tota l
Les s tha n
1 Yea r
1-3
Yea rs
4-5
Yea rs
More tha n
5 Yea rs
$
-
$
-
$
-
$
-
$
-
Pa yments Due by Peri od
1.1
169.9
35.8
0.2
0.6
33.8
32.0
-
0.5
57.0
3.8
-
-
35.6
-
-
-
43.5
-
0.2
$
207.0
$
66.4
$
61.3
$
35.6
$
43.7
(1)
Long-term debt obligations mean all payment obligations under long-term borrowings. As of June 30, 2019, we did not have any outstanding
borrowings under our revolving credit facility. Further discussion of our contractual obligations associated with long-term debt can be found in Note
11, Debt, in the notes to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
(2) Capital lease amounts include all future payment obligations under a lease classified as a capital lease pursuant to FASB ASC Topic 840.
(3) Operating lease amounts include future minimum lease payments under all our non-cancelable operating leases with an initial term in excess of one
year. For more information on our operating leases, see Note 20, Commitments and Contingencies, in the notes to the Consolidated Financial
Statements included in Item 8 of this Annual Report on Form 10-K.
28
29
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
(4) Purchase obligations are defined as agreements that are enforceable and legally binding that specify all significant terms, including fixed or minimum
quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. We do, in the normal course
of business, regularly initiate purchase orders for the procurement of (i) selected finished goods sourced from third-party suppliers, (ii) lumber, fabric,
leather and other raw materials used in production, and (iii) certain outsourced services. All purchase orders are based on current needs and are
fulfilled by suppliers within short time periods. At June 30, 2019, our open purchase orders with respect to such goods and services totaled $23.9
million and are to be paid in less than one year. Other purchase commitments included within this table represent payment due for other services such
as telecommunication, computer-related software, royalties, web development, insurance and other maintenance contracts.
(5) Non-current income taxes payable of $1.6 million and non-current deferred tax liabilities of $1.1 million have been excluded from the table above due
to uncertainty regarding the timing of future payments.
We believe that our cash flow from operations, together with our other available sources of liquidity, will be adequate to
make all required payments of principal and interest on our debt, to permit anticipated capital expenditures, and to fund
working capital and other cash requirements. As of June 30, 2019, we had working capital of $93.5 million compared to $93.2
million at June 30, 2018, an increase of $0.3 million and a current ratio of 1.76 at June 30, 2019 compared to 1.77 at June 30,
2018. In addition to using available cash to fund changes in working capital, capital expenditures, retail acquisitions,
repayment of debt, and payment of cash dividends, the Company has been authorized by our Board of Directors to repurchase
shares of our common stock from time to time, either directly or through agents, in the open market at prices and on terms
satisfactory to us.
Off-Balance Sheet Arrangements and Other Commitments and Contingencies
Except as indicated below, we do not utilize or employ any off-balance sheet arrangements, including special-purpose
entities, in operating our business. As such, we do not maintain any (i) retained or contingent interests, (ii) derivative
instruments (other than as specified below), or (iii) variable interests which could serve as a source of potential risk to our
future liquidity, capital resources and results of operations.
We may, from time to time in the ordinary course of business, provide guarantees on behalf of selected affiliated entities or
become contractually obligated to perform in accordance with the terms and conditions of certain business agreements. The
nature and extent of these guarantees and obligations may vary based on our underlying relationship with the benefiting
party and the business purpose for which the guarantee or obligation is being provided. The only such program in place at
both June 30, 2019 and 2018, respectively, was for our legacy consumer credit program described below.
Ethan Allen Consumer Credit Program. The terms and conditions of our legacy consumer credit program, which is financed
and administered by a third-party financial institution on a non-recourse basis to Ethan Allen, are set forth in an agreement
between the Company and that financial service provider (the “Program Agreement”) which was last amended effective
January 2014. Any independent retailer choosing to participate in the consumer credit program is required to enter into a
separate agreement with that same third-party financial institution which sets forth the terms and conditions under which
the retailer is to perform in connection with its offering of consumer credit to its customers (the “Retailer Agreement”). We
have obligated ourselves on behalf of any independent retailer choosing to participate in our consumer credit program by
agreeing, in the event of default, breach, or failure of the independent retailer to perform under such Retailer Agreement, to
take on certain responsibilities of the independent retailer, including, but not limited to, delivery of goods and reimbursement
of customer deposits. Customer receivables originated by independent retailers remain non-recourse to Ethan Allen. While
the maximum potential amount of future payments (undiscounted) that we could be required to make under this obligation
is indeterminable, recourse provisions exist that would enable us to recover, from the independent retailer, any amount paid
or incurred by us related to our performance. Based on the underlying creditworthiness of our independent retailers,
including their historical ability to perform satisfactorily in connection with the terms of our consumer credit program, we
believe this obligation will expire without requiring funding by us. To ensure funding for delivery of products sold, the terms
of the Program Agreement also contain a right for the financial services provider to demand from the Company collateral at
a variable rate based on the volume of program sales if the Company does not meet certain covenants, including a minimum
working capital requirement. At June 30, 2019 and 2018, we were in compliance with all such covenants. The Program
Agreement and legacy consumer credit program will terminate on July 31, 2019.
During the fourth quarter of fiscal 2019, we launched a new consumer credit program utilizing a non-related third-party
financial institution. Our new Ethan Allen Platinum consumer credit program, designed to make the Ethan Allen brand
accessible to everyone, had a successful national launch and should continue to attract both new prospects and returning
clients. Financing offered through this program is administered by a third-party financial institution and is granted to our
clients on a non-recourse basis to the Company.
Product Warranties. Our products, including our case goods, upholstery and home accents, generally carry explicit product
warranties and are provided based on terms that are generally accepted in the industry. All our domestic independent
retailers are required to enter into and perform in accordance with the terms and conditions of a warranty service agreement.
We record provisions for estimated warranty and other related costs at time of sale based on historical warranty loss
experience and make periodic adjustments to those provisions to reflect actual experience. On rare occasion, certain
warranty and other related claims involve matters of dispute that ultimately are resolved by negotiation, arbitration or
litigation. In certain cases, a material warranty issue may arise which is beyond the scope of our historical experience. We
provide for such warranty issues as they become known and are deemed to be both probable and estimable. It is reasonably
possible that, from time to time, additional warranty and other related claims could arise from disputes or other matters
beyond the scope of our historical experience. As of June 30, 2019 and 2018, our product warranty liability totaled $1.6
million and $1.5 million, respectively.
Dividends
In January 2019, we paid a $1.00 per share special cash dividend, in addition to the regular quarterly dividend of $0.19 per
share. For the full fiscal 2019 year, we paid a total of $1.76 per share in dividends for an aggregate total of $47.0 million. In
the prior year, total dividends paid were $29.5 million.
With our dividends, we have returned $126.5 million to shareholders over the past five years. Future cash dividends will
depend on our earnings, capital requirements, financial condition and other factors considered relevant by us, subject to final
determination by our Board of Directors.
Foreign Currency
Foreign Currency Exposure. Foreign currency exchange risk is primarily limited to our operation of Ethan Allen operated retail
design centers located in Canada and our manufacturing plants in Mexico and Honduras, as substantially all purchases of
imported parts and finished goods are denominated in U.S. dollars. The financial statements of these foreign locations are
translated into U.S. dollars using period-end rates of exchange for assets and liabilities and average rates for the period for
revenues and expenses. Translation gains and losses that arise from translating assets, liabilities, revenues and expenses of
foreign operations are recorded in accumulated other comprehensive (loss) income as a component of shareholders’ equity.
Foreign exchange gains or losses resulting from market changes in the value of foreign currencies did not have a material
impact during any of the fiscal periods presented in this Annual Report on Form 10-K.
Impact of Inflation. We believe any inflationary impact on our product and operating costs during the past three fiscal years
was offset by our ability to create operational efficiencies, seek lower cost alternatives and raise selling prices.
Critical Accounting Estimates
We prepare our consolidated financial statements in conformity with U.S. GAAP. In some cases, these principles require
management to make difficult and subjective judgments regarding uncertainties and, as a result, such estimates and
assumptions may significantly impact our financial results and disclosures. We consider an accounting estimate to be critical
if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the
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(4) Purchase obligations are defined as agreements that are enforceable and legally binding that specify all significant terms, including fixed or minimum
quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. We do, in the normal course
of business, regularly initiate purchase orders for the procurement of (i) selected finished goods sourced from third-party suppliers, (ii) lumber, fabric,
leather and other raw materials used in production, and (iii) certain outsourced services. All purchase orders are based on current needs and are
fulfilled by suppliers within short time periods. At June 30, 2019, our open purchase orders with respect to such goods and services totaled $23.9
million and are to be paid in less than one year. Other purchase commitments included within this table represent payment due for other services such
as telecommunication, computer-related software, royalties, web development, insurance and other maintenance contracts.
(5) Non-current income taxes payable of $1.6 million and non-current deferred tax liabilities of $1.1 million have been excluded from the table above due
to uncertainty regarding the timing of future payments.
We believe that our cash flow from operations, together with our other available sources of liquidity, will be adequate to
make all required payments of principal and interest on our debt, to permit anticipated capital expenditures, and to fund
working capital and other cash requirements. As of June 30, 2019, we had working capital of $93.5 million compared to $93.2
million at June 30, 2018, an increase of $0.3 million and a current ratio of 1.76 at June 30, 2019 compared to 1.77 at June 30,
2018. In addition to using available cash to fund changes in working capital, capital expenditures, retail acquisitions,
repayment of debt, and payment of cash dividends, the Company has been authorized by our Board of Directors to repurchase
shares of our common stock from time to time, either directly or through agents, in the open market at prices and on terms
satisfactory to us.
Off-Balance Sheet Arrangements and Other Commitments and Contingencies
Except as indicated below, we do not utilize or employ any off-balance sheet arrangements, including special-purpose
entities, in operating our business. As such, we do not maintain any (i) retained or contingent interests, (ii) derivative
instruments (other than as specified below), or (iii) variable interests which could serve as a source of potential risk to our
future liquidity, capital resources and results of operations.
We may, from time to time in the ordinary course of business, provide guarantees on behalf of selected affiliated entities or
become contractually obligated to perform in accordance with the terms and conditions of certain business agreements. The
nature and extent of these guarantees and obligations may vary based on our underlying relationship with the benefiting
party and the business purpose for which the guarantee or obligation is being provided. The only such program in place at
both June 30, 2019 and 2018, respectively, was for our legacy consumer credit program described below.
Ethan Allen Consumer Credit Program. The terms and conditions of our legacy consumer credit program, which is financed
and administered by a third-party financial institution on a non-recourse basis to Ethan Allen, are set forth in an agreement
between the Company and that financial service provider (the “Program Agreement”) which was last amended effective
January 2014. Any independent retailer choosing to participate in the consumer credit program is required to enter into a
separate agreement with that same third-party financial institution which sets forth the terms and conditions under which
the retailer is to perform in connection with its offering of consumer credit to its customers (the “Retailer Agreement”). We
have obligated ourselves on behalf of any independent retailer choosing to participate in our consumer credit program by
agreeing, in the event of default, breach, or failure of the independent retailer to perform under such Retailer Agreement, to
of customer deposits. Customer receivables originated by independent retailers remain non-recourse to Ethan Allen. While
the maximum potential amount of future payments (undiscounted) that we could be required to make under this obligation
is indeterminable, recourse provisions exist that would enable us to recover, from the independent retailer, any amount paid
or incurred by us related to our performance. Based on the underlying creditworthiness of our independent retailers,
including their historical ability to perform satisfactorily in connection with the terms of our consumer credit program, we
believe this obligation will expire without requiring funding by us. To ensure funding for delivery of products sold, the terms
of the Program Agreement also contain a right for the financial services provider to demand from the Company collateral at
a variable rate based on the volume of program sales if the Company does not meet certain covenants, including a minimum
working capital requirement. At June 30, 2019 and 2018, we were in compliance with all such covenants. The Program
Agreement and legacy consumer credit program will terminate on July 31, 2019.
During the fourth quarter of fiscal 2019, we launched a new consumer credit program utilizing a non-related third-party
financial institution. Our new Ethan Allen Platinum consumer credit program, designed to make the Ethan Allen brand
accessible to everyone, had a successful national launch and should continue to attract both new prospects and returning
clients. Financing offered through this program is administered by a third-party financial institution and is granted to our
clients on a non-recourse basis to the Company.
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Product Warranties. Our products, including our case goods, upholstery and home accents, generally carry explicit product
warranties and are provided based on terms that are generally accepted in the industry. All our domestic independent
retailers are required to enter into and perform in accordance with the terms and conditions of a warranty service agreement.
We record provisions for estimated warranty and other related costs at time of sale based on historical warranty loss
experience and make periodic adjustments to those provisions to reflect actual experience. On rare occasion, certain
warranty and other related claims involve matters of dispute that ultimately are resolved by negotiation, arbitration or
litigation. In certain cases, a material warranty issue may arise which is beyond the scope of our historical experience. We
provide for such warranty issues as they become known and are deemed to be both probable and estimable. It is reasonably
possible that, from time to time, additional warranty and other related claims could arise from disputes or other matters
beyond the scope of our historical experience. As of June 30, 2019 and 2018, our product warranty liability totaled $1.6
million and $1.5 million, respectively.
Dividends
In January 2019, we paid a $1.00 per share special cash dividend, in addition to the regular quarterly dividend of $0.19 per
share. For the full fiscal 2019 year, we paid a total of $1.76 per share in dividends for an aggregate total of $47.0 million. In
the prior year, total dividends paid were $29.5 million.
With our dividends, we have returned $126.5 million to shareholders over the past five years. Future cash dividends will
depend on our earnings, capital requirements, financial condition and other factors considered relevant by us, subject to final
determination by our Board of Directors.
take on certain responsibilities of the independent retailer, including, but not limited to, delivery of goods and reimbursement
Foreign Currency
Foreign Currency Exposure. Foreign currency exchange risk is primarily limited to our operation of Ethan Allen operated retail
design centers located in Canada and our manufacturing plants in Mexico and Honduras, as substantially all purchases of
imported parts and finished goods are denominated in U.S. dollars. The financial statements of these foreign locations are
translated into U.S. dollars using period-end rates of exchange for assets and liabilities and average rates for the period for
revenues and expenses. Translation gains and losses that arise from translating assets, liabilities, revenues and expenses of
foreign operations are recorded in accumulated other comprehensive (loss) income as a component of shareholders’ equity.
Foreign exchange gains or losses resulting from market changes in the value of foreign currencies did not have a material
impact during any of the fiscal periods presented in this Annual Report on Form 10-K.
Impact of Inflation. We believe any inflationary impact on our product and operating costs during the past three fiscal years
was offset by our ability to create operational efficiencies, seek lower cost alternatives and raise selling prices.
Critical Accounting Estimates
We prepare our consolidated financial statements in conformity with U.S. GAAP. In some cases, these principles require
management to make difficult and subjective judgments regarding uncertainties and, as a result, such estimates and
assumptions may significantly impact our financial results and disclosures. We consider an accounting estimate to be critical
if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the
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ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period, or
use of different estimates that we reasonably could have used in the current period, would have a material impact on our
financial condition or results of operations. We base our estimates on currently known facts and circumstances, prior
experience and other assumptions we believe to be reasonable. We use our best judgment in valuing these estimates and
may, as warranted, use external advice. Actual results could differ from these estimates, assumptions, and judgments and
these differences could be significant. We make frequent comparisons throughout the year of actual experience to our
assumptions to reduce the likelihood of significant adjustments and will record adjustments when differences are known.
The following critical accounting estimates affect our consolidated financial statements.
Goodwill and Intangible Assets. Goodwill and other indefinite-lived intangible assets are evaluated for impairment on an
annual basis during the fourth quarter of each fiscal year, and between annual tests whenever events or circumstances
indicate that the carrying value of the goodwill or other indefinite-lived intangible asset may exceed its fair value. When
testing goodwill for impairment, we may assess qualitative factors for some or all of our reporting units to determine whether
it is more likely than not (that is, a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying
amount, including goodwill. Alternatively, we may bypass this qualitative assessment and determine whether the carrying
value exceeds the fair value using a quantitative assessment.
We also annually evaluate whether our trade name continues to have an indefinite life. Our trade name is reviewed for
impairment annually in the fourth quarter and may be reviewed more frequently if indicators of impairment are present.
Conditions that may indicate impairment include, but are not limited to, a significant adverse change in customer demand or
business climate that could affect the value of an asset, a product recall or an adverse action or assessment by a regulator.
We qualitatively assess indefinite-lived intangible asset impairment to determine whether it is more likely than not that the
fair value of the asset is less than its carrying amount. If our trade name is qualitatively assessed and determined it is not
more likely than not that the asset’s fair value is greater than its carrying amount, an impairment review is performed by
comparing the carrying value to the estimated fair value, determined using a discounted cash flow methodology. Factors
used in the valuation of intangible assets with indefinite lives include, but are not limited to, management’s plans for future
operations, recent results of operations and projected future cash flows.
Impairment of Long-lived Assets. The recoverability of long-lived assets is evaluated for impairment at least annually or
whenever events or changes in circumstances indicate that we may not be able to recover the carrying amount of an asset
or asset group. Our assessment of recoverability determines whether the carrying value will be recovered through the
expected undiscounted future cash flows resulting from the use of the asset. In the event the sum of the expected
undiscounted future cash flows is less than the carrying value of the asset, an impairment loss equal to the excess of the
asset’s carrying value over its fair value is recorded. For retail design center level long-lived assets, expected cash flows are
determined based on our estimate of future net sales, margin rates and expenses over the remaining expected terms of the
leases. Impairment, if any, is recorded in the period in which the impairment occurred.
Inventories. Inventories (finished goods, work in process and raw materials) are stated at the lower of cost, determined on a
first-in, first-out basis, and net realizable value. Cost is determined based solely on those charges incurred in the acquisition
and production of the related inventory (i.e. material, labor and manufacturing overhead costs). We estimate an inventory
reserve for excess quantities and obsolete items based on specific identification and historical write-downs, taking into
account future demand and market conditions. If actual demand or market conditions in the future are less favorable than
those estimated, additional inventory write-downs may be required.
Income Taxes. We are subject to income taxes in the United States and other foreign jurisdictions. Our tax provision is an
estimate based on our understanding of laws in Federal, state and foreign tax jurisdictions. These laws can be complicated
and are difficult to apply to any business, including ours. The tax laws also require us to allocate our taxable income to many
jurisdictions based on subjective allocation methodologies and information collection processes.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and
tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Additional
factors that we consider when making judgments about the deferred tax valuation include tax law changes, a recent history
of cumulative losses, and variances in future projected profitability.
The Company evaluates, on a quarterly basis, uncertain tax positions taken or expected to be taken on tax returns for
recognition, measurement, presentation, and disclosure in its financial statements. If an income tax position exceeds a 50%
probability of success upon tax audit, based solely on the technical merits of the position, the Company recognizes an income
tax benefit in its financial statements. The tax benefits recognized are measured based on the largest benefit that has a
greater than 50% likelihood of being realized upon ultimate settlement. The liability associated with an unrecognized tax
benefit is classified as a long-term liability except for the amount for which a cash payment is expected to be made or tax
positions settled within one year.
Business Insurance Reserves. We have insurance programs in place to cover workers’ compensation and property/casualty
claims. The insurance programs, which are funded through self-insured retention, are subject to various stop-loss limitations.
We accrue estimated losses using actuarial models and assumptions based on historical loss experience. Although we believe
that the insurance reserves are adequate, the reserve estimates are based on historical experience, which may not be
indicative of current and future losses. In addition, the actuarial calculations used to estimate insurance reserves are based
on numerous assumptions, some of which are subjective. We adjust insurance reserves, as needed, in the event that future
loss experience differs from historical loss patterns.
Recent Accounting Pronouncements
we include here by reference.
Business Outlook
See Note 3, Summary of Significant Accounting Policies, in the notes to our consolidated financial statements included under
Part II, Item 8, for a full description of recent accounting pronouncements, including the expected dates of adoption, which
With our vertical enterprise well positioned, we maintain a cautiously optimistic outlook. Our retail strategy will continue
with its focus on (i) providing relevant product offerings, a wide array of product solutions, and superior interior design
solutions through our large staff of interior design professionals, (ii) continuing strong advertising and marketing campaigns
to get our message across and to continue broadening our customer base, (iii) the opening of new or relocated design centers
in more prominent locations, and encouraging independent retailers to do the same, (iv) leveraging the use of technology
and personal service within our retail network and online through ethanallen.com, and (v) further expansion internationally.
We believe this strategy provides an opportunity to grow our business.
We continue to strengthen our vertically integrated structure from concept of idea, to engineering, to manufacturing, to
retail and logistics. We intend to maintain strong manufacturing capabilities in North America, which we believe is a long-
term competitive advantage that will allow us to advance our objectives of maintaining fast order delivery, exceptional quality
and improving capacity to ship stocked and custom made-to-order items more quickly, which in turn will allow us to grow
our business.
We have completed a major transformation of our product offerings, which reflect fresh and relevant styling targeted to a
wide demographic base. Our design centers continue to be optimized, both in location and size, to build traffic and increase
sales. In addition to expanding our retail channels, we continue to leverage our manufacturing capacities to expand our
contract sales with GSA-related governmental agencies and the military as well as with other contract customers, including
those in the hospitality industry.
Our network of professionally trained interior design professionals differentiates us significantly from our competitors. We
continue to strengthen the level of service, professionalism, and interior design competence, as well as to improve the
efficiency of our retail operations. We believe that over time, we will continue to benefit from (i) continuous repositioning of
our retail network, (ii) frequent new product introductions, (iii) new and innovative marketing promotions and effective use
of targeted advertising media, and (iv) continued use of the latest technology combined with personal service from our
interior design professionals.
We expect the home furnishings industry to remain extremely competitive with respect to both the sourcing of products and
the wholesale and retail sale of those products for the foreseeable future. Domestic manufacturers continue to face pricing
pressures because of the lower manufacturing costs on imports, particularly from Asia. While we also utilize overseas sourcing
for approximately 25% of our products, we choose to differentiate ourselves by maintaining a substantial North American
manufacturing base, the majority of which is located in the United States. This structure enables us to leverage our vertically
integrated structure to our advantage. We continue to believe that a balanced approach to product sourcing, which includes
our own North American manufacturing of approximately 75% of our product offerings coupled with the import of other
selected products, provides the greatest degree of flexibility, lower inventory levels, and short lead times and is the most
effective approach to ensuring that acceptable levels of quality and service are maintained.
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ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period, or
use of different estimates that we reasonably could have used in the current period, would have a material impact on our
financial condition or results of operations. We base our estimates on currently known facts and circumstances, prior
experience and other assumptions we believe to be reasonable. We use our best judgment in valuing these estimates and
may, as warranted, use external advice. Actual results could differ from these estimates, assumptions, and judgments and
these differences could be significant. We make frequent comparisons throughout the year of actual experience to our
assumptions to reduce the likelihood of significant adjustments and will record adjustments when differences are known.
The following critical accounting estimates affect our consolidated financial statements.
Goodwill and Intangible Assets. Goodwill and other indefinite-lived intangible assets are evaluated for impairment on an
annual basis during the fourth quarter of each fiscal year, and between annual tests whenever events or circumstances
indicate that the carrying value of the goodwill or other indefinite-lived intangible asset may exceed its fair value. When
testing goodwill for impairment, we may assess qualitative factors for some or all of our reporting units to determine whether
it is more likely than not (that is, a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying
amount, including goodwill. Alternatively, we may bypass this qualitative assessment and determine whether the carrying
value exceeds the fair value using a quantitative assessment.
We also annually evaluate whether our trade name continues to have an indefinite life. Our trade name is reviewed for
impairment annually in the fourth quarter and may be reviewed more frequently if indicators of impairment are present.
Conditions that may indicate impairment include, but are not limited to, a significant adverse change in customer demand or
business climate that could affect the value of an asset, a product recall or an adverse action or assessment by a regulator.
We qualitatively assess indefinite-lived intangible asset impairment to determine whether it is more likely than not that the
fair value of the asset is less than its carrying amount. If our trade name is qualitatively assessed and determined it is not
more likely than not that the asset’s fair value is greater than its carrying amount, an impairment review is performed by
comparing the carrying value to the estimated fair value, determined using a discounted cash flow methodology. Factors
used in the valuation of intangible assets with indefinite lives include, but are not limited to, management’s plans for future
operations, recent results of operations and projected future cash flows.
Impairment of Long-lived Assets. The recoverability of long-lived assets is evaluated for impairment at least annually or
whenever events or changes in circumstances indicate that we may not be able to recover the carrying amount of an asset
or asset group. Our assessment of recoverability determines whether the carrying value will be recovered through the
expected undiscounted future cash flows resulting from the use of the asset. In the event the sum of the expected
undiscounted future cash flows is less than the carrying value of the asset, an impairment loss equal to the excess of the
asset’s carrying value over its fair value is recorded. For retail design center level long-lived assets, expected cash flows are
determined based on our estimate of future net sales, margin rates and expenses over the remaining expected terms of the
leases. Impairment, if any, is recorded in the period in which the impairment occurred.
Inventories. Inventories (finished goods, work in process and raw materials) are stated at the lower of cost, determined on a
first-in, first-out basis, and net realizable value. Cost is determined based solely on those charges incurred in the acquisition
and production of the related inventory (i.e. material, labor and manufacturing overhead costs). We estimate an inventory
reserve for excess quantities and obsolete items based on specific identification and historical write-downs, taking into
account future demand and market conditions. If actual demand or market conditions in the future are less favorable than
those estimated, additional inventory write-downs may be required.
Income Taxes. We are subject to income taxes in the United States and other foreign jurisdictions. Our tax provision is an
estimate based on our understanding of laws in Federal, state and foreign tax jurisdictions. These laws can be complicated
and are difficult to apply to any business, including ours. The tax laws also require us to allocate our taxable income to many
jurisdictions based on subjective allocation methodologies and information collection processes.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and
tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Additional
factors that we consider when making judgments about the deferred tax valuation include tax law changes, a recent history
of cumulative losses, and variances in future projected profitability.
The Company evaluates, on a quarterly basis, uncertain tax positions taken or expected to be taken on tax returns for
recognition, measurement, presentation, and disclosure in its financial statements. If an income tax position exceeds a 50%
probability of success upon tax audit, based solely on the technical merits of the position, the Company recognizes an income
tax benefit in its financial statements. The tax benefits recognized are measured based on the largest benefit that has a
greater than 50% likelihood of being realized upon ultimate settlement. The liability associated with an unrecognized tax
benefit is classified as a long-term liability except for the amount for which a cash payment is expected to be made or tax
positions settled within one year.
Business Insurance Reserves. We have insurance programs in place to cover workers’ compensation and property/casualty
claims. The insurance programs, which are funded through self-insured retention, are subject to various stop-loss limitations.
We accrue estimated losses using actuarial models and assumptions based on historical loss experience. Although we believe
that the insurance reserves are adequate, the reserve estimates are based on historical experience, which may not be
indicative of current and future losses. In addition, the actuarial calculations used to estimate insurance reserves are based
on numerous assumptions, some of which are subjective. We adjust insurance reserves, as needed, in the event that future
loss experience differs from historical loss patterns.
Recent Accounting Pronouncements
See Note 3, Summary of Significant Accounting Policies, in the notes to our consolidated financial statements included under
Part II, Item 8, for a full description of recent accounting pronouncements, including the expected dates of adoption, which
we include here by reference.
Business Outlook
With our vertical enterprise well positioned, we maintain a cautiously optimistic outlook. Our retail strategy will continue
with its focus on (i) providing relevant product offerings, a wide array of product solutions, and superior interior design
solutions through our large staff of interior design professionals, (ii) continuing strong advertising and marketing campaigns
to get our message across and to continue broadening our customer base, (iii) the opening of new or relocated design centers
in more prominent locations, and encouraging independent retailers to do the same, (iv) leveraging the use of technology
and personal service within our retail network and online through ethanallen.com, and (v) further expansion internationally.
We believe this strategy provides an opportunity to grow our business.
We continue to strengthen our vertically integrated structure from concept of idea, to engineering, to manufacturing, to
retail and logistics. We intend to maintain strong manufacturing capabilities in North America, which we believe is a long-
term competitive advantage that will allow us to advance our objectives of maintaining fast order delivery, exceptional quality
and improving capacity to ship stocked and custom made-to-order items more quickly, which in turn will allow us to grow
our business.
We have completed a major transformation of our product offerings, which reflect fresh and relevant styling targeted to a
wide demographic base. Our design centers continue to be optimized, both in location and size, to build traffic and increase
sales. In addition to expanding our retail channels, we continue to leverage our manufacturing capacities to expand our
contract sales with GSA-related governmental agencies and the military as well as with other contract customers, including
those in the hospitality industry.
Our network of professionally trained interior design professionals differentiates us significantly from our competitors. We
continue to strengthen the level of service, professionalism, and interior design competence, as well as to improve the
efficiency of our retail operations. We believe that over time, we will continue to benefit from (i) continuous repositioning of
our retail network, (ii) frequent new product introductions, (iii) new and innovative marketing promotions and effective use
of targeted advertising media, and (iv) continued use of the latest technology combined with personal service from our
interior design professionals.
We expect the home furnishings industry to remain extremely competitive with respect to both the sourcing of products and
the wholesale and retail sale of those products for the foreseeable future. Domestic manufacturers continue to face pricing
pressures because of the lower manufacturing costs on imports, particularly from Asia. While we also utilize overseas sourcing
for approximately 25% of our products, we choose to differentiate ourselves by maintaining a substantial North American
manufacturing base, the majority of which is located in the United States. This structure enables us to leverage our vertically
integrated structure to our advantage. We continue to believe that a balanced approach to product sourcing, which includes
our own North American manufacturing of approximately 75% of our product offerings coupled with the import of other
selected products, provides the greatest degree of flexibility, lower inventory levels, and short lead times and is the most
effective approach to ensuring that acceptable levels of quality and service are maintained.
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ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements and Supplementary Data
Consolidated Financial Statements
Management’s Report on Internal Control over Financial Reporting……………………………………………………………………
Report of Independent Registered Public Accounting Firm…………………………………………………………………………………..
Consolidated Balance Sheets at June 30, 2019 and 2018……………………………………………………………………………………..
Consolidated Statements of Comprehensive Income for the years ended June 30, 2019, 2018 and 2017…………….
Consolidated Statements of Cash Flows for the years ended June 30, 2019, 2018 and 2017………………………………..
Consolidated Statements of Shareholders’ Equity for the years ended June 30, 2019, 2018 and 2017…………………
Notes to the Consolidated Financial Statements……………………………………………………………………………………………………
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of business, we are exposed to market risks relating to fluctuations in interest rates and foreign currency
exchange rates that could impact our financial position and results of operations.
Interest Rate Risk
Debt. Interest rate risk exists primarily through our borrowing activities. We utilize U.S. dollar denominated borrowings to
fund substantially all our working capital and investment needs. Short-term debt, if required, is used to meet working capital
requirements and long-term debt is generally used to finance long-term investments. There is inherent rollover risk for
borrowings as they mature and are renewed at current market rates. The extent of this risk is not quantifiable or predictable
because of the variability of future interest rates and our future financing requirements. For floating-rate obligations, interest
rate changes do not affect the fair value of the underlying financial instrument but would impact future earnings and cash
flows, assuming other factors are held constant. Conversely, for fixed-rate obligations, interest rate changes affect the fair
value of the underlying financial instrument but would not impact earnings or cash flows.
At June 30, 2019, we did not have any floating-rate debt obligations outstanding under our revolving credit facility. It is
anticipated that the fair market value of any future debt under the credit facility will continue to be immaterially affected by
fluctuations in interest rates and we do not believe that the value of such debt would be significantly impacted by current
market events. Previous borrowings under the facility during fiscal 2019 had an interest rate equal to the one-month LIBOR
rate of 2.5% plus a spread using a debt leverage pricing grid currently at 1.5%. During fiscal 2019, we recorded interest
expense of $0.2 million on our borrowings. We currently do not engage in any interest rate hedging activity and we have no
intention of doing so in the foreseeable future. Assuming all terms of our outstanding long-term debt remained the same, a
hypothetical 100 basis point change (up or down) in the one-month LIBOR rate would not have a material affect on our
consolidated results of operations and financial condition.
LIBOR Transition. LIBOR is the subject of recent national, international and other regulatory guidance and proposals for
reform. These reforms and other pressure may cause LIBOR to disappear entirely or to perform differently than in the past.
It is expected that certain banks will stop reporting information used to set LIBOR at the end of 2021 when their reporting
obligations cease. This will effectively end the usefulness of LIBOR and may end its publication. The consequences of these
developments cannot be entirely predicted but, as noted above, could impact the interest earned on our investments and
our interest expense. If LIBOR is no longer widely available, or otherwise at our option, we will pursue alternative interest
rate calculations in our credit agreement. As of June 30, 2019 and 2018, the Company had no outstanding borrowings under
its existing credit facility and no material exposure to LIBOR, thus we do not believe the discontinuation of LIBOR will have a
material impact on our financial position and results of operations.
Cash and Cash Equivalents. The fair market value of our cash and cash equivalents at June 30, 2019 was $20.8 million. Our
cash and cash equivalents consist of demand deposits and money market funds with original maturities of three months or
less and are reported at fair value. It is anticipated that the fair market value of our cash equivalents will continue to be
immaterially affected by fluctuations in interest rates. Preservation of principal is the primary goal of our cash and investment
policy. Pursuant to our established investment guidelines, we try to achieve high levels of credit quality, liquidity and
diversification. Because of our investment policy, our financial exposure to fluctuations in interest rates is expected to remain
low. We do not believe that the value or liquidity of our cash and cash equivalents have been significantly impacted by current
market events.
Foreign Currency Exchange Risk
Foreign currency exchange risk is primarily limited to our operation of Ethan Allen operated retail design centers located in
Canada and our manufacturing plants in Mexico and Honduras, as substantially all purchases of imported parts and finished
goods are denominated in United States dollars. As such, foreign exchange gains or losses resulting from market changes in
the value of foreign currencies have not had, nor are they expected to have, a material affect on our consolidated results of
operations. A decrease in the value of foreign currencies relative to the U.S. dollar may affect the profitability of our vendors,
but as we employ a balanced sourcing strategy, we believe any impact would be moderate relative to peers in our industry.
A hypothetical 10% weaker United States dollar against all foreign currencies at June 30, 2019 would have had an immaterial
impact on our consolidated results of operations and financial condition. We currently do not engage in any foreign currency
hedging activity and we have no intention of doing so in the foreseeable future.
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ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
In the normal course of business, we are exposed to market risks relating to fluctuations in interest rates and foreign currency
Index to Consolidated Financial Statements and Supplementary Data
Consolidated Financial Statements
Management’s Report on Internal Control over Financial Reporting……………………………………………………………………
Report of Independent Registered Public Accounting Firm…………………………………………………………………………………..
Consolidated Balance Sheets at June 30, 2019 and 2018……………………………………………………………………………………..
Consolidated Statements of Comprehensive Income for the years ended June 30, 2019, 2018 and 2017…………….
Consolidated Statements of Cash Flows for the years ended June 30, 2019, 2018 and 2017………………………………..
Consolidated Statements of Shareholders’ Equity for the years ended June 30, 2019, 2018 and 2017…………………
Notes to the Consolidated Financial Statements……………………………………………………………………………………………………
Page
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39
40
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exchange rates that could impact our financial position and results of operations.
Interest Rate Risk
Debt. Interest rate risk exists primarily through our borrowing activities. We utilize U.S. dollar denominated borrowings to
fund substantially all our working capital and investment needs. Short-term debt, if required, is used to meet working capital
requirements and long-term debt is generally used to finance long-term investments. There is inherent rollover risk for
borrowings as they mature and are renewed at current market rates. The extent of this risk is not quantifiable or predictable
because of the variability of future interest rates and our future financing requirements. For floating-rate obligations, interest
rate changes do not affect the fair value of the underlying financial instrument but would impact future earnings and cash
flows, assuming other factors are held constant. Conversely, for fixed-rate obligations, interest rate changes affect the fair
value of the underlying financial instrument but would not impact earnings or cash flows.
At June 30, 2019, we did not have any floating-rate debt obligations outstanding under our revolving credit facility. It is
anticipated that the fair market value of any future debt under the credit facility will continue to be immaterially affected by
fluctuations in interest rates and we do not believe that the value of such debt would be significantly impacted by current
market events. Previous borrowings under the facility during fiscal 2019 had an interest rate equal to the one-month LIBOR
rate of 2.5% plus a spread using a debt leverage pricing grid currently at 1.5%. During fiscal 2019, we recorded interest
expense of $0.2 million on our borrowings. We currently do not engage in any interest rate hedging activity and we have no
intention of doing so in the foreseeable future. Assuming all terms of our outstanding long-term debt remained the same, a
hypothetical 100 basis point change (up or down) in the one-month LIBOR rate would not have a material affect on our
consolidated results of operations and financial condition.
LIBOR Transition. LIBOR is the subject of recent national, international and other regulatory guidance and proposals for
reform. These reforms and other pressure may cause LIBOR to disappear entirely or to perform differently than in the past.
It is expected that certain banks will stop reporting information used to set LIBOR at the end of 2021 when their reporting
obligations cease. This will effectively end the usefulness of LIBOR and may end its publication. The consequences of these
developments cannot be entirely predicted but, as noted above, could impact the interest earned on our investments and
our interest expense. If LIBOR is no longer widely available, or otherwise at our option, we will pursue alternative interest
rate calculations in our credit agreement. As of June 30, 2019 and 2018, the Company had no outstanding borrowings under
its existing credit facility and no material exposure to LIBOR, thus we do not believe the discontinuation of LIBOR will have a
material impact on our financial position and results of operations.
Cash and Cash Equivalents. The fair market value of our cash and cash equivalents at June 30, 2019 was $20.8 million. Our
cash and cash equivalents consist of demand deposits and money market funds with original maturities of three months or
less and are reported at fair value. It is anticipated that the fair market value of our cash equivalents will continue to be
immaterially affected by fluctuations in interest rates. Preservation of principal is the primary goal of our cash and investment
policy. Pursuant to our established investment guidelines, we try to achieve high levels of credit quality, liquidity and
diversification. Because of our investment policy, our financial exposure to fluctuations in interest rates is expected to remain
low. We do not believe that the value or liquidity of our cash and cash equivalents have been significantly impacted by current
market events.
Foreign Currency Exchange Risk
Foreign currency exchange risk is primarily limited to our operation of Ethan Allen operated retail design centers located in
Canada and our manufacturing plants in Mexico and Honduras, as substantially all purchases of imported parts and finished
goods are denominated in United States dollars. As such, foreign exchange gains or losses resulting from market changes in
the value of foreign currencies have not had, nor are they expected to have, a material affect on our consolidated results of
operations. A decrease in the value of foreign currencies relative to the U.S. dollar may affect the profitability of our vendors,
but as we employ a balanced sourcing strategy, we believe any impact would be moderate relative to peers in our industry.
A hypothetical 10% weaker United States dollar against all foreign currencies at June 30, 2019 would have had an immaterial
impact on our consolidated results of operations and financial condition. We currently do not engage in any foreign currency
hedging activity and we have no intention of doing so in the foreseeable future.
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ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such
term is defined in Rule 13a-15(f) of the Exchange Act. Our internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with U.S. GAAP.
Our internal control over financial reporting includes those policies and procedures that:
•
•
•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of our assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance
with authorizations of our management and directors; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of our assets that could have a material affect on our financial statements.
Management has assessed the effectiveness of our internal control over financial reporting based on the framework in
“Internal Control – Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway
Commission.
Based on the above evaluation, management has concluded that our internal control over financial reporting was effective
as of June 30, 2019 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
consolidated financial statements for external reporting purposes in accordance with U.S. GAAP. The effectiveness of our
internal control over financial reporting as of June 30, 2019 has been audited by KPMG LLP, an independent registered public
accounting firm, as stated in their report, which is included herein.
/s/ M. Farooq Kathwari
Chairman, President and
Chief Executive Officer
(Principal Executive Officer)
/s/ Corey Whitely
Executive Vice President, Administration
Chief Financial Officer and Treasurer
(Principal Financial Officer)
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Ethan Allen Interiors Inc.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Ethan Allen Interiors Inc. and subsidiaries (the
“Company”) as of June 30, 2019 and 2018, the related consolidated statements of comprehensive income, shareholders’
equity, and cash flows for each of the years in the three-year period ended June 30, 2019, and the related notes (collectively,
the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of
June 30, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of June 30, 2019 and 2018, and the results of its operations and its cash flows for each of the
years in the three-year period ended June 30, 2019, in conformity with U.S. generally accepted accounting principles. Also in
our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June
30, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to
express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control
over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States ) (“PCAOB”) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained
in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our
audit of internal control over financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts
and expenditures of the company are being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use, or disposition of the company’s assets that could have a material affect on the financial statements.
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ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such
term is defined in Rule 13a-15(f) of the Exchange Act. Our internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with U.S. GAAP.
Our internal control over financial reporting includes those policies and procedures that:
•
•
•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of our assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance
with authorizations of our management and directors; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of our assets that could have a material affect on our financial statements.
Management has assessed the effectiveness of our internal control over financial reporting based on the framework in
“Internal Control – Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway
Commission.
Based on the above evaluation, management has concluded that our internal control over financial reporting was effective
as of June 30, 2019 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
consolidated financial statements for external reporting purposes in accordance with U.S. GAAP. The effectiveness of our
internal control over financial reporting as of June 30, 2019 has been audited by KPMG LLP, an independent registered public
accounting firm, as stated in their report, which is included herein.
/s/ M. Farooq Kathwari
Chairman, President and
Chief Executive Officer
(Principal Executive Officer)
/s/ Corey Whitely
Executive Vice President, Administration
Chief Financial Officer and Treasurer
(Principal Financial Officer)
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Ethan Allen Interiors Inc.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Ethan Allen Interiors Inc. and subsidiaries (the
“Company”) as of June 30, 2019 and 2018, the related consolidated statements of comprehensive income, shareholders’
equity, and cash flows for each of the years in the three-year period ended June 30, 2019, and the related notes (collectively,
the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of
June 30, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of June 30, 2019 and 2018, and the results of its operations and its cash flows for each of the
years in the three-year period ended June 30, 2019, in conformity with U.S. generally accepted accounting principles. Also in
our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June
30, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to
express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control
over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States ) (“PCAOB”) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained
in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our
audit of internal control over financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts
and expenditures of the company are being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use, or disposition of the company’s assets that could have a material affect on the financial statements.
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ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
We have served as the Company’s auditor since 1989.
Stamford, Connecticut
August 9, 2019
See accompanying notes to the consolidated financial statements.
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ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
We have served as the Company’s auditor since 1989.
/s/ KPMG LLP
Stamford, Connecticut
August 9, 2019
See accompanying notes to the consolidated financial statements.
38
39
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
See accompanying notes to the consolidated financial statements.
See accompanying notes to the consolidated financial statements.
40
41
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
See accompanying notes to the consolidated financial statements.
See accompanying notes to the consolidated financial statements.
40
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ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(1) Organization and Nature of Business
Founded in 1932 and incorporated in Delaware in 1989, Ethan Allen Interiors Inc., through its wholly-owned subsidiary, Ethan
Allen Global, Inc., and Ethan Allen Global, Inc.’s subsidiaries (collectively, “we,” “us,” “our,” “Ethan Allen” or the “Company”),
is a leading interior design company, manufacturer and retailer in the home furnishings marketplace. Today we are a global
luxury international home fashion brand that is vertically integrated from design through delivery, which affords our clientele
a value proposition of style, quality and price. We provide complimentary interior design service to our customers and sell a
full range of furniture products and decorative accents through a retail network of approximately 300 design centers in the
United States and abroad as well as online at ethanallen.com. The design centers represent a mix of independent licensees
and Company-owned and operated locations. Nearly all our Company operated retail design centers are located in the United
States , with the remaining Company operated design centers located in Canada. The majority of the independently operated design
centers are in Asia, with the remaining independently operated design centers located throughout the United States, the Middle
East and Europe. We also own and operate six manufacturing facilities, including three manufacturing plants and one sawmill
in the United States and one manufacturing plant in Mexico and one in Honduras.
(2) Basis of Presentation
Principles of Consolidation. Ethan Allen conducts business globally and has strategically aligned its business into two
reportable segments: Wholesale and Retail. These two segments represent strategic business areas of our vertically
integrated enterprise that operate separately and provide their own distinctive services. The accompanying consolidated
financial statements include the accounts of the Company and its wholly owned subsidiaries. Our consolidated financial
statements also include the accounts of an entity in which we are a majority shareholder with the power to direct the activities
that most significantly impact the entity’s performance. Noncontrolling interest amounts in the entity are immaterial and
included in the Consolidated Statements of Comprehensive Income within interest and other income, net. All intercompany
activity and balances have been eliminated from the consolidated financial statements.
Use of Estimates. We prepare our consolidated financial statements in accordance with U.S. GAAP, which requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of net sales
and expenses during the reporting period. Due to the inherent uncertainty involved in making those estimates, actual results
could differ from those estimates. Areas in which significant estimates have been made include, but are not limited to,
goodwill and indefinite-lived intangible asset impairment analyses, useful lives for property, plant and equipment, inventory
obsolescence, business insurance retention reserves, tax valuation allowances and the evaluation of uncertain tax positions.
Reclassifications. Certain reclassifications have been made to prior years’ financial statements 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.
The Company has evaluated subsequent events through the date that the financial statements were issued.
(3) Summary of Significant Accounting Policies
The significant accounting policies of the Company and its subsidiaries are summarized below.
Cash and Cash Equivalents
Cash and short-term, highly liquid investments with original maturities of three months or less are considered cash and cash
equivalents and are reported at fair value. Our corporate money market funds are readily convertible into cash and the net
asset value of each fund on the last day of the month is used to determine its fair value. We invest excess cash in money market
accounts and short-term commercial paper. As of June 30, 2019 and 2018, we had no restricted cash on hand.
Accounts Receivable
Accounts receivable arise from the sale of products on trade credit terms and is presented net of allowance for doubtful
accounts. We maintain an allowance for estimated losses resulting from the inability of our customers to make required
payments. The allowance for doubtful accounts is based on a review of specifically identified accounts in addition to an overall
aging analysis. Judgments are made with respect to the collectability of accounts receivable based on historical experience
and current economic trends. On a monthly basis, we review all significant accounts as to their past due balances, as well as
See accompanying notes to the consolidated financial statements.
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ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(1) Organization and Nature of Business
Founded in 1932 and incorporated in Delaware in 1989, Ethan Allen Interiors Inc., through its wholly-owned subsidiary, Ethan
Allen Global, Inc., and Ethan Allen Global, Inc.’s subsidiaries (collectively, “we,” “us,” “our,” “Ethan Allen” or the “Company”),
is a leading interior design company, manufacturer and retailer in the home furnishings marketplace. Today we are a global
luxury international home fashion brand that is vertically integrated from design through delivery, which affords our clientele
a value proposition of style, quality and price. We provide complimentary interior design service to our customers and sell a
full range of furniture products and decorative accents through a retail network of approximately 300 design centers in the
United States and abroad as well as online at ethanallen.com. The design centers represent a mix of independent licensees
and Company-owned and operated locations. Nearly all our Company operated retail design centers are located in the United
States , with the remaining Company operated design centers located in Canada. The majority of the independently operated design
centers are in Asia, with the remaining independently operated design centers located throughout the United States, the Middle
East and Europe. We also own and operate six manufacturing facilities, including three manufacturing plants and one sawmill
in the United States and one manufacturing plant in Mexico and one in Honduras.
(2) Basis of Presentation
Principles of Consolidation. Ethan Allen conducts business globally and has strategically aligned its business into two
reportable segments: Wholesale and Retail. These two segments represent strategic business areas of our vertically
integrated enterprise that operate separately and provide their own distinctive services. The accompanying consolidated
financial statements include the accounts of the Company and its wholly owned subsidiaries. Our consolidated financial
statements also include the accounts of an entity in which we are a majority shareholder with the power to direct the activities
that most significantly impact the entity’s performance. Noncontrolling interest amounts in the entity are immaterial and
included in the Consolidated Statements of Comprehensive Income within interest and other income, net. All intercompany
activity and balances have been eliminated from the consolidated financial statements.
Use of Estimates. We prepare our consolidated financial statements in accordance with U.S. GAAP, which requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of net sales
and expenses during the reporting period. Due to the inherent uncertainty involved in making those estimates, actual results
could differ from those estimates. Areas in which significant estimates have been made include, but are not limited to,
goodwill and indefinite-lived intangible asset impairment analyses, useful lives for property, plant and equipment, inventory
obsolescence, business insurance retention reserves, tax valuation allowances and the evaluation of uncertain tax positions.
Reclassifications. Certain reclassifications have been made to prior years’ financial statements 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.
The Company has evaluated subsequent events through the date that the financial statements were issued.
(3) Summary of Significant Accounting Policies
The significant accounting policies of the Company and its subsidiaries are summarized below.
Cash and Cash Equivalents
Cash and short-term, highly liquid investments with original maturities of three months or less are considered cash and cash
equivalents and are reported at fair value. Our corporate money market funds are readily convertible into cash and the net
asset value of each fund on the last day of the month is used to determine its fair value. We invest excess cash in money market
accounts and short-term commercial paper. As of June 30, 2019 and 2018, we had no restricted cash on hand.
Accounts Receivable
Accounts receivable arise from the sale of products on trade credit terms and is presented net of allowance for doubtful
accounts. We maintain an allowance for estimated losses resulting from the inability of our customers to make required
payments. The allowance for doubtful accounts is based on a review of specifically identified accounts in addition to an overall
aging analysis. Judgments are made with respect to the collectability of accounts receivable based on historical experience
and current economic trends. On a monthly basis, we review all significant accounts as to their past due balances, as well as
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43
See accompanying notes to the consolidated financial statements.
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
collectability of the outstanding trade accounts receivable for possible write-off. It is our policy to write-off the accounts
receivable against the allowance account when we deem the receivable to be uncollectible. Additionally, we review orders
from retailers that are significantly past due, and we ship product only when our ability to collect payment from our customer
for the new order is probable. At June 30, 2019 and 2018, the allowance for doubtful accounts was immaterial, respectively.
Inventories
Inventories are stated at the lower of cost (on first-in, first-out basis) or net realizable value. Cost is determined based solely
on those charges incurred in the acquisition and production of the related inventory (i.e. material, labor and manufacturing
overhead costs).
Property, Plant and Equipment
Property, plant and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation of property, plant
and equipment is provided over the estimated useful lives of the respective assets on a straight-line basis. Estimated useful lives of
the respective assets typically range from twenty to forty years for buildings and improvements and from three to twenty years for
machinery and equipment. Capitalized computer software costs include internal and external costs incurred during the software's
development stage and are depreciated over three to five years. Leasehold improvements are amortized over the shorter of the
underlying lease term or the estimated useful life. Repairs and maintenance expenditures, which are not considered leasehold
improvements and do not extend the useful life of the property and equipment, are expensed as incurred.
Retirement or dispositions of long-lived assets are recorded based on carrying value and proceeds received. Any resulting gains or
losses are recorded as a component of selling, general and administrative expenses.
Property, plant and equipment is reviewed for impairment at least annually or whenever events or changes in circumstances
indicate that the carrying amount of assets may not be recoverable. For further discussion regarding impairments refer to
the Impairment of Long-Lived Assets accounting policy below.
Assets Held for Sale
An asset is considered to be held for sale when all of the following criteria are met: (i) management commits to a plan to sell the
property; (ii) it is unlikely that the disposal plan will be significantly modified or discontinued; (iii) the property is available for
immediate sale in its present condition; (iv) actions required to complete the sale of the property have been initiated; (v) sale of the
asset is probable and the completed sale is expected to occur within one year; and (vi) the property is actively being marketed for
sale at a price that is reasonable given its current market value.
Upon designation as an asset held for sale, the carrying value of the asset is recorded at the lower of its carrying value or its estimated
fair value less estimated costs to sell, and the Company ceases depreciating the asset. As of June 30, 2019 and 2018, we did not
have any assets held for sale.
Impairment of Long-Lived Assets
We review the carrying value of our long-lived assets for impairment at least annually or whenever events or changes in
circumstances indicate that their carrying amounts may not be recoverable. Our assessment of recoverability is based on our best
estimates using either quoted market prices or an analysis of the undiscounted projected future cash flows by asset groups in order
to determine if there is any indicator of impairment requiring us to further assess the fair value of our long-lived assets. If the sum
of the estimated undiscounted future cash flows related to the asset is less than the carrying value, we recognize a loss equal
to the difference between the carrying value and the fair value, usually determined by the estimated discounted cash flow
analysis of the assets. Our asset groups consist of our operating segments in our Wholesale reportable segment, each of our retail
design centers and other corporate assets. The asset group is defined as the lowest level for which identifiable cash flows are
available and largely independent of the cash flows of other groups of assets, which for our retail segment is the individual
retail design center and for our wholesale segment is the manufacturing plant level. We estimate future cash flows based on
design center-level historical results, current trends, and operating and cash flow projections. Our estimates are subject to
uncertainty and may be affected by a number of factors outside its control, including general economic conditions and the
competitive environment. While we believe our estimates and judgments about future cash flows are reasonable, future
impairment charges may be required if the expected cash flow estimates, as projected, do not occur or if events change
requiring us to revise its estimates. During fiscal 2019, our retail segment recorded a $9.9 million impairment for long-lived
assets at the retail design center level. There were no impairments during fiscal 2018 or 2017. Refer to Note 10, Restructuring
and Impairment Activities, for further disclosure on the long-lived asset impairment.
Goodwill and Other Indefinite-Lived Intangible Assets
Our goodwill and intangible assets are comprised primarily of goodwill, which represents the excess of cost over the fair value
of net assets acquired, and our Ethan Allen trade name and related trademarks. We determined these assets have indefinite
useful lives, and are therefore not amortized.
We are required to test goodwill and indefinite-lived intangibles at the reporting level for potential impairment annually, or
more frequently if impairment indicators occur. Goodwill and other indefinite-lived intangible assets are evaluated for
impairment on an annual basis during the fourth quarter of each fiscal year, and between annual tests whenever events or
circumstances indicate that the carrying value of the goodwill or other intangible asset may exceed its fair value.
Goodwill. When testing goodwill for impairment, we may assess qualitative factors for some or all of our reporting units to
determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting
unit is less than its carrying amount, including goodwill. Alternatively, we may bypass this qualitative assessment for some or
all of our reporting units and determine whether the carrying value exceeds the fair value using a quantitative assessment,
as described below. We have two reporting units; wholesale and retail, which are consistent with our reportable operating
segments. Only our wholesale reporting unit has goodwill remaining at June 30, 2019. We performed our annual qualitative
goodwill impairment test during the fourth quarter of fiscal 2019, consistent with the timing of previous years, and concluded
that there was no impairment.
Other Indefinite-Lived Intangible Assets (trade name). The fair value of our trade name, which is the Company’s only
indefinite-lived intangible asset other than goodwill, is qualitatively assessed annually in the fourth quarter and may be
reviewed more frequently if indicators of impairment are present. Conditions that may indicate impairment include, but are
not limited to, a significant adverse change in customer demand or business climate that could affect the value of an asset, a
product recall or an adverse action or assessment by a regulator. We performed our annual trade name impairment test
during the fourth quarter of fiscal 2019, consistent with the timing of previous years, and concluded that there was no
impairment.
Fair Value of Financial Instruments
Income Taxes
Because of their short-term nature, the carrying value of our cash and cash equivalents, receivables and payables, short-term
debt and customer deposit liabilities approximates fair value. At June 30, 2019 and 2018, our total debt consisted of capital
leases obligations. The estimated fair value is equal to the carrying value on those dates.
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance must
be established for deferred tax assets when it is more likely than not that the assets will not be realized.
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be
sustained on examination by the taxing authorities, based on the technical merits of the position. Most of the unrecognized
tax benefits, if recognized, would be recorded as a benefit to income tax expense. The liability associated with an
unrecognized tax benefit is classified as a long-term liability except for the amount for which a cash payment is expected to
be made or tax positions settled within one year. We recognize interest and penalties related to income tax matters as a
component of income tax expense.
Revenue Recognition
Our reported revenue (net sales) consist substantially of product sales. We report product sales net of discounts and recognize
them at the point in time when control transfers to the customer. For sales to our customers in our wholesale segment,
control typically transfers when the product is shipped. For sales in our retail segment, control generally transfers upon
delivery to the customer.
Estimated refunds for returns and allowances are recorded using our historical return patterns. We record estimated refunds
for sales returns on a gross basis rather than on a net basis and have recorded an asset for product we expect to receive back
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collectability of the outstanding trade accounts receivable for possible write-off. It is our policy to write-off the accounts
Goodwill and Other Indefinite-Lived Intangible Assets
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
receivable against the allowance account when we deem the receivable to be uncollectible. Additionally, we review orders
from retailers that are significantly past due, and we ship product only when our ability to collect payment from our customer
for the new order is probable. At June 30, 2019 and 2018, the allowance for doubtful accounts was immaterial, respectively.
Inventories are stated at the lower of cost (on first-in, first-out basis) or net realizable value. Cost is determined based solely
on those charges incurred in the acquisition and production of the related inventory (i.e. material, labor and manufacturing
Inventories
overhead costs).
Property, Plant and Equipment
Property, plant and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation of property, plant
and equipment is provided over the estimated useful lives of the respective assets on a straight-line basis. Estimated useful lives of
the respective assets typically range from twenty to forty years for buildings and improvements and from three to twenty years for
machinery and equipment. Capitalized computer software costs include internal and external costs incurred during the software's
development stage and are depreciated over three to five years. Leasehold improvements are amortized over the shorter of the
underlying lease term or the estimated useful life. Repairs and maintenance expenditures, which are not considered leasehold
improvements and do not extend the useful life of the property and equipment, are expensed as incurred.
Retirement or dispositions of long-lived assets are recorded based on carrying value and proceeds received. Any resulting gains or
losses are recorded as a component of selling, general and administrative expenses.
Property, plant and equipment is reviewed for impairment at least annually or whenever events or changes in circumstances
indicate that the carrying amount of assets may not be recoverable. For further discussion regarding impairments refer to
the Impairment of Long-Lived Assets accounting policy below.
Assets Held for Sale
An asset is considered to be held for sale when all of the following criteria are met: (i) management commits to a plan to sell the
property; (ii) it is unlikely that the disposal plan will be significantly modified or discontinued; (iii) the property is available for
immediate sale in its present condition; (iv) actions required to complete the sale of the property have been initiated; (v) sale of the
asset is probable and the completed sale is expected to occur within one year; and (vi) the property is actively being marketed for
sale at a price that is reasonable given its current market value.
Upon designation as an asset held for sale, the carrying value of the asset is recorded at the lower of its carrying value or its estimated
fair value less estimated costs to sell, and the Company ceases depreciating the asset. As of June 30, 2019 and 2018, we did not
have any assets held for sale.
Impairment of Long-Lived Assets
We review the carrying value of our long-lived assets for impairment at least annually or whenever events or changes in
circumstances indicate that their carrying amounts may not be recoverable. Our assessment of recoverability is based on our best
estimates using either quoted market prices or an analysis of the undiscounted projected future cash flows by asset groups in order
to determine if there is any indicator of impairment requiring us to further assess the fair value of our long-lived assets. If the sum
of the estimated undiscounted future cash flows related to the asset is less than the carrying value, we recognize a loss equal
to the difference between the carrying value and the fair value, usually determined by the estimated discounted cash flow
analysis of the assets. Our asset groups consist of our operating segments in our Wholesale reportable segment, each of our retail
design centers and other corporate assets. The asset group is defined as the lowest level for which identifiable cash flows are
available and largely independent of the cash flows of other groups of assets, which for our retail segment is the individual
retail design center and for our wholesale segment is the manufacturing plant level. We estimate future cash flows based on
uncertainty and may be affected by a number of factors outside its control, including general economic conditions and the
competitive environment. While we believe our estimates and judgments about future cash flows are reasonable, future
impairment charges may be required if the expected cash flow estimates, as projected, do not occur or if events change
requiring us to revise its estimates. During fiscal 2019, our retail segment recorded a $9.9 million impairment for long-lived
assets at the retail design center level. There were no impairments during fiscal 2018 or 2017. Refer to Note 10, Restructuring
and Impairment Activities, for further disclosure on the long-lived asset impairment.
Our goodwill and intangible assets are comprised primarily of goodwill, which represents the excess of cost over the fair value
of net assets acquired, and our Ethan Allen trade name and related trademarks. We determined these assets have indefinite
useful lives, and are therefore not amortized.
We are required to test goodwill and indefinite-lived intangibles at the reporting level for potential impairment annually, or
more frequently if impairment indicators occur. Goodwill and other indefinite-lived intangible assets are evaluated for
impairment on an annual basis during the fourth quarter of each fiscal year, and between annual tests whenever events or
circumstances indicate that the carrying value of the goodwill or other intangible asset may exceed its fair value.
Goodwill. When testing goodwill for impairment, we may assess qualitative factors for some or all of our reporting units to
determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting
unit is less than its carrying amount, including goodwill. Alternatively, we may bypass this qualitative assessment for some or
all of our reporting units and determine whether the carrying value exceeds the fair value using a quantitative assessment,
as described below. We have two reporting units; wholesale and retail, which are consistent with our reportable operating
segments. Only our wholesale reporting unit has goodwill remaining at June 30, 2019. We performed our annual qualitative
goodwill impairment test during the fourth quarter of fiscal 2019, consistent with the timing of previous years, and concluded
that there was no impairment.
Other Indefinite-Lived Intangible Assets (trade name). The fair value of our trade name, which is the Company’s only
indefinite-lived intangible asset other than goodwill, is qualitatively assessed annually in the fourth quarter and may be
reviewed more frequently if indicators of impairment are present. Conditions that may indicate impairment include, but are
not limited to, a significant adverse change in customer demand or business climate that could affect the value of an asset, a
product recall or an adverse action or assessment by a regulator. We performed our annual trade name impairment test
during the fourth quarter of fiscal 2019, consistent with the timing of previous years, and concluded that there was no
impairment.
Fair Value of Financial Instruments
Because of their short-term nature, the carrying value of our cash and cash equivalents, receivables and payables, short-term
debt and customer deposit liabilities approximates fair value. At June 30, 2019 and 2018, our total debt consisted of capital
leases obligations. The estimated fair value is equal to the carrying value on those dates.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance must
be established for deferred tax assets when it is more likely than not that the assets will not be realized.
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be
sustained on examination by the taxing authorities, based on the technical merits of the position. Most of the unrecognized
tax benefits, if recognized, would be recorded as a benefit to income tax expense. The liability associated with an
unrecognized tax benefit is classified as a long-term liability except for the amount for which a cash payment is expected to
be made or tax positions settled within one year. We recognize interest and penalties related to income tax matters as a
component of income tax expense.
design center-level historical results, current trends, and operating and cash flow projections. Our estimates are subject to
Revenue Recognition
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Our reported revenue (net sales) consist substantially of product sales. We report product sales net of discounts and recognize
them at the point in time when control transfers to the customer. For sales to our customers in our wholesale segment,
control typically transfers when the product is shipped. For sales in our retail segment, control generally transfers upon
delivery to the customer.
Estimated refunds for returns and allowances are recorded using our historical return patterns. We record estimated refunds
for sales returns on a gross basis rather than on a net basis and have recorded an asset for product we expect to receive back
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
from customers in Prepaid expenses and other current assets and a corresponding refund liability in Other Current Liabilities
on our consolidated balance sheet. At June 30, 2019 and 2018, these amounts were immaterial.
Share-Based Compensation
Refer to Note 4, Revenue Recognition, for additional information regarding revenue.
Cost of Sales
Our cost of sales consist primarily of the cost to manufacture or purchase our merchandise (i.e. direct material, labor and
overhead costs) as well as inspection, internal transfer, in-bound freight and warehousing costs.
Selling, General and Administrative Expenses (“SG&A”)
SG&A expenses include the costs of selling our products and other general and administrative costs. Selling expenses are
primarily composed of shipping and handling costs, commissions, advertising, warranty, and compensation and benefits of
employees performing various sales functions. Occupancy costs, depreciation, compensation and benefit costs for
administration employees and other administrative costs are included in SG&A.
Shipping and Handling Costs
Our practice has been to sell our products at the same delivered cost to all retailers and customers nationwide, regardless of
shipping point. Costs incurred by the Company to deliver finished goods are expensed and recorded in selling, general and
administrative expenses. Shipping and handling costs amounted to $75.6 million in fiscal year 2019, $73.6 million for fiscal
2018 and $71.3 million in fiscal 2017.
Advertising Costs
Advertising costs are expensed when first aired or distributed. Our total advertising costs were $30.5 million in fiscal year
2019, $43.3 million in fiscal year 2018 and $39.7 million in fiscal year 2017. These amounts include advertising media
expenses, outside and inside agency expenses, certain website related fees and photo and video production. Prepaid
advertising costs were immaterial at June 30, 2019 and 2018, respectively.
Deferred Financing Fees
Deferred financing fees related to our revolving credit facility are included in non-current assets on the consolidated balance
sheets and amortized utilizing the effective interest method. Such amortization is included in interest expense, net on the
consolidated statements of comprehensive income.
Operating Leases
The Company leases retail design centers, distribution facilities, office space and, less significantly, certain equipment. We
classify leases at the inception of the lease as a capital or an operating lease. In a capital or an operating lease, the expected
lease term begins with the date that we take possession of the equipment or the leased space for construction and other
purposes. The expected lease term may also include the exercise of renewal options if the exercise of the option is determined
to be reasonably assured. The expected term is also used in the determination of whether a design center is a capital or
operating lease. We record expense for operating leases on a straight-line basis, beginning on the date that we take
possession or control of the property. Several of our operating lease agreements contain provisions for tenant improvement
allowances, rent holidays, rent concessions, and rent escalations.
Incentive payments received from landlords are recorded as deferred lease incentives and are amortized over the underlying
lease term on a straight-line basis as a reduction of rent expense. When the terms of an operating lease provide for periods
of free rent, rent concessions, and/or rent escalations, we establish a deferred rent liability for the difference between the
scheduled rent payment and the straight-line rent expense recognized. This deferred rent liability is also amortized over the
underlying lease term on a straight-line basis as a reduction of rent expense.
Acquisitions
From time to time we acquire design centers from our independent retailers in arms-length transactions. We record these
acquisitions using the acquisition method of accounting. All of the assets acquired, liabilities assumed, contractual
contingencies and contingent consideration are recognized at their fair value on the acquisition date. Cash paid to acquire
design centers during fiscal 2019, 2018 and 2017 was $0.5 million, $6.3 million and $0.7 million, respectively. Acquisition-
related expenses are recognized separately and expensed as incurred.
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Share-based compensation expense is included within selling, general and administrative expenses. Tax benefits associated
with our share-based compensation arrangements are included within income tax expense.
We estimate, as of the date of grant, the fair value of stock options awarded using the Black-Scholes option pricing model.
Use of a valuation model requires management to make certain assumptions with respect to selected model inputs, including
anticipated changes in the underlying stock price (i.e. expected volatility) and option exercise activity (i.e. expected life).
Expected volatility is based on the historical volatility of our stock and other contributing factors. The expected life of options
granted, which represents the period of time that the options are expected to be outstanding, is based, primarily, on historical
data.
We estimate, as of the date of grant, the fair value of restricted stock units awarded using a discounted cash flow model,
which requires management to make certain assumptions with respect to model inputs including anticipated future dividends
not paid during the restriction period, and a discount for lack of marketability for a one-year holding period after vesting.
As share-based compensation expense recognized is based on awards ultimately expected to vest, it has been reduced for
estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates. Forfeitures are estimated based primarily on historical experience. Windfall tax
benefits, defined as tax deductions that exceed recorded share-based compensation, are classified as cash inflows from
Performance-based stock units require management to make assumptions regarding the likelihood of achieving Company
performance targets on a quarterly basis. The number of performance-based options that vest will be predicated on the
Company achieving certain performance levels. A change in the financial performance levels the Company achieves could
result in changes to our current estimate of the vesting percentage and related share-based compensation.
financing activities.
Earnings Per Share
We compute basic earnings per share (“EPS”) by dividing net income by the weighted average number of common shares
outstanding during the period. Diluted EPS is calculated similarly, except that the weighted average outstanding shares are
adjusted to include the effects of converting all potentially dilutive share-based awards issued under our employee stock
plans. The number of potential common shares outstanding are determined in accordance with the treasury stock method
to the extent they are dilutive. For the purpose of calculating EPS, common shares outstanding include common shares
issuable upon the exercise of outstanding share-based compensation awards, including employee stock options and
restricted stock. Under the treasury stock method, the exercise price paid by the optionee and future share-based
compensation expense that the Company has not yet recognized are assumed to be used to repurchase shares.
Foreign Currency Translation
The functional currency of each Company operated foreign location is the respective local currency. Assets and liabilities are
translated into U.S. dollars using the current period-end exchange rate and income and expense amounts are translated using
the average exchange rate for the period in which the transaction occurred. Resulting translation adjustments are reported
as a component of accumulated other comprehensive income (loss) within shareholders’ equity.
Treasury Stock
The Company accounts for repurchased common stock under the cost method and includes such treasury stock as a
component of its shareholders’ equity. We account for the formal retirement of treasury stock by deducting its par value
from common stock, reducing additional paid-in capital (“APIC”) by the average amount recorded in APIC when the stock was
originally issued and any remaining excess of cost deducted from retained earnings.
Recent Accounting Pronouncements
As of the beginning of fiscal 2019, we implemented all applicable new accounting standards and updates issued by the
Financial Accounting Standards Board (“FASB”) that were in effect. There were no new standards or updates adopted during
fiscal 2019 that had a material impact on our consolidated financial statements.
New Accounting Standards or Updates Adopted in fiscal 2019
Revenue Recognition. In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts
with Customers (Accounting Standards Codification Topic 606 (“ASC 606”)), which requires an entity to recognize the amount
from customers in Prepaid expenses and other current assets and a corresponding refund liability in Other Current Liabilities
Share-Based Compensation
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
on our consolidated balance sheet. At June 30, 2019 and 2018, these amounts were immaterial.
Refer to Note 4, Revenue Recognition, for additional information regarding revenue.
Cost of Sales
Our cost of sales consist primarily of the cost to manufacture or purchase our merchandise (i.e. direct material, labor and
overhead costs) as well as inspection, internal transfer, in-bound freight and warehousing costs.
Selling, General and Administrative Expenses (“SG&A”)
SG&A expenses include the costs of selling our products and other general and administrative costs. Selling expenses are
primarily composed of shipping and handling costs, commissions, advertising, warranty, and compensation and benefits of
employees performing various sales functions. Occupancy costs, depreciation, compensation and benefit costs for
administration employees and other administrative costs are included in SG&A.
Our practice has been to sell our products at the same delivered cost to all retailers and customers nationwide, regardless of
shipping point. Costs incurred by the Company to deliver finished goods are expensed and recorded in selling, general and
administrative expenses. Shipping and handling costs amounted to $75.6 million in fiscal year 2019, $73.6 million for fiscal
Shipping and Handling Costs
2018 and $71.3 million in fiscal 2017.
Advertising Costs
Advertising costs are expensed when first aired or distributed. Our total advertising costs were $30.5 million in fiscal year
2019, $43.3 million in fiscal year 2018 and $39.7 million in fiscal year 2017. These amounts include advertising media
expenses, outside and inside agency expenses, certain website related fees and photo and video production. Prepaid
advertising costs were immaterial at June 30, 2019 and 2018, respectively.
Deferred financing fees related to our revolving credit facility are included in non-current assets on the consolidated balance
sheets and amortized utilizing the effective interest method. Such amortization is included in interest expense, net on the
Deferred Financing Fees
consolidated statements of comprehensive income.
Operating Leases
The Company leases retail design centers, distribution facilities, office space and, less significantly, certain equipment. We
classify leases at the inception of the lease as a capital or an operating lease. In a capital or an operating lease, the expected
lease term begins with the date that we take possession of the equipment or the leased space for construction and other
purposes. The expected lease term may also include the exercise of renewal options if the exercise of the option is determined
to be reasonably assured. The expected term is also used in the determination of whether a design center is a capital or
operating lease. We record expense for operating leases on a straight-line basis, beginning on the date that we take
possession or control of the property. Several of our operating lease agreements contain provisions for tenant improvement
allowances, rent holidays, rent concessions, and rent escalations.
Incentive payments received from landlords are recorded as deferred lease incentives and are amortized over the underlying
lease term on a straight-line basis as a reduction of rent expense. When the terms of an operating lease provide for periods
of free rent, rent concessions, and/or rent escalations, we establish a deferred rent liability for the difference between the
scheduled rent payment and the straight-line rent expense recognized. This deferred rent liability is also amortized over the
underlying lease term on a straight-line basis as a reduction of rent expense.
Acquisitions
From time to time we acquire design centers from our independent retailers in arms-length transactions. We record these
acquisitions using the acquisition method of accounting. All of the assets acquired, liabilities assumed, contractual
contingencies and contingent consideration are recognized at their fair value on the acquisition date. Cash paid to acquire
related expenses are recognized separately and expensed as incurred.
Share-based compensation expense is included within selling, general and administrative expenses. Tax benefits associated
with our share-based compensation arrangements are included within income tax expense.
We estimate, as of the date of grant, the fair value of stock options awarded using the Black-Scholes option pricing model.
Use of a valuation model requires management to make certain assumptions with respect to selected model inputs, including
anticipated changes in the underlying stock price (i.e. expected volatility) and option exercise activity (i.e. expected life).
Expected volatility is based on the historical volatility of our stock and other contributing factors. The expected life of options
granted, which represents the period of time that the options are expected to be outstanding, is based, primarily, on historical
data.
We estimate, as of the date of grant, the fair value of restricted stock units awarded using a discounted cash flow model,
which requires management to make certain assumptions with respect to model inputs including anticipated future dividends
not paid during the restriction period, and a discount for lack of marketability for a one-year holding period after vesting.
As share-based compensation expense recognized is based on awards ultimately expected to vest, it has been reduced for
estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates. Forfeitures are estimated based primarily on historical experience. Windfall tax
benefits, defined as tax deductions that exceed recorded share-based compensation, are classified as cash inflows from
financing activities.
Performance-based stock units require management to make assumptions regarding the likelihood of achieving Company
performance targets on a quarterly basis. The number of performance-based options that vest will be predicated on the
Company achieving certain performance levels. A change in the financial performance levels the Company achieves could
result in changes to our current estimate of the vesting percentage and related share-based compensation.
Earnings Per Share
We compute basic earnings per share (“EPS”) by dividing net income by the weighted average number of common shares
outstanding during the period. Diluted EPS is calculated similarly, except that the weighted average outstanding shares are
adjusted to include the effects of converting all potentially dilutive share-based awards issued under our employee stock
plans. The number of potential common shares outstanding are determined in accordance with the treasury stock method
to the extent they are dilutive. For the purpose of calculating EPS, common shares outstanding include common shares
issuable upon the exercise of outstanding share-based compensation awards, including employee stock options and
restricted stock. Under the treasury stock method, the exercise price paid by the optionee and future share-based
compensation expense that the Company has not yet recognized are assumed to be used to repurchase shares.
Foreign Currency Translation
The functional currency of each Company operated foreign location is the respective local currency. Assets and liabilities are
translated into U.S. dollars using the current period-end exchange rate and income and expense amounts are translated using
the average exchange rate for the period in which the transaction occurred. Resulting translation adjustments are reported
as a component of accumulated other comprehensive income (loss) within shareholders’ equity.
Treasury Stock
The Company accounts for repurchased common stock under the cost method and includes such treasury stock as a
component of its shareholders’ equity. We account for the formal retirement of treasury stock by deducting its par value
from common stock, reducing additional paid-in capital (“APIC”) by the average amount recorded in APIC when the stock was
originally issued and any remaining excess of cost deducted from retained earnings.
Recent Accounting Pronouncements
As of the beginning of fiscal 2019, we implemented all applicable new accounting standards and updates issued by the
Financial Accounting Standards Board (“FASB”) that were in effect. There were no new standards or updates adopted during
fiscal 2019 that had a material impact on our consolidated financial statements.
design centers during fiscal 2019, 2018 and 2017 was $0.5 million, $6.3 million and $0.7 million, respectively. Acquisition-
New Accounting Standards or Updates Adopted in fiscal 2019
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Revenue Recognition. In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts
with Customers (Accounting Standards Codification Topic 606 (“ASC 606”)), which requires an entity to recognize the amount
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The new standard
supersedes virtually all existing authoritative accounting guidance on revenue recognition and requires additional disclosures
and greater use of estimates and judgments. We adopted the new standard in the first quarter of fiscal 2019. We reviewed
substantially all of our contracts and revenue streams and determined that while the application of the new standard did not
have a material change in the amount of or timing for recognizing revenue, it did impact our financial statement disclosures
related to net sales and related accounts. See Note 4 for further details on these new disclosures.
Cash Flow Simplification. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flow (Topic 230): Classification of
Certain Cash Receipts and Cash Payments. The new guidance is intended to reduce the diversity in practice around how
certain transactions are classified in the statement of cash flows. This includes revised guidance on the cash flow classification
of debt prepayments and debt extinguishment costs, contingent consideration payments made after a business combination
and distributions received from equity method investments. We adopted the provisions of this guidance in the first quarter
of fiscal 2019 with retrospective application. The adoption of this guidance did not have a material impact on our consolidated
financial statements.
Restricted Cash. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted
Cash, which is intended to reduce diversity in the presentation of restricted cash and restricted cash equivalents in the cash
flow statement. The statement requires that restricted cash and restricted cash equivalents be included as components of
total cash and cash equivalents as presented on the statement of cash flows. The Company had not previously included
restricted cash as a component of cash and cash equivalents as presented on its consolidated statement of cash flows. We
adopted the new standard in the first quarter of fiscal 2019, under the retrospective adoption method, and prior year
restricted cash has been reclassified to conform to current year presentation. See Note 5 for further details.
Share-Based Payments. In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope
of Modification Accounting, which amended the scope of modification accounting for share-based payment arrangements.
The guidance focused on changes to the terms or conditions of share-based payment awards that would require the
application of modification accounting and specifies that an entity would not apply modification accounting if the fair value,
vesting conditions and classification of the awards are the same immediately before and after the modification. We adopted
ASU 2017-09 in the first quarter of fiscal 2019. The adoption of this standard had no impact on our consolidated financial
statements.
Recent Accounting Standards or Updates Not Yet Effective
Leases. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), an update related to accounting for leases. The
standard introduces a lessee model that will require lessees to recognize on the balance sheet the assets and liabilities for
the rights and obligations created by those leases with terms of more than twelve months. Lessors will remain largely
unchanged from current GAAP. In addition, ASU 2016-02 will require disclosures to help investors and other financial
statement users better understand the amount, timing and uncertainty of cash flows arising from leases. We are required to
adopt ASU 2016-02 in the first quarter of fiscal 2020 and expect to apply the modified retrospective approach, which allows
for a cumulative-effect adjustment at the beginning of the period of adoption and does not require application of the
guidance to comparative periods. We plan to elect certain practical expedients permitted under the transition guidance,
including the package of practical expedients, which allows the Company to not reassess whether existing contracts contain
leases, the lease classification of existing leases, or initial direct costs for existing leases. We also plan to elect not to separate
lease and non-lease components and not to recognize a right-of-use asset and a lease liability for leases with an initial term
of twelve months or less. In addition, we plan to not elect the hindsight practical expedient. A complete population of
contracts that meet the definition of a lease under ASU 2016-02 has been identified. We have reviewed this inventory of
leases and are in the final stage of implementing a third-party lease accounting software system and finalizing our control
framework in preparation for the adoption of this standard in the first quarter of fiscal 2020. We currently expect the adoption
to have a material impact to our consolidated balance sheet in order to recognize the right of use assets and related liabilities,
including enhanced disclosures. However, we do not expect the adoption to have a material impact on our consolidated
statements of comprehensive income or cash flows.
Goodwill Impairment Test. In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic
350): Simplifying the Test for Goodwill Impairment, which removes the requirement for companies to compare the implied
fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. A goodwill impairment will
now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of
goodwill. This accounting standards update will be effective for us beginning in the first quarter of fiscal 2021 and we do not
expect the adoption to have a material impact on our consolidated financial statements.
Implementation Costs in a Cloud Computing Arrangement - In August 2018, the FASB issued ASU 2018-15, Intangibles-
Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a
Cloud Computing Arrangement That Is a Service Contract, an update related to accounting for implementation costs incurred
in a cloud computing arrangement that is a service contract. This guidance aligns the requirements for capitalizing
implementation costs in a cloud computing service contract with the guidance for capitalizing implementation costs to
develop or obtain internal-use software. Capitalized implementation costs related to a hosting arrangement that is a service
contract will be amortized over the term of the hosting arrangement, beginning when the module or component of the
hosting arrangement is ready for its intended use. This accounting standards update will be effective for us beginning in the
first quarter of fiscal 2021, with early adoption permitted. We are currently evaluating the impact of this accounting standards
update, but do not expect the adoption to have a material impact on our consolidated financial statements.
No other new accounting pronouncements issued or effective as of June 30, 2019 have had or are expected to have an impact
on our consolidated financial statements.
(4) Revenue Recognition
We adopted ASC 606 using the cumulative effect approach, which required us to apply the new guidance retrospectively to
revenue transactions completed on or after July 1, 2018.
Upon adoption of ASC 606, we have elected the following accounting policies and practical expedients:
• We recognize shipping and handling expense as fulfillment activities (rather than as a promised good or service)
when the activities are performed even if those activities are performed after the control of the good has been
transferred. Accordingly, we record the expenses for shipping and handling activities at the same time we recognize
• We exclude from the measurement of the transaction price all taxes imposed on and concurrent with a specific
revenue-producing transaction and collected by the entity from a customer, including sales, use, excise, value-
added, and franchise taxes (collectively referred to as sales taxes).
• We do not adjust net sales for the effects of financing components if the contract has a duration of one year or less,
as we believe that we will receive payment from the customer within one year of when we transfer control of the
net sales.
related goods.
Our reported revenue (net sales) consist substantially of product sales. We report product sales net of discounts and recognize
them at the point in time when control transfers to the customer. For sales to our customers in our wholesale segment,
control typically transfers when the product is shipped. For sales in our retail segment, control generally transfers upon
delivery to the customer.
Estimated refunds for returns and allowances are recorded using our historical return patterns. Under ASC 606, we record
estimated refunds for sales returns on a gross basis rather than on a net basis and have recorded an asset for product we
expect to receive back from customers in Prepaid expenses and other current assets and a corresponding refund liability in
Accounts payable and accrued expenses on our consolidated balance sheets. At June 30, 2019 and 2018, these amounts were
In many cases we receive deposits from customers before we have transferred control of our product to our customers,
resulting in contract liabilities. These contract liabilities are reported as a current liability in Customer Deposits on our
consolidated balance sheets. At June 30, 2018 we had customer deposits of $61.2 million, which were subsequently
recognized as net sales upon delivery to the customer during fiscal 2019. Customer deposits totaled $56.7 million at June 30,
immaterial.
2019.
48
49
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The new standard
supersedes virtually all existing authoritative accounting guidance on revenue recognition and requires additional disclosures
and greater use of estimates and judgments. We adopted the new standard in the first quarter of fiscal 2019. We reviewed
substantially all of our contracts and revenue streams and determined that while the application of the new standard did not
have a material change in the amount of or timing for recognizing revenue, it did impact our financial statement disclosures
related to net sales and related accounts. See Note 4 for further details on these new disclosures.
Cash Flow Simplification. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flow (Topic 230): Classification of
Certain Cash Receipts and Cash Payments. The new guidance is intended to reduce the diversity in practice around how
certain transactions are classified in the statement of cash flows. This includes revised guidance on the cash flow classification
of debt prepayments and debt extinguishment costs, contingent consideration payments made after a business combination
and distributions received from equity method investments. We adopted the provisions of this guidance in the first quarter
of fiscal 2019 with retrospective application. The adoption of this guidance did not have a material impact on our consolidated
financial statements.
Restricted Cash. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted
Cash, which is intended to reduce diversity in the presentation of restricted cash and restricted cash equivalents in the cash
flow statement. The statement requires that restricted cash and restricted cash equivalents be included as components of
total cash and cash equivalents as presented on the statement of cash flows. The Company had not previously included
restricted cash as a component of cash and cash equivalents as presented on its consolidated statement of cash flows. We
adopted the new standard in the first quarter of fiscal 2019, under the retrospective adoption method, and prior year
restricted cash has been reclassified to conform to current year presentation. See Note 5 for further details.
Share-Based Payments. In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope
of Modification Accounting, which amended the scope of modification accounting for share-based payment arrangements.
The guidance focused on changes to the terms or conditions of share-based payment awards that would require the
application of modification accounting and specifies that an entity would not apply modification accounting if the fair value,
vesting conditions and classification of the awards are the same immediately before and after the modification. We adopted
ASU 2017-09 in the first quarter of fiscal 2019. The adoption of this standard had no impact on our consolidated financial
statements.
Recent Accounting Standards or Updates Not Yet Effective
Leases. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), an update related to accounting for leases. The
standard introduces a lessee model that will require lessees to recognize on the balance sheet the assets and liabilities for
the rights and obligations created by those leases with terms of more than twelve months. Lessors will remain largely
unchanged from current GAAP. In addition, ASU 2016-02 will require disclosures to help investors and other financial
statement users better understand the amount, timing and uncertainty of cash flows arising from leases. We are required to
adopt ASU 2016-02 in the first quarter of fiscal 2020 and expect to apply the modified retrospective approach, which allows
for a cumulative-effect adjustment at the beginning of the period of adoption and does not require application of the
guidance to comparative periods. We plan to elect certain practical expedients permitted under the transition guidance,
including the package of practical expedients, which allows the Company to not reassess whether existing contracts contain
leases, the lease classification of existing leases, or initial direct costs for existing leases. We also plan to elect not to separate
lease and non-lease components and not to recognize a right-of-use asset and a lease liability for leases with an initial term
of twelve months or less. In addition, we plan to not elect the hindsight practical expedient. A complete population of
contracts that meet the definition of a lease under ASU 2016-02 has been identified. We have reviewed this inventory of
leases and are in the final stage of implementing a third-party lease accounting software system and finalizing our control
framework in preparation for the adoption of this standard in the first quarter of fiscal 2020. We currently expect the adoption
to have a material impact to our consolidated balance sheet in order to recognize the right of use assets and related liabilities,
including enhanced disclosures. However, we do not expect the adoption to have a material impact on our consolidated
statements of comprehensive income or cash flows.
Goodwill Impairment Test. In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic
350): Simplifying the Test for Goodwill Impairment, which removes the requirement for companies to compare the implied
fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. A goodwill impairment will
now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of
goodwill. This accounting standards update will be effective for us beginning in the first quarter of fiscal 2021 and we do not
expect the adoption to have a material impact on our consolidated financial statements.
Implementation Costs in a Cloud Computing Arrangement - In August 2018, the FASB issued ASU 2018-15, Intangibles-
Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a
Cloud Computing Arrangement That Is a Service Contract, an update related to accounting for implementation costs incurred
in a cloud computing arrangement that is a service contract. This guidance aligns the requirements for capitalizing
implementation costs in a cloud computing service contract with the guidance for capitalizing implementation costs to
develop or obtain internal-use software. Capitalized implementation costs related to a hosting arrangement that is a service
contract will be amortized over the term of the hosting arrangement, beginning when the module or component of the
hosting arrangement is ready for its intended use. This accounting standards update will be effective for us beginning in the
first quarter of fiscal 2021, with early adoption permitted. We are currently evaluating the impact of this accounting standards
update, but do not expect the adoption to have a material impact on our consolidated financial statements.
No other new accounting pronouncements issued or effective as of June 30, 2019 have had or are expected to have an impact
on our consolidated financial statements.
(4) Revenue Recognition
We adopted ASC 606 using the cumulative effect approach, which required us to apply the new guidance retrospectively to
revenue transactions completed on or after July 1, 2018.
Upon adoption of ASC 606, we have elected the following accounting policies and practical expedients:
• We recognize shipping and handling expense as fulfillment activities (rather than as a promised good or service)
when the activities are performed even if those activities are performed after the control of the good has been
transferred. Accordingly, we record the expenses for shipping and handling activities at the same time we recognize
net sales.
• We exclude from the measurement of the transaction price all taxes imposed on and concurrent with a specific
revenue-producing transaction and collected by the entity from a customer, including sales, use, excise, value-
added, and franchise taxes (collectively referred to as sales taxes).
• We do not adjust net sales for the effects of financing components if the contract has a duration of one year or less,
as we believe that we will receive payment from the customer within one year of when we transfer control of the
related goods.
Our reported revenue (net sales) consist substantially of product sales. We report product sales net of discounts and recognize
them at the point in time when control transfers to the customer. For sales to our customers in our wholesale segment,
control typically transfers when the product is shipped. For sales in our retail segment, control generally transfers upon
delivery to the customer.
Estimated refunds for returns and allowances are recorded using our historical return patterns. Under ASC 606, we record
estimated refunds for sales returns on a gross basis rather than on a net basis and have recorded an asset for product we
expect to receive back from customers in Prepaid expenses and other current assets and a corresponding refund liability in
Accounts payable and accrued expenses on our consolidated balance sheets. At June 30, 2019 and 2018, these amounts were
immaterial.
In many cases we receive deposits from customers before we have transferred control of our product to our customers,
resulting in contract liabilities. These contract liabilities are reported as a current liability in Customer Deposits on our
consolidated balance sheets. At June 30, 2018 we had customer deposits of $61.2 million, which were subsequently
recognized as net sales upon delivery to the customer during fiscal 2019. Customer deposits totaled $56.7 million at June 30,
2019.
48
49
The following table disaggregates our net sales by product category by segment for the fiscal year ended June 30, 2019:
(7) Inventories
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
(Amounts in thousands)
Uphol s tery furni ture
Ca s e goods furni ture
Home a ccents
Other
Whol es a l e
Reta i l
Tota l
$
216,460
$
263,744
$
480,204
151,999
77,978
(4,886)
172,293
130,325
23,467
324,292
208,303
18,581
Tota l before i ntercompa ny el i mi na ti ons
$
441,551
$
589,829
1,031,380
El i mi na ti ons
Cons ol i da ted net s a l es
(284,696)
$
746,684
• Upholstery furniture includes fabric-covered items such as sleepers, recliners and other motion furniture, chairs,
ottomans, custom pillows, sofas, loveseats, cut fabrics and leather.
•
Case goods furniture includes items such as beds, dressers, armoires, tables, chairs, buffets, entertainment units,
home office furniture, and wooden accents.
• Home accents includes items such as window treatments and drapery hardware, wall décor, florals, lighting, clocks,
mattresses, bedspreads, throws, pillows, decorative accents, area rugs, wall coverings and home and garden
furnishings.
• Other includes net sales for product delivery, the Ethan Allen Hotel room rentals and banquets, our net share of
third-party furniture protection plans, non-inventoried parts, and consulting and other fees, net of discounts,
allowances and other sales incentives.
(5) Restricted Cash
We did not hold any restricted cash at June 30, 2019 or 2018. At June 30, 2017 we held $7.3 million of restricted cash in lieu
of providing letters of credit for the benefit of the provider of our workmen’s compensation and other insurance liabilities.
By June 30, 2018, this obligation had been reduced to $5.9 million, which was then exchanged for a letter of credit for the
benefit of this provider, and the restricted cash balance was reduced to zero. As such, we did not hold any restricted cash at
June 30, 2019 or 2018.
(6) Fair Value Measurement
Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability (i.e., the “exit price”)
in an orderly transaction between market participants at the measurement date. In determining fair value, the use of various
valuation methodologies, including market, income and cost approaches is permissible. We consider the principal or most
advantageous market in which it would transact and considers assumptions that market participants would use when pricing
the asset or liability.
Fair Value Hierarchy. The accounting guidance for fair value measurements establishes a fair value hierarchy that requires an
entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
There are three levels of inputs that may be used to measure fair value based on the reliability of inputs. A financial
instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair
value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment
and may affect their placement within the fair value hierarchy levels. We have categorized our cash equivalents as Level 1
assets within the fair value hierarchy as there are quoted prices in active markets for identical assets or liabilities. There were
no Level 2 or Level 3 assets or liabilities held by the Company as of June 30, 2019 and 2018.
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis. We measure certain assets at fair value on a non-
recurring basis. These assets are recognized at fair value when they are deemed to be other-than-temporarily impaired. With
the exception of the $9.9 million retail design center asset impairment charge, we did not record any additional other-than-
temporary impairments on those assets required to be measured at fair value on a non-recurring basis during fiscal 2019. In
addition, we did not hold any available-for-sale securities during fiscal 2019 and 2018, thus no fair value measurements were
required. Refer to Note 10, Restructuring and Impairment Activities, for further disclosure of the retail design center asset
impairment charge.
Inventories at June 30, 2019 and 2018 are summarized as follows (in thousands):
Finished goods
Work in process
Raw materials
Inventory reserve
Inventories, net
2019
2018
$
128,047
$
124,640
9,185
26,661
(1,504)
12,057
27,947
(1,632)
$
162,389
$
163,012
2019
2018
$
83,343
$
82,899
384,641
123,396
591,380
404,522
123,606
611,027
(8) Property, Plant and Equipment
Property, plant and equipment at June 30, 2019 and 2018 are summarized as follows (in thousands):
La nd a nd i mprovements
Bui l di ng a nd i mprovements
Ma chi nery a nd equi pment
Property, pl a nt a nd equi pment, gros s
Les s : a ccumul a ted depreci a ti on a nd a morti za ti on
(346,134)
(343,124)
Property, pl a nt a nd equi pment, net
$
245,246
$
267,903
We recorded depreciation expense of $19.6 million, $19.8 million and $20.1 million in fiscal 2019, fiscal 2018 and fiscal
2017, respectively.
(9) Goodwill and Other Intangible Assets
At both June 30, 2019 and 2018, we had $25.4 million of goodwill and $19.7 million of other indefinite-lived intangible assets
consisting of Ethan Allen trade names, all of which is in our wholesale segment.
Both goodwill and indefinite-lived intangible assets are not amortized as they are estimated to have an indefinite life. We
used a qualitative approach for our wholesale segment goodwill impairment test in fiscal 2019 due to the relative fair value
of our reporting unit significantly exceeding the carrying value of the goodwill, as well as the operating performance of that
respective reporting unit. Based on this qualitative assessment, we concluded that it is more likely than not that the fair value
of our wholesale goodwill exceeded its carrying value.
We also used a qualitative approach for our trade names impairment test in fiscal 2019 and concluded that it is more likely
than not that the fair value of our trade name exceeded its carrying value.
(10) Restructuring and Impairment Activities
Optimization of Manufacturing and Logistics
During fiscal 2019, we began to execute plans to consolidate our manufacturing and logistics operations as part of an overall
strategy to maximize production efficiencies and maintain our competitive advantage. In April 2019, the following changes
to our operations were announced as we continue to improve the vertical integration of our business operations.
• Our 550,000 square foot Old Fort, North Carolina case goods manufacturing plant, while maintaining a lumber
processing facility, will be converted into a state-of-the-art distribution center to support our national distribution
structure and growing GSA contract business.
•
•
Consolidating approximately half of the case goods manufacturing from our Old Fort plant into our case goods plants
in Orleans and Beecher Falls, Vermont, with the balance to be consolidated into our other manufacturing facilities.
Expansion of our Maiden, North Carolina campus with the addition of 80,000 square feet of operating space.
• Distribution operations and art framing production at our Passaic, New Jersey facility will be discontinued with the
distribution operations moved to our operations in North Carolina and the art framing operations outsourced.
50
51
The following table disaggregates our net sales by product category by segment for the fiscal year ended June 30, 2019:
(7) Inventories
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
(Amounts in thousands)
Uphol s tery furni ture
Ca s e goods furni ture
Home a ccents
Other
Whol es a l e
Reta i l
Tota l
$
216,460
$
263,744
$
480,204
151,999
77,978
(4,886)
172,293
130,325
23,467
324,292
208,303
18,581
Tota l before i ntercompa ny el i mi na ti ons
$
441,551
$
589,829
1,031,380
El i mi na ti ons
Cons ol i da ted net s a l es
(284,696)
$
746,684
• Upholstery furniture includes fabric-covered items such as sleepers, recliners and other motion furniture, chairs,
ottomans, custom pillows, sofas, loveseats, cut fabrics and leather.
•
Case goods furniture includes items such as beds, dressers, armoires, tables, chairs, buffets, entertainment units,
home office furniture, and wooden accents.
• Home accents includes items such as window treatments and drapery hardware, wall décor, florals, lighting, clocks,
mattresses, bedspreads, throws, pillows, decorative accents, area rugs, wall coverings and home and garden
furnishings.
• Other includes net sales for product delivery, the Ethan Allen Hotel room rentals and banquets, our net share of
third-party furniture protection plans, non-inventoried parts, and consulting and other fees, net of discounts,
allowances and other sales incentives.
(5) Restricted Cash
We did not hold any restricted cash at June 30, 2019 or 2018. At June 30, 2017 we held $7.3 million of restricted cash in lieu
of providing letters of credit for the benefit of the provider of our workmen’s compensation and other insurance liabilities.
By June 30, 2018, this obligation had been reduced to $5.9 million, which was then exchanged for a letter of credit for the
benefit of this provider, and the restricted cash balance was reduced to zero. As such, we did not hold any restricted cash at
June 30, 2019 or 2018.
(6) Fair Value Measurement
Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability (i.e., the “exit price”)
in an orderly transaction between market participants at the measurement date. In determining fair value, the use of various
valuation methodologies, including market, income and cost approaches is permissible. We consider the principal or most
advantageous market in which it would transact and considers assumptions that market participants would use when pricing
the asset or liability.
Fair Value Hierarchy. The accounting guidance for fair value measurements establishes a fair value hierarchy that requires an
entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
There are three levels of inputs that may be used to measure fair value based on the reliability of inputs. A financial
instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair
value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment
and may affect their placement within the fair value hierarchy levels. We have categorized our cash equivalents as Level 1
assets within the fair value hierarchy as there are quoted prices in active markets for identical assets or liabilities. There were
no Level 2 or Level 3 assets or liabilities held by the Company as of June 30, 2019 and 2018.
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis. We measure certain assets at fair value on a non-
recurring basis. These assets are recognized at fair value when they are deemed to be other-than-temporarily impaired. With
the exception of the $9.9 million retail design center asset impairment charge, we did not record any additional other-than-
temporary impairments on those assets required to be measured at fair value on a non-recurring basis during fiscal 2019. In
addition, we did not hold any available-for-sale securities during fiscal 2019 and 2018, thus no fair value measurements were
required. Refer to Note 10, Restructuring and Impairment Activities, for further disclosure of the retail design center asset
impairment charge.
Inventories at June 30, 2019 and 2018 are summarized as follows (in thousands):
Finished goods
Work in process
Raw materials
Inventory reserve
Inventories, net
2019
2018
$
128,047
9,185
26,661
(1,504)
$
124,640
12,057
27,947
(1,632)
$
162,389
$
163,012
(8) Property, Plant and Equipment
Property, plant and equipment at June 30, 2019 and 2018 are summarized as follows (in thousands):
La nd a nd i mprovements
Bui l di ng a nd i mprovements
Ma chi nery a nd equi pment
Property, pl a nt a nd equi pment, gros s
2019
2018
$
83,343
384,641
123,396
591,380
$
82,899
404,522
123,606
611,027
Les s : a ccumul a ted depreci a ti on a nd a morti za ti on
(346,134)
(343,124)
Property, pl a nt a nd equi pment, net
$
245,246
$
267,903
We recorded depreciation expense of $19.6 million, $19.8 million and $20.1 million in fiscal 2019, fiscal 2018 and fiscal
2017, respectively.
(9) Goodwill and Other Intangible Assets
At both June 30, 2019 and 2018, we had $25.4 million of goodwill and $19.7 million of other indefinite-lived intangible assets
consisting of Ethan Allen trade names, all of which is in our wholesale segment.
Both goodwill and indefinite-lived intangible assets are not amortized as they are estimated to have an indefinite life. We
used a qualitative approach for our wholesale segment goodwill impairment test in fiscal 2019 due to the relative fair value
of our reporting unit significantly exceeding the carrying value of the goodwill, as well as the operating performance of that
respective reporting unit. Based on this qualitative assessment, we concluded that it is more likely than not that the fair value
of our wholesale goodwill exceeded its carrying value.
We also used a qualitative approach for our trade names impairment test in fiscal 2019 and concluded that it is more likely
than not that the fair value of our trade name exceeded its carrying value.
(10) Restructuring and Impairment Activities
Optimization of Manufacturing and Logistics
During fiscal 2019, we began to execute plans to consolidate our manufacturing and logistics operations as part of an overall
strategy to maximize production efficiencies and maintain our competitive advantage. In April 2019, the following changes
to our operations were announced as we continue to improve the vertical integration of our business operations.
• Our 550,000 square foot Old Fort, North Carolina case goods manufacturing plant, while maintaining a lumber
processing facility, will be converted into a state-of-the-art distribution center to support our national distribution
structure and growing GSA contract business.
•
•
Consolidating approximately half of the case goods manufacturing from our Old Fort plant into our case goods plants
in Orleans and Beecher Falls, Vermont, with the balance to be consolidated into our other manufacturing facilities.
Expansion of our Maiden, North Carolina campus with the addition of 80,000 square feet of operating space.
• Distribution operations and art framing production at our Passaic, New Jersey facility will be discontinued with the
distribution operations moved to our operations in North Carolina and the art framing operations outsourced.
50
51
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
As of June 30, 2019, we have permanently ceased operations at our Passaic, New Jersey facility and, for the most part,
transferred our Old Fort case goods manufacturing operations to other existing operations. As a result, approximately 325 of
our associates in Old Fort and 55 associates in Passaic were terminated. We plan to continue with the optimization project
during fiscal 2020 as we convert Old Fort into a distribution center and expand our existing Maiden, North Carolina campus.
For these fourth quarter of fiscal 2019 actions, we recorded pre-tax restructuring, impairment, and other related charges
totaling $8.3 million, consisting of $3.1 million in impairments of long-lived assets, $2.8 million in employee severance and
other payroll and benefit costs, $2.0 million in inventory write-downs and manufacturing variances and $0.4 million of other
associated costs, including freight and relocation expenses. The inventory write-downs and abnormal manufacturing
overhead variances of $2.0 million were recorded within Cost of Sales with the remaining $6.3 million recorded within the
line item Restructuring and Impairment Charges in the consolidated statement of comprehensive income.
Retail Design Center Long-Lived Assets Impairment
During the fourth quarter of fiscal 2019, we recorded a non-cash impairment charge of $9.9 million related to the impairment
of long-lived assets held at certain retail design center locations. Due to retail segment operating losses and a recent
organizational realignment, we identified this as a fiscal 2019 triggering event requiring assessment of recoverability. The
asset group used in the impairment analysis, which represented the lowest level for which identifiable cash flows were
available and largely independent of the cash flows of other groups of assets, was the individual retail design center. We
estimated future cash flows based on design center-level historical results, current trends, and operating and cash flow
projections. The impairment charge of $9.9 million was recorded in the consolidated statement of comprehensive income
within the line item Restructuring and Impairment Charges.
Lease Exit Costs and Other Charges
During the fourth quarter of fiscal 2019 we recorded $2.1 million of charges primarily related to remaining contractual
obligations under leased retail design center space for which we ceased using as of June 30, 2019. The amount of the charge
was equal to all costs that will continue to be incurred under our lease for its remaining term without economic benefit and
measured at fair value when we ceased using the right conveyed by the contract. The pre-tax charge was recorded in the
consolidated statement of comprehensive income within the line item Restructuring and Impairment Charges.
Summary of Restructuring, Impairments and Other related charges
Restructuring, impairment and other related fiscal 2019 charges are summarized in the table below (in thousands):
Borrowi ngs under revol vi ng credi t fa ci l i ty
Optimization of manufacturing and logistics
Impairment of long-lived assets at retail design centers
Lease exit costs (remaining lease rentals)
Other charges (income)
Total Restructuring, Impairments and other charges
Inventory write-downs and manufacturing overhead costs
Total
Fiscal 2019
Charges
$
6,330
9,913
2,662
(525)
18,380
1,994
20,374
$
$
(1)
2023. Interest rates on our capital leases range from 3.8% to 5.1%.
Certain of our property and equipment are held under capital leases and have maturities ranging from fiscal 2020 to fiscal
(1)
Inventory write-downs and manufacturing overhead costs are reported within Cost of Sales in the consolidated statements of
comprehensive income.
52
53
Restructuring, Impairments and Other Related Charges Rollforward
Activity in the Company’s restructuring reserves is summarized in the table below (in thousands):
Optimization of Manufacturing and Logis tics
June 30, 2018
New Charges
Non-Cas h
Payments
June 30, 2019
Employee s everance, other payroll and benefit cos ts
$
-
$
2,837
$
-
$
(1,123)
$
1,714
(1)
Balance
Fis cal 2019 Activity
Balance
Accelerated depreciation of long-lived as s ets
Inventory write-downs and manufacturing overhead cos ts
Other exit and relocation cos ts
Sub-total
Retail Des ign Center Impairment
Impairment of long-lived as s ets
Other Res tructuring and Impairment Charges
Leas e exit cos ts (remaining leas e rentals )
Other charges (income)
Sub-total
-
-
-
-
-
-
958
958
3,112
1,128
283
4,523
9,913
9,913
3,112
1,994
381
8,324
2,662
(525)
2,137
(866)
(98)
(2,087)
-
-
-
(483)
-
(483)
(209)
(209)
(2)
(3)
3,145
224
3,369
-
-
-
-
1,714
Total Res tructuring, Impairments and other exit cos ts
$
958
$
20,374
$
13,953
$
(2,296)
$
5,083
(1) Remaining severance expected to be paid during the first quarter of fiscal 2020. The balance of $1.7 million is reported within Accrued
compensation and benefits in our consolidated balance sheet as of June 30, 2019.
(2) The current portion of the remaining lease rentals as of June 30, 2019 is recorded within Accounts payable and accrued expenses and
totaled $1.1 million while the non-current portion of $2.1 million is reflected in Other long-term liabilities.
(3) The remaining balance from the other charges (income) as of June 30, 2019 is recorded within Accounts payable and accrued expenses.
Total debt obligations at June 30, 2019 and 2018 consist of the following (in thousands):
(11) Debt
Ca pi ta l l ea s es
Tota l debt
Les s current ma turi ti es
Tota l l ong-term debt
Capital Leases
Revolving Credit Facility
2019
$
-
2018
$
-
1,066
1,066
550
1,680
1,680
584
$
516
$
1,096
On December 21, 2018, the Company and most of its domestic subsidiaries (the “Loan Parties”) entered into a Second
Amended and Restated Credit Agreement (the “Facility”). The Facility amends and restates the existing Amended and
Restated Credit Agreement, dated as of October 21, 2014, as amended. The Facility provides a revolving credit line of up to
$165 million, subject to borrowing base availability, and extends the maturity of the Facility to December 21, 2023. We
incurred financing costs of $0.6 million under the Facility, which are being amortized over the remaining life of the Facility
using the effective interest method.
At the Company’s option, revolving loans under the Facility bear interest, based on the average availability, at an annual rate
of either (a) the London Interbank Offered rate (“LIBOR”) plus 1.5% to 2.0%, or (b) the higher of (i) the prime rate, (ii) the
federal funds effective rate plus 0.5%, or (iii) LIBOR plus 1.0% plus in each case 0.5% to 1.0%.
The availability of credit at any given time under the Facility will be constrained by the terms and conditions of the Facility,
including the amount of collateral available, a borrowing base formula based upon numerous factors including the value of
eligible inventory and eligible accounts receivable, and other restrictions contained in the Facility. All obligations under the
Facility are secured by assets of the Loan Parties including inventory, receivables and certain types of intellectual property.
As of June 30, 2019, we have permanently ceased operations at our Passaic, New Jersey facility and, for the most part,
Restructuring, Impairments and Other Related Charges Rollforward
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
transferred our Old Fort case goods manufacturing operations to other existing operations. As a result, approximately 325 of
our associates in Old Fort and 55 associates in Passaic were terminated. We plan to continue with the optimization project
during fiscal 2020 as we convert Old Fort into a distribution center and expand our existing Maiden, North Carolina campus.
For these fourth quarter of fiscal 2019 actions, we recorded pre-tax restructuring, impairment, and other related charges
totaling $8.3 million, consisting of $3.1 million in impairments of long-lived assets, $2.8 million in employee severance and
other payroll and benefit costs, $2.0 million in inventory write-downs and manufacturing variances and $0.4 million of other
associated costs, including freight and relocation expenses. The inventory write-downs and abnormal manufacturing
overhead variances of $2.0 million were recorded within Cost of Sales with the remaining $6.3 million recorded within the
line item Restructuring and Impairment Charges in the consolidated statement of comprehensive income.
Retail Design Center Long-Lived Assets Impairment
During the fourth quarter of fiscal 2019, we recorded a non-cash impairment charge of $9.9 million related to the impairment
of long-lived assets held at certain retail design center locations. Due to retail segment operating losses and a recent
organizational realignment, we identified this as a fiscal 2019 triggering event requiring assessment of recoverability. The
asset group used in the impairment analysis, which represented the lowest level for which identifiable cash flows were
available and largely independent of the cash flows of other groups of assets, was the individual retail design center. We
estimated future cash flows based on design center-level historical results, current trends, and operating and cash flow
projections. The impairment charge of $9.9 million was recorded in the consolidated statement of comprehensive income
within the line item Restructuring and Impairment Charges.
Lease Exit Costs and Other Charges
During the fourth quarter of fiscal 2019 we recorded $2.1 million of charges primarily related to remaining contractual
obligations under leased retail design center space for which we ceased using as of June 30, 2019. The amount of the charge
was equal to all costs that will continue to be incurred under our lease for its remaining term without economic benefit and
measured at fair value when we ceased using the right conveyed by the contract. The pre-tax charge was recorded in the
consolidated statement of comprehensive income within the line item Restructuring and Impairment Charges.
Summary of Restructuring, Impairments and Other related charges
Restructuring, impairment and other related fiscal 2019 charges are summarized in the table below (in thousands):
Optimization of manufacturing and logistics
Impairment of long-lived assets at retail design centers
Lease exit costs (remaining lease rentals)
Other charges (income)
Total Restructuring, Impairments and other charges
Inventory write-downs and manufacturing overhead costs
Total
Fiscal 2019
Charges
$
6,330
9,913
2,662
(525)
$
18,380
1,994
(1)
$
20,374
(1)
Inventory write-downs and manufacturing overhead costs are reported within Cost of Sales in the consolidated statements of
comprehensive income.
Activity in the Company’s restructuring reserves is summarized in the table below (in thousands):
Optimization of Manufacturing and Logis tics
Balance
June 30, 2018
New Charges
Fis cal 2019 Activity
Non-Cas h
Payments
Balance
June 30, 2019
Employee s everance, other payroll and benefit cos ts
$
-
$
2,837
$
-
$
(1,123)
$
1,714
(1)
Accelerated depreciation of long-lived as s ets
Inventory write-downs and manufacturing overhead cos ts
Other exit and relocation cos ts
Sub-total
Retail Des ign Center Impairment
Impairment of long-lived as s ets
Other Res tructuring and Impairment Charges
Leas e exit cos ts (remaining leas e rentals )
Other charges (income)
Sub-total
-
-
-
-
-
-
958
958
3,112
1,994
381
8,324
3,112
1,128
283
4,523
-
(866)
(98)
(2,087)
-
-
-
1,714
9,913
9,913
-
-
2,662
(525)
2,137
(483)
-
(483)
-
(209)
(209)
(2)
(3)
3,145
224
3,369
Total Res tructuring, Impairments and other exit cos ts
$
958
$
20,374
$
13,953
$
(2,296)
$
5,083
(1) Remaining severance expected to be paid during the first quarter of fiscal 2020. The balance of $1.7 million is reported within Accrued
compensation and benefits in our consolidated balance sheet as of June 30, 2019.
(2) The current portion of the remaining lease rentals as of June 30, 2019 is recorded within Accounts payable and accrued expenses and
totaled $1.1 million while the non-current portion of $2.1 million is reflected in Other long-term liabilities.
(3) The remaining balance from the other charges (income) as of June 30, 2019 is recorded within Accounts payable and accrued expenses.
(11) Debt
Total debt obligations at June 30, 2019 and 2018 consist of the following (in thousands):
Borrowi ngs under revol vi ng credi t fa ci l i ty
Ca pi ta l l ea s es
Tota l debt
Les s current ma turi ti es
Tota l l ong-term debt
Capital Leases
2019
2018
$
-
1,066
$
-
1,680
1,066
550
1,680
584
$
516
$
1,096
Certain of our property and equipment are held under capital leases and have maturities ranging from fiscal 2020 to fiscal
2023. Interest rates on our capital leases range from 3.8% to 5.1%.
Revolving Credit Facility
On December 21, 2018, the Company and most of its domestic subsidiaries (the “Loan Parties”) entered into a Second
Amended and Restated Credit Agreement (the “Facility”). The Facility amends and restates the existing Amended and
Restated Credit Agreement, dated as of October 21, 2014, as amended. The Facility provides a revolving credit line of up to
$165 million, subject to borrowing base availability, and extends the maturity of the Facility to December 21, 2023. We
incurred financing costs of $0.6 million under the Facility, which are being amortized over the remaining life of the Facility
using the effective interest method.
At the Company’s option, revolving loans under the Facility bear interest, based on the average availability, at an annual rate
of either (a) the London Interbank Offered rate (“LIBOR”) plus 1.5% to 2.0%, or (b) the higher of (i) the prime rate, (ii) the
federal funds effective rate plus 0.5%, or (iii) LIBOR plus 1.0% plus in each case 0.5% to 1.0%.
The availability of credit at any given time under the Facility will be constrained by the terms and conditions of the Facility,
including the amount of collateral available, a borrowing base formula based upon numerous factors including the value of
eligible inventory and eligible accounts receivable, and other restrictions contained in the Facility. All obligations under the
Facility are secured by assets of the Loan Parties including inventory, receivables and certain types of intellectual property.
52
53
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Borrowings under the Facility
To fund a portion of the special cash dividend paid to shareholders in January 2019, we borrowed $16.0 million from the
Facility having a maturity date of December 21, 2023. By June 30, 2019, we had repaid all of the borrowed amount using cash
generated from operating activities. As of June 30, 2019 and 2018, we had no borrowings outstanding under the Facility.
During fiscal years 2019, 2018 and 2017, we recorded interest expense of $0.2 million, $0.1 million and $0.8 million,
respectively, on our outstanding debt amounts.
Debt Obligations
During fiscal 2019, 2018 and 2017, the weighted-average interest rates applicable under our outstanding debt obligations
were 4.2%, 3.3% and 2.4%, respectively.
The following table summarizes, as of June 30, 2019, the timing of cash payments related to our outstanding long-term debt
(capital lease) obligations for each of the five fiscal years subsequent to June 30, 2019, and thereafter (in thousands).
Income tax expense attributable to income before income taxes consists of the following for the fiscal years ended June 30
Fis cal Year Ended June 30,
2020
2021
2022
2023
2024
2025 and thereafter
Total s cheduled debt payments
$
Covenants and Other Ratios
$
550
437
60
19
-
-
1,066
The Facility contains various restrictive and affirmative covenants, including required financial reporting, limitations on the
ability to grant liens, make loans or other investments, incur additional debt, issue additional equity, merge or consolidate
with or into another person, sell assets, pay dividends or make other distributions or enter into transactions with affiliates,
along with other restrictions and limitations similar to those frequently found in credit agreements of this type and size. Loans
under the Facility may become immediately due and payable upon certain events of default (including failure to comply with
covenants, change of control or cross-defaults) as set forth in the Facility.
The Facility does not contain any significant financial ratio covenants or coverage ratio covenants other than a fixed charge
coverage ratio covenant based on the ratio of (a) EBITDA, plus cash Rentals, minus Unfinanced Capital Expenditures to (b)
Fixed Charges, as such terms are defined in the Facility (the “FCCR Covenant”). The FCCR Covenant only applies in certain
limited circumstances, including when the unused availability under the Facility drops below $18.5 million. The FCCR
Covenant ratio is set at 1.0 and measured on a trailing twelve-month basis.
At both June 30, 2019 and 2018, there was $6.1 million and $6.2 million, respectively, of standby letters of credit outstanding
under the Facility. Total availability under the Facility was $158.9 million at June 30, 2019 and $108.8 million at June 30, 2018.
At both June 30, 2019 and June 30, 2018, we were in compliance with all the covenants under the Facility.
(12) Other Long-term Liabilities
The following table summarizes the nature of the amounts within other long-term liabilities at June 30, 2019 and 2018
(in thousands):
Deferred rent
Unrecognized tax benefits (non-current)
Accrued lease exit costs
Other long-term liabilities
Other long-term liabilities
2019
2018
$
17,130
1,616
2,089
1,176
$
18,020
1,840
-
187
$
22,011
$
20,047
54
The following is a reconciliation of expected income tax expense (benefit) (computed by applying the federal statutory income
tax rate to income before taxes) to actual income tax expense (benefit) for the fiscal years ended June 30 (in thousands):
Expected income tax expense
State income taxes, net of federal income tax
Valuation allowance
Re-measurement of deferred taxes
Section 199 Qualified Production Activities deduction
Unrecognized tax expense (benefit)
Stock-based compensation - forfeitures and exercises
Other, net
Actual income tax expense
2019
2018
2017
$
7,111
21.0%
$
13,739
28.0%
$
19,947
35.0%
737
602
-
-
26
184
2.2%
1.8%
0.0%
0.0%
0.1%
0.5%
1,263
42
(2,651)
(678)
-
55
570
356
2.6%
0.1%
-5.4%
-1.4%
0.0%
0.1%
1.2%
0.7%
1,403
329
(999)
(48)
-
-
-
2.5%
0.6%
-1.8%
0.0%
-0.1%
-
-
(337)
-1.0%
169
0.3%
$
8,162
24.1%
$
12,696
25.9%
$
20,801
36.5%
Section 250 Foreign Derived Intangible Income deduction
(161)
-0.5%
The significant components of deferred tax assets recorded within the consolidated balance sheet were as follows at June 30
(13) Income Taxes
(in thousands):
Current:
Federal
State
Foreign
Deferred:
Federal
State
Foreign
Total current
Total deferred
Income tax expense
(in thousands):
Deferred tax assets:
Employee compensation accruals
Stock-based compensation
Deferred rent credits
Net operating loss carryforwards
Property, plant and equipment
Goodwill
Reserves
Other, net
Subtotal deferred tax assets
Less: Valuation allowance
Total net deferred tax assets
2019
2018
2017
$
10,133
$
10,289
$
15,265
1,237
304
11,674
(3,092)
(381)
(39)
(3,512)
1,689
824
12,802
174
(124)
(156)
(106)
1,585
445
17,295
3,413
85
8
3,506
$
8,162
$
12,696
$
20,801
2019
2018
$
2,697
$
2,729
933
4,407
3,959
-
328
247
1,460
14,063
(2,527)
$
12,020
$
11,536
715
4,184
4,259
1,021
77
863
1,401
15,217
(3,197)
55
Borrowings under the Facility
(13) Income Taxes
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
To fund a portion of the special cash dividend paid to shareholders in January 2019, we borrowed $16.0 million from the
Facility having a maturity date of December 21, 2023. By June 30, 2019, we had repaid all of the borrowed amount using cash
generated from operating activities. As of June 30, 2019 and 2018, we had no borrowings outstanding under the Facility.
During fiscal years 2019, 2018 and 2017, we recorded interest expense of $0.2 million, $0.1 million and $0.8 million,
During fiscal 2019, 2018 and 2017, the weighted-average interest rates applicable under our outstanding debt obligations
The following table summarizes, as of June 30, 2019, the timing of cash payments related to our outstanding long-term debt
(capital lease) obligations for each of the five fiscal years subsequent to June 30, 2019, and thereafter (in thousands).
respectively, on our outstanding debt amounts.
Debt Obligations
were 4.2%, 3.3% and 2.4%, respectively.
Fis cal Year Ended June 30,
2020
2021
2022
2023
2024
$
550
437
60
19
-
-
2025 and thereafter
Total s cheduled debt payments
$
1,066
Covenants and Other Ratios
The Facility contains various restrictive and affirmative covenants, including required financial reporting, limitations on the
ability to grant liens, make loans or other investments, incur additional debt, issue additional equity, merge or consolidate
with or into another person, sell assets, pay dividends or make other distributions or enter into transactions with affiliates,
along with other restrictions and limitations similar to those frequently found in credit agreements of this type and size. Loans
under the Facility may become immediately due and payable upon certain events of default (including failure to comply with
covenants, change of control or cross-defaults) as set forth in the Facility.
The Facility does not contain any significant financial ratio covenants or coverage ratio covenants other than a fixed charge
coverage ratio covenant based on the ratio of (a) EBITDA, plus cash Rentals, minus Unfinanced Capital Expenditures to (b)
Fixed Charges, as such terms are defined in the Facility (the “FCCR Covenant”). The FCCR Covenant only applies in certain
limited circumstances, including when the unused availability under the Facility drops below $18.5 million. The FCCR
Covenant ratio is set at 1.0 and measured on a trailing twelve-month basis.
At both June 30, 2019 and 2018, there was $6.1 million and $6.2 million, respectively, of standby letters of credit outstanding
under the Facility. Total availability under the Facility was $158.9 million at June 30, 2019 and $108.8 million at June 30, 2018.
At both June 30, 2019 and June 30, 2018, we were in compliance with all the covenants under the Facility.
The following table summarizes the nature of the amounts within other long-term liabilities at June 30, 2019 and 2018
(12) Other Long-term Liabilities
(in thousands):
Deferred rent
Unrecognized tax benefits (non-current)
Accrued lease exit costs
Other long-term liabilities
Other long-term liabilities
2019
2018
$
17,130
$
18,020
1,616
2,089
1,176
1,840
-
187
$
22,011
$
20,047
Income tax expense attributable to income before income taxes consists of the following for the fiscal years ended June 30
(in thousands):
Current:
Federal
State
Foreign
Total current
Deferred:
Federal
State
Foreign
Total deferred
Income tax expense
2019
2018
2017
$
10,133
1,237
304
11,674
$
10,289
1,689
824
12,802
$
15,265
1,585
445
17,295
(3,092)
(381)
(39)
(3,512)
174
(124)
(156)
(106)
3,413
85
8
3,506
$
8,162
$
12,696
$
20,801
The following is a reconciliation of expected income tax expense (benefit) (computed by applying the federal statutory income
tax rate to income before taxes) to actual income tax expense (benefit) for the fiscal years ended June 30 (in thousands):
Expected income tax expense
State income taxes, net of federal income tax
Valuation allowance
Re-measurement of deferred taxes
Section 199 Qualified Production Activities deduction
Section 250 Foreign Derived Intangible Income deduction
Unrecognized tax expense (benefit)
Stock-based compensation - forfeitures and exercises
Other, net
Actual income tax expense
2019
2018
2017
$
7,111
21.0%
$
13,739
28.0%
$
19,947
35.0%
737
602
-
-
2.2%
1.8%
0.0%
0.0%
(161)
-0.5%
26
184
0.1%
0.5%
(337)
-1.0%
1,263
42
(2,651)
(678)
-
55
570
356
2.6%
0.1%
-5.4%
-1.4%
0.0%
0.1%
1.2%
0.7%
1,403
329
-
(999)
-
(48)
-
169
2.5%
0.6%
-
-1.8%
0.0%
-0.1%
-
0.3%
$
8,162
24.1%
$
12,696
25.9%
$
20,801
36.5%
The significant components of deferred tax assets recorded within the consolidated balance sheet were as follows at June 30
(in thousands):
Deferred tax assets:
Employee compensation accruals
Stock-based compensation
Deferred rent credits
Net operating loss carryforwards
Property, plant and equipment
Goodwill
Reserves
Other, net
Subtotal deferred tax assets
Less: Valuation allowance
Total net deferred tax assets
2019
2018
$
2,697
$
2,729
715
4,184
4,259
1,021
77
863
1,401
15,217
(3,197)
933
4,407
3,959
-
328
247
1,460
14,063
(2,527)
$
12,020
$
11,536
54
55
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
The significant components of deferred tax liabilities recorded within the consolidated balance sheet were as follows at June
30 (in thousands):
A reconciliation of the beginning and ending amount of unrecognized tax benefits including related interest and penalties as
of June 30, 2019 and 2018 is as follows (in thousands):
Property, pl a nt a nd equi pment
Inta ngi bl e a s s ets other tha n goodwi l l
Commi s s i ons
Tota l deferred ta x l i a bi l i ty
2019
$
-
9,007
1,974
2018
$
2,827
8,951
2,230
$
10,981
$
14,008
The deferred tax balances are classified in the consolidated balance sheets as follows at June 30 (in thousands):
Non-current a s s ets
Non-current l i a bi l i ti es
2019
$
2,108
1,069
2018
$
1,688
4,160
Tota l net deferred ta x a s s et (l i a bi l i ty)
$
1,039
$
(2,472)
results could differ from those currently anticipated.
Commencing with fiscal 2018 the Company is prospectively reporting its deferred tax assets and liabilities as non-current in
conformance with ASU 2015-17, Balance Sheet Classification of Deferred Tax Assets. Prior to that, current deferred tax assets
and liabilities and non-current deferred tax assets and liabilities were presented net in the consolidated balance sheets.
We evaluate our deferred tax assets to determine if the “more likely than not” standard of evidence has not been met thereby
supporting the need for a valuation allowance. A valuation allowance must be established for deferred tax assets when it is
not more likely than not that assets will be realized. At June 30, 2019, such an allowance was in place against the Belgian and
Canadian foreign tax assets, and totaled $3.2 million compared to $2.5 million at June 30, 2018.
The Company’s deferred income tax assets at June 30, 2019 with respect to the net operating losses expire as follows (in
thousands):
Deferred Income
Ta x As s ets
Net Opera ti ng Los s
Ca rryforwa rds
Uni ted Sta tes (federa l a nd s ta te), expi ri ng between 2023 a nd 2032
$
1,168
$
20,662
Forei gn, expi ri ng between 2034 a nd 2039
$
3,091
$
9,566
Deferred federal income taxes were previously not provided for unremitted foreign earnings of our foreign subsidiaries
because we expected those earnings to be indefinitely reinvested. As part of the Tax Act, the Company reported the Deemed
Repatriation Transition Tax (the “Transition Tax”) on previously untaxed accumulated earnings and profits (“E&P”) of certain
of our foreign subsidiaries. To determine the amount of the Transition Tax, we determined, in addition to other factors, the
amount of post- 1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings.
We reported a Transition Tax obligation of $0.1 million for the fiscal year ended June 30, 2018.
On December 22, 2017, the Tax Act was enacted. Among the significant changes to the United States Internal Revenue Code,
the Tax Act lowered the United States federal corporate income tax rate (“Federal Tax Rate”) from 35% to 21% effective
January 1, 2018, introduced a limitation on the deduction of certain interest expenses, introduced a deduction for certain
business capital expenditures and introduced a system of taxing foreign-sourced income from multinational corporations.
The Company computed its income tax expense for the 2018 fiscal year using a blended Federal Tax Rate of 28%. The 21%
Federal Tax Rate applies to fiscal years ending June 30, 2019 and each year thereafter. The Company re-measured its net
deferred tax assets and liabilities using the Federal Tax Rate that would apply when these amounts were expected to reverse.
At June 30, 2018, the Company’s re-measurement of its deferred tax assets and liabilities resulted in a discrete tax benefit
$2.7 million, which lowered the effective tax rate by 5.4% for that fiscal year.
Uncertain Tax Positions
We recognize interest and penalties related to income tax matters as a component of income tax expense. If the $2.2 million
of unrecognized tax benefits and related interest and penalties as of June 30, 2019 were recognized, approximately $1.7
million would be recorded as a benefit to income tax expense.
56
57
Beginning balance
Additions for tax pos itions taken during the current year
Additions for tax pos itions taken during the prior year
Reductions for tax pos itions taken in prior years
Decreas es related to s ettlements with taxing authorities
Ending balance
2019
2018
$
2,187
$
2,106
329
143
(450)
-
360
107
(386)
-
$
2,209
$
2,187
It is reasonably possible that various issues relating to approximately $0.6 million of the total gross unrecognized tax benefits
as of June 30, 2019 will be resolved within the next twelve months as exams are completed or statutes expire. If recognized,
approximately $0.6 million of unrecognized tax benefits would reduce our tax expense in the period realized. However, actual
The Company conducts business globally and, as a result, the Company or one or more of its subsidiaries files income tax
returns in the United States, various state, and foreign jurisdictions. In the normal course of business, the Company is subject
to examination by the taxing authorities in such major jurisdictions as the United States, Canada, Mexico, Belgium and
Honduras. As of June 30, 2019, the Company and certain subsidiaries are currently under audit from 2015 through 2017 in
the United States. While the amount of uncertain tax benefits with respect to the entities and years under audit may change
within the next twelve months, it is not anticipated that any of the changes will be significant.
(14) Shareholders’ Equity
Shares Authorized for Issuance
Our authorized capital stock consists of 150,000,000 shares of common stock, par value $0.01 per share, and 1,055,000 shares
of Preferred Stock, par value $0.01 per share. The Board of Directors may provide for the issuance of all or any shares of
Preferred Stock in one or more classes or series, and to fix for each such class or series such voting powers, full or limited, or
no voting powers, and such distinctive designations, preferences and relative, participating, optional or other special rights
and such qualifications, limitations or restrictions thereof, as shall be stated and expressed in the resolution or resolutions
adopted by the Board of Directors providing for the issuance of such class or series and as may be permitted by the General
Corporation Law of the State of Delaware. As of June 30, 2019 and 2018, there were no shares of Preferred Stock issued or
outstanding.
Share Repurchase Program
At June 30, 2019, we had a remaining Board authorization to repurchase 2,518,046 shares of our common stock pursuant to
our program. There is no expiration date on the repurchase authorization and the amount and timing of future share
repurchases, if any, will be determined as market and business conditions warrant.
During the past three fiscal years, we repurchased the following shares of our common stock (trade date basis) under our
existing share repurchase program:
Common s hares repurchas ed
-
950,484
357,363
Cos t to repurchas e common s hares
$
-
$
22,019,381
$
10,246,302
Average price per s hare
$
-
$
23.17
$
28.67
2019
2018
2017
For the fiscal years presented above, we funded our purchases of treasury stock with existing cash on hand, cash generated
through current period operations and our credit facility. All our common stock repurchases are recorded as treasury stock
and result in a reduction of shareholders’ equity.
$
$
$
$
2,106
360
107
(386)
-
2,187
2,187
329
143
(450)
-
2,209
Beginning balance
Additions for tax pos itions taken during the current year
Additions for tax pos itions taken during the prior year
Reductions for tax pos itions taken in prior years
Decreas es related to s ettlements with taxing authorities
Ending balance
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
The significant components of deferred tax liabilities recorded within the consolidated balance sheet were as follows at June
A reconciliation of the beginning and ending amount of unrecognized tax benefits including related interest and penalties as
of June 30, 2019 and 2018 is as follows (in thousands):
2019
2018
30 (in thousands):
Property, pl a nt a nd equi pment
Inta ngi bl e a s s ets other tha n goodwi l l
Commi s s i ons
Tota l deferred ta x l i a bi l i ty
2019
$
-
9,007
1,974
2018
$
2,827
8,951
2,230
$
10,981
$
14,008
2019
2018
$
2,108
$
1,688
1,069
4,160
The deferred tax balances are classified in the consolidated balance sheets as follows at June 30 (in thousands):
Non-current a s s ets
Non-current l i a bi l i ti es
Tota l net deferred ta x a s s et (l i a bi l i ty)
$
1,039
$
(2,472)
Commencing with fiscal 2018 the Company is prospectively reporting its deferred tax assets and liabilities as non-current in
conformance with ASU 2015-17, Balance Sheet Classification of Deferred Tax Assets. Prior to that, current deferred tax assets
and liabilities and non-current deferred tax assets and liabilities were presented net in the consolidated balance sheets.
We evaluate our deferred tax assets to determine if the “more likely than not” standard of evidence has not been met thereby
supporting the need for a valuation allowance. A valuation allowance must be established for deferred tax assets when it is
not more likely than not that assets will be realized. At June 30, 2019, such an allowance was in place against the Belgian and
Canadian foreign tax assets, and totaled $3.2 million compared to $2.5 million at June 30, 2018.
The Company’s deferred income tax assets at June 30, 2019 with respect to the net operating losses expire as follows (in
thousands):
Deferred Income
Net Opera ti ng Los s
Ta x As s ets
Ca rryforwa rds
Uni ted Sta tes (federa l a nd s ta te), expi ri ng between 2023 a nd 2032
$
1,168
$
20,662
Forei gn, expi ri ng between 2034 a nd 2039
$
3,091
$
9,566
Deferred federal income taxes were previously not provided for unremitted foreign earnings of our foreign subsidiaries
because we expected those earnings to be indefinitely reinvested. As part of the Tax Act, the Company reported the Deemed
Repatriation Transition Tax (the “Transition Tax”) on previously untaxed accumulated earnings and profits (“E&P”) of certain
of our foreign subsidiaries. To determine the amount of the Transition Tax, we determined, in addition to other factors, the
amount of post- 1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings.
We reported a Transition Tax obligation of $0.1 million for the fiscal year ended June 30, 2018.
On December 22, 2017, the Tax Act was enacted. Among the significant changes to the United States Internal Revenue Code,
the Tax Act lowered the United States federal corporate income tax rate (“Federal Tax Rate”) from 35% to 21% effective
January 1, 2018, introduced a limitation on the deduction of certain interest expenses, introduced a deduction for certain
business capital expenditures and introduced a system of taxing foreign-sourced income from multinational corporations.
The Company computed its income tax expense for the 2018 fiscal year using a blended Federal Tax Rate of 28%. The 21%
Federal Tax Rate applies to fiscal years ending June 30, 2019 and each year thereafter. The Company re-measured its net
deferred tax assets and liabilities using the Federal Tax Rate that would apply when these amounts were expected to reverse.
At June 30, 2018, the Company’s re-measurement of its deferred tax assets and liabilities resulted in a discrete tax benefit
$2.7 million, which lowered the effective tax rate by 5.4% for that fiscal year.
Uncertain Tax Positions
We recognize interest and penalties related to income tax matters as a component of income tax expense. If the $2.2 million
of unrecognized tax benefits and related interest and penalties as of June 30, 2019 were recognized, approximately $1.7
million would be recorded as a benefit to income tax expense.
It is reasonably possible that various issues relating to approximately $0.6 million of the total gross unrecognized tax benefits
as of June 30, 2019 will be resolved within the next twelve months as exams are completed or statutes expire. If recognized,
approximately $0.6 million of unrecognized tax benefits would reduce our tax expense in the period realized. However, actual
results could differ from those currently anticipated.
The Company conducts business globally and, as a result, the Company or one or more of its subsidiaries files income tax
returns in the United States, various state, and foreign jurisdictions. In the normal course of business, the Company is subject
to examination by the taxing authorities in such major jurisdictions as the United States, Canada, Mexico, Belgium and
Honduras. As of June 30, 2019, the Company and certain subsidiaries are currently under audit from 2015 through 2017 in
the United States. While the amount of uncertain tax benefits with respect to the entities and years under audit may change
within the next twelve months, it is not anticipated that any of the changes will be significant.
(14) Shareholders’ Equity
Shares Authorized for Issuance
Our authorized capital stock consists of 150,000,000 shares of common stock, par value $0.01 per share, and 1,055,000 shares
of Preferred Stock, par value $0.01 per share. The Board of Directors may provide for the issuance of all or any shares of
Preferred Stock in one or more classes or series, and to fix for each such class or series such voting powers, full or limited, or
no voting powers, and such distinctive designations, preferences and relative, participating, optional or other special rights
and such qualifications, limitations or restrictions thereof, as shall be stated and expressed in the resolution or resolutions
adopted by the Board of Directors providing for the issuance of such class or series and as may be permitted by the General
Corporation Law of the State of Delaware. As of June 30, 2019 and 2018, there were no shares of Preferred Stock issued or
outstanding.
Share Repurchase Program
At June 30, 2019, we had a remaining Board authorization to repurchase 2,518,046 shares of our common stock pursuant to
our program. There is no expiration date on the repurchase authorization and the amount and timing of future share
repurchases, if any, will be determined as market and business conditions warrant.
During the past three fiscal years, we repurchased the following shares of our common stock (trade date basis) under our
existing share repurchase program:
Common s hares repurchas ed
-
950,484
357,363
Cos t to repurchas e common s hares
$
-
$
22,019,381
$
10,246,302
Average price per s hare
$
-
$
23.17
$
28.67
2019
2018
2017
For the fiscal years presented above, we funded our purchases of treasury stock with existing cash on hand, cash generated
through current period operations and our credit facility. All our common stock repurchases are recorded as treasury stock
and result in a reduction of shareholders’ equity.
56
57
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
(15) Earnings Per Share
Stock Option Awards
Basic and diluted earnings per share are calculated using the following weighted average share data (in thousands):
A summary of stock option activity during the fiscal year ended June 30, 2019 is presented below.
Wei ghted a vera ge s ha res outs ta ndi ng for ba s i c ca l cul a ti on
Di l uti ve effect of s tock opti ons a nd other s ha re-ba s ed a wa rds
Wei ghted a vera ge s ha res outs ta ndi ng a djus ted for di l uti on ca l cul a ti on
Fiscal Year Ended June 30,
2019
2018
2017
26,695
56
26,751
27,321
304
27,625
27,679
279
27,958
Dilutive potential common shares consist of stock options and unvested restricted stock awards. In fiscal 2019, 2018 and
2017, stock options to purchase 231,717, 195,318, and 379,350 common shares, respectively, were excluded from the diluted
EPS calculations because their inclusion would have been anti-dilutive.
As of June 30, 2019, 2018 and 2017, the number of performance-based equity award grants excluded from the calculation of
diluted EPS was 187,882, 210,836 and 215,613, respectively. Performance-based awards are excluded from the calculation
of diluted EPS unless the performance criteria are probable of being achieved as of the balance sheet date.
Wei ghted
Avera ge
Exerci s e
Wei ghted
Avera ge
Rema i ni ng
Contra ctua l
Intri ns i c Va l ue
Aggrega te
Opti ons
Pri ce
Term (yrs )
($ i n thous a nds )
Outs ta ndi ng - June 30, 2018
Gra nted
Exerci s ed
561,595
$
21.70
25,590
$
23.45
(52,250)
$
15.73
Ca ncel ed (forfei ted/expi red)
(156,024)
$
23.36
Outs ta ndi ng - June 30, 2019
378,911
$
21.95
Exerci s a bl e - June 30, 2019
319,024
$
21.04
4.4
3.7
$
990
$
990
(16) Accumulated Other Comprehensive Income (Loss)
million, respectively.
The following table sets forth the activity in accumulated other comprehensive loss (in thousands):
Beginning balance at July 1
Changes before reclassifications
Amounts reclassified from accumulated other comprehensive income
Current period other comprehensive income (loss)
Ending balance at June 30
Year Ended June 30,
2019
$
(6,171)
520
-
2018
$
(4,131)
(2,040)
-
520
(2,040)
$
(5,651)
$
(6,171)
Accumulated other comprehensive income consists of foreign currency translation adjustments which are the result of
changes in foreign currency exchange rates related to our operations in Canada, Belgium, Honduras, and Mexico, and exclude
income taxes given that the earnings of non-U.S. subsidiaries are deemed to be indefinitely reinvested.
(17) Share-Based Compensation
Share-based compensation expense totaled $0.1 million, $1.0 million, and $1.3 million in fiscal 2019, 2018 and 2017,
respectively. These amounts have been included in the consolidated statements of comprehensive income within selling,
general and administrative expenses. During fiscal 2019, 2018, and 2017, we recognized related tax benefits associated with
our share-based compensation arrangements totaling $0.1 million, $0.5 million, and $0.5 million, respectively (before
valuation allowances). Such amounts have been included in the consolidated statements of comprehensive income within
income tax expense. There was no stock-based compensation capitalized as of June 30, 2019 and 2018, respectively.
At June 30, 2019, we had 1,586,906 shares of common stock available for future issuance pursuant to the Ethan Allen Interiors
Inc. Stock Incentive Plan (the “Plan”). Under this Plan, the aggregate number of shares of common stock that may be issued
through awards of any form is 6,487,867 shares. The Plan provides for the grant of non-compensatory stock options to eligible
employees and non-employee directors. Stock options under the Plan are non-qualified under section 422 of the Internal
Revenue Code and allow for the purchase of shares of our common stock. The Plan also provides for the issuance of stock
appreciation rights (“SARs”) on issued options, however no SARs have been issued to date. The option awards are approved
by the Compensation Committee of the Board of Directors after consideration of recommendations proposed by the Chief
Executive Officer. Options are generally granted with an exercise price equal to the market price of our common stock at the
date of grant, vest ratably over a specified service period, and have a contractual term of 10 years. Equity awards can also
include performance vesting conditions. Company policy further requires an additional one year holding period beyond the
service vest date for certain executives. Beginning January 31, 2014, grants to employees include both company performance
and service vesting conditions (as further described below). Grants to independent directors have a three year service vesting
condition. The following is a description of equity grants made under the Plan.
58
59
The aggregate intrinsic value of options exercised during fiscal 2019, 2018 and 2017 was $0.3 million, $0.1 million, and $0.8
As of June 30, 2019, $0.2 million of total unrecognized compensation expense related to non-vested stock options is expected
to be recognized over a weighted average period of 1.5 years. A summary of the nonvested shares as of June 30, 2019 and
changes during the year then ended is presented below.
Nonvested June 30, 2018
Granted
Vested
Canceled (forfeited/expired)
Options
Weighted Average
Exercise Price
108,172
$
27.74
25,590
$
23.45
(63,436)
$
27.16
(10,439)
$
25.95
Nonvested at June 30, 2019
59,887
$
26.84
We estimate, as of the date of grant, the fair value of stock options awarded using the Black-Scholes option pricing model.
Use of a valuation model requires management to make certain assumptions with respect to selected model inputs, including
anticipated changes in the underlying stock price (i.e. expected volatility) and option exercise activity (i.e. expected life).
Expected volatility is based on the historical volatility of our stock. The risk-free rate of return is based on the United States
Treasury bill rate extrapolated to the term matching the expected life of the grant. The dividend yield is based on the
annualized dividend rate at the grant date relative to the grant date stock price. The expected life of options granted, which
represents the period of time that the options are expected to be outstanding, is based, primarily, on historical data.
There were no stock option awards granted to employees during each of the past three fiscal years. Non-employee
(independent) directors were granted stock options each year and valued using the Black-Scholes option pricing model with
the following weighted average assumptions:
Volatility
Risk-free rate of return
Dividend yield
Expected average life (years)
Grant date fair value ($)
Fair value as a % of exercise price
Stock Unit Awards
2019
31.3%
2.80%
3.24%
5.0
22.6%
2018
31.5%
1.76%
2.47%
4.6
22.5%
2017
36.8%
1.03%
1.96%
5.0
23.9%
$
5.30
$
6.93
$
8.30
Under the Plan, the Compensation Committee of the Board of Directors was authorized to award common shares to certain
employees based on the attainment of certain financial goals over a given performance period. The awards are offered at no
cost to the employees. In the event of an employee's termination during the vesting period, the potential right to earn shares
under this program is generally forfeited.
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
(15) Earnings Per Share
Stock Option Awards
Basic and diluted earnings per share are calculated using the following weighted average share data (in thousands):
A summary of stock option activity during the fiscal year ended June 30, 2019 is presented below.
Wei ghted a vera ge s ha res outs ta ndi ng for ba s i c ca l cul a ti on
Di l uti ve effect of s tock opti ons a nd other s ha re-ba s ed a wa rds
Wei ghted a vera ge s ha res outs ta ndi ng a djus ted for di l uti on ca l cul a ti on
Fiscal Year Ended June 30,
2019
2018
2017
26,695
56
26,751
27,321
304
27,625
27,679
279
27,958
Dilutive potential common shares consist of stock options and unvested restricted stock awards. In fiscal 2019, 2018 and
2017, stock options to purchase 231,717, 195,318, and 379,350 common shares, respectively, were excluded from the diluted
EPS calculations because their inclusion would have been anti-dilutive.
As of June 30, 2019, 2018 and 2017, the number of performance-based equity award grants excluded from the calculation of
diluted EPS was 187,882, 210,836 and 215,613, respectively. Performance-based awards are excluded from the calculation
of diluted EPS unless the performance criteria are probable of being achieved as of the balance sheet date.
(16) Accumulated Other Comprehensive Income (Loss)
The following table sets forth the activity in accumulated other comprehensive loss (in thousands):
Beginning balance at July 1
Changes before reclassifications
Amounts reclassified from accumulated other comprehensive income
Current period other comprehensive income (loss)
Ending balance at June 30
Year Ended June 30,
2019
2018
$
(6,171)
$
(4,131)
520
-
520
(2,040)
-
(2,040)
$
(5,651)
$
(6,171)
Accumulated other comprehensive income consists of foreign currency translation adjustments which are the result of
changes in foreign currency exchange rates related to our operations in Canada, Belgium, Honduras, and Mexico, and exclude
income taxes given that the earnings of non-U.S. subsidiaries are deemed to be indefinitely reinvested.
(17) Share-Based Compensation
Share-based compensation expense totaled $0.1 million, $1.0 million, and $1.3 million in fiscal 2019, 2018 and 2017,
respectively. These amounts have been included in the consolidated statements of comprehensive income within selling,
general and administrative expenses. During fiscal 2019, 2018, and 2017, we recognized related tax benefits associated with
our share-based compensation arrangements totaling $0.1 million, $0.5 million, and $0.5 million, respectively (before
valuation allowances). Such amounts have been included in the consolidated statements of comprehensive income within
income tax expense. There was no stock-based compensation capitalized as of June 30, 2019 and 2018, respectively.
At June 30, 2019, we had 1,586,906 shares of common stock available for future issuance pursuant to the Ethan Allen Interiors
Inc. Stock Incentive Plan (the “Plan”). Under this Plan, the aggregate number of shares of common stock that may be issued
through awards of any form is 6,487,867 shares. The Plan provides for the grant of non-compensatory stock options to eligible
employees and non-employee directors. Stock options under the Plan are non-qualified under section 422 of the Internal
Revenue Code and allow for the purchase of shares of our common stock. The Plan also provides for the issuance of stock
appreciation rights (“SARs”) on issued options, however no SARs have been issued to date. The option awards are approved
by the Compensation Committee of the Board of Directors after consideration of recommendations proposed by the Chief
Executive Officer. Options are generally granted with an exercise price equal to the market price of our common stock at the
date of grant, vest ratably over a specified service period, and have a contractual term of 10 years. Equity awards can also
include performance vesting conditions. Company policy further requires an additional one year holding period beyond the
service vest date for certain executives. Beginning January 31, 2014, grants to employees include both company performance
and service vesting conditions (as further described below). Grants to independent directors have a three year service vesting
condition. The following is a description of equity grants made under the Plan.
Wei ghted
Avera ge
Exerci s e
Pri ce
Wei ghted
Avera ge
Rema i ni ng
Contra ctua l
Term (yrs )
Aggrega te
Intri ns i c Va l ue
($ i n thous a nds )
Opti ons
Outs ta ndi ng - June 30, 2018
Gra nted
Exerci s ed
561,595
$
21.70
25,590
$
23.45
(52,250)
$
15.73
Ca ncel ed (forfei ted/expi red)
(156,024)
$
23.36
Outs ta ndi ng - June 30, 2019
378,911
$
21.95
Exerci s a bl e - June 30, 2019
319,024
$
21.04
4.4
3.7
$
990
$
990
The aggregate intrinsic value of options exercised during fiscal 2019, 2018 and 2017 was $0.3 million, $0.1 million, and $0.8
million, respectively.
As of June 30, 2019, $0.2 million of total unrecognized compensation expense related to non-vested stock options is expected
to be recognized over a weighted average period of 1.5 years. A summary of the nonvested shares as of June 30, 2019 and
changes during the year then ended is presented below.
Nonvested June 30, 2018
Granted
Vested
Canceled (forfeited/expired)
Options
Weighted Average
Exercise Price
108,172
$
27.74
25,590
$
23.45
(63,436)
$
27.16
(10,439)
$
25.95
Nonvested at June 30, 2019
59,887
$
26.84
We estimate, as of the date of grant, the fair value of stock options awarded using the Black-Scholes option pricing model.
Use of a valuation model requires management to make certain assumptions with respect to selected model inputs, including
anticipated changes in the underlying stock price (i.e. expected volatility) and option exercise activity (i.e. expected life).
Expected volatility is based on the historical volatility of our stock. The risk-free rate of return is based on the United States
Treasury bill rate extrapolated to the term matching the expected life of the grant. The dividend yield is based on the
annualized dividend rate at the grant date relative to the grant date stock price. The expected life of options granted, which
represents the period of time that the options are expected to be outstanding, is based, primarily, on historical data.
There were no stock option awards granted to employees during each of the past three fiscal years. Non-employee
(independent) directors were granted stock options each year and valued using the Black-Scholes option pricing model with
the following weighted average assumptions:
Volatility
Risk-free rate of return
Dividend yield
Expected average life (years)
Grant date fair value ($)
Fair value as a % of exercise price
Stock Unit Awards
2019
31.3%
2.80%
3.24%
5.0
5.30
22.6%
$
2018
31.5%
1.76%
2.47%
4.6
6.93
22.5%
$
2017
36.8%
1.03%
1.96%
5.0
8.30
23.9%
$
Under the Plan, the Compensation Committee of the Board of Directors was authorized to award common shares to certain
employees based on the attainment of certain financial goals over a given performance period. The awards are offered at no
cost to the employees. In the event of an employee's termination during the vesting period, the potential right to earn shares
under this program is generally forfeited.
58
59
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Payout of these grants depends on our financial performance (80%) and a market-based condition based on the total return
our shareholders receive on their investment in our stock relative to returns earned through investments in other peer
companies (20%). The performance award opportunity ranges from 50% of the employee's target award if minimum
performance requirements are met to a maximum of 125% of the target award based on the attainment of certain financial
and shareholder-return goals over a specific performance period, which is generally three fiscal years. The number of awards
that will vest, as well as unearned and canceled awards, depend on the achievement of certain financial and shareholder-
return goals over the three-year performance periods, and will be settled in shares if service conditions are met, requiring
employees to remain employed with us through the end of the three-year performance periods. We account for stock unit
awards as equity-based awards because upon vesting, they will be settled in common shares. We expense as compensation
cost the fair value of the shares as of the grant date and amortize expense ratably over the total performance and time vest
period, considering the probability that we will satisfy the performance goals.
The following table summarizes the performance-based stock units’ activity during fiscal 2019 at the maximum award
amounts based upon the respective performance share agreements:
Outs ta ndi ng a t June 30, 2018
Gra nted
Ves ted
Wei ghted Avera ge
Gra nt Da te
Fa i r Va l ue
$
26.15
$
18.33
Uni ts
330,369
105,644
(7,654)
$
26.79
Ca ncel ed (forfei ted/expi red)
(114,477)
$
28.02
Outs ta ndi ng a t June 30, 2019
313,882
$
22.82
We estimate, as of the date of grant, the fair value of Performance Units with a discounted cash flow model, using as model
inputs the risk-free rate of return as the discount rate, dividend yield for dividends not paid during the restriction period, and
a discount for lack of marketability for a one-year post-vest holding period. The lack of marketability discount used is the
present value of a future put option using Monte-Carlo and Black-Scholes pricing models. The weighted average assumptions
used for the fiscal years ended June 30 are noted in the table following.
Volatility
Risk-free rate of return
Dividend yield
Expected average life (years)
2019
2018
2017
32.1%
2.72%
3.24%
3.0
32.9%
1.41%
2.47%
1.9
30.8%
0.92%
1.97%
2.0
Share-based compensation expenses related to performance-based shares recognized in our consolidated statements of
comprehensive income are presented in the following table for the fiscal years ended June 30 (in thousands).
Fiscal 2016 grants
Fiscal 2017 grants
Fiscal 2018 grants
Fiscal 2019 grants
Total expense
2019
$
5
-
(457)
321
(131)
$
2018
$
92
(12)
457
-
$
537
2017
$
794
12
-
-
$
806
As of June 30, 2019, we estimate $0.7 million of total unrecognized compensation cost related to outstanding stock units
granted under the Plan. That cost is expected to be recognized over a weighted average period of 2.0 years.
Restricted Stock Awards
There was no restricted stock award activity during fiscal 2019. As of June 30, 2019 or 2018, there were no restricted stock
awards outstanding, respectively.
(18) Employee Retirement Programs
The Ethan Allen Retirement Savings Plan (the “401(k) Plan”)
The Company established its 401(k) Plan in 1994. The 401(k) Plan is a defined contribution plan covering all full-time, United
States employees and is subject to the provisions of the Employee Retirement Income Security Act of 1974 and the Internal
Revenue Code of 1986 (“IRC”). All United States employees of the Company are eligible to participate in the 401(k) Plan on
the first day of any subsequent April, July, October or January coincident with or next following the three-month anniversary
of their date of hire. Each year, participants may contribute up to 100% of their eligible annual compensation, subject to
annual limitations established by the IRC. We may, at our discretion, make a matching and profit sharing contribution to the
401(k) Plan on behalf of each eligible participant, which vests immediately. The Company contributed $3.4 million, $3.4
million and $3.5 million in matching and profit sharing contributions to employee 401(k) accounts during fiscal 2019, 2018
and 2017, respectively.
Other Retirement Plans and Benefits
Ethan Allen provides additional benefits to selected members of management in the form of previously entered deferred
compensation arrangements and a management cash bonus and other incentive programs. The total cost of these benefits
was $0.7 million, $0.1 million, and $1.0 million in fiscal 2019, 2018 and 2017, respectively.
(19) Segment Information
Operating segments are defined as (i) components of an enterprise that engage in business activities from which they may
earn revenue and incur expense, (ii) have operating results that are regularly reviewed by the enterprise’s chief operating
decision maker to make decisions about resources to be allocated to the segment and assess its performance, and (iii) for
which discrete financial information is available. The Company’s Chief Executive Officer is its chief operating decision maker
(“CODM”) and reviews financial information at the operating segment level and is responsible for making decisions about
resources allocated amongst the operating segments based on actual results. Our operating segments are aligned with how
the Company, including its CODM, manages the business. As such, our reportable operating segments are the Wholesale
segment and the Retail segment.
Our wholesale and retail operating segments represent strategic business areas of our vertically integrated enterprise that
operate separately and provide their own distinctive services. This vertical structure enables us to offer our complete line of
home furnishings and accents more effectively while controlling quality and cost. We evaluate performance of the respective
segments based upon revenues and operating income. Inter-segment transactions result, primarily, from the wholesale sale
of inventory to the retail segment, including the related profit margin.
As of June 30, 2019, the Company operated 144 design centers (our retail segment) and our independent retailers operated
158 design centers. Our wholesale segment net sales include sales to our retail segment, which are eliminated in
consolidation, and sales to our independent retailers. Our retail segment net sales accounted for 79% of our consolidated net
sales in fiscal 2019. Our wholesale segment net sales to independent retailers and other third parties accounted for the remaining
21%. Our ten largest customers were all within our wholesale segment and represent 12.4% of our consolidated net sales in fiscal
2019. These customers are the GSA and nine independent retailers who operate 116 design centers.
60
61
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Payout of these grants depends on our financial performance (80%) and a market-based condition based on the total return
our shareholders receive on their investment in our stock relative to returns earned through investments in other peer
companies (20%). The performance award opportunity ranges from 50% of the employee's target award if minimum
performance requirements are met to a maximum of 125% of the target award based on the attainment of certain financial
and shareholder-return goals over a specific performance period, which is generally three fiscal years. The number of awards
that will vest, as well as unearned and canceled awards, depend on the achievement of certain financial and shareholder-
return goals over the three-year performance periods, and will be settled in shares if service conditions are met, requiring
employees to remain employed with us through the end of the three-year performance periods. We account for stock unit
awards as equity-based awards because upon vesting, they will be settled in common shares. We expense as compensation
cost the fair value of the shares as of the grant date and amortize expense ratably over the total performance and time vest
period, considering the probability that we will satisfy the performance goals.
The following table summarizes the performance-based stock units’ activity during fiscal 2019 at the maximum award
(18) Employee Retirement Programs
The Ethan Allen Retirement Savings Plan (the “401(k) Plan”)
The Company established its 401(k) Plan in 1994. The 401(k) Plan is a defined contribution plan covering all full-time, United
States employees and is subject to the provisions of the Employee Retirement Income Security Act of 1974 and the Internal
Revenue Code of 1986 (“IRC”). All United States employees of the Company are eligible to participate in the 401(k) Plan on
the first day of any subsequent April, July, October or January coincident with or next following the three-month anniversary
of their date of hire. Each year, participants may contribute up to 100% of their eligible annual compensation, subject to
annual limitations established by the IRC. We may, at our discretion, make a matching and profit sharing contribution to the
401(k) Plan on behalf of each eligible participant, which vests immediately. The Company contributed $3.4 million, $3.4
million and $3.5 million in matching and profit sharing contributions to employee 401(k) accounts during fiscal 2019, 2018
and 2017, respectively.
amounts based upon the respective performance share agreements:
Other Retirement Plans and Benefits
Outs ta ndi ng a t June 30, 2018
Gra nted
Ves ted
Wei ghted Avera ge
Gra nt Da te
Fa i r Va l ue
$
26.15
$
18.33
Uni ts
330,369
105,644
(7,654)
$
26.79
Ca ncel ed (forfei ted/expi red)
(114,477)
$
28.02
Outs ta ndi ng a t June 30, 2019
313,882
$
22.82
We estimate, as of the date of grant, the fair value of Performance Units with a discounted cash flow model, using as model
inputs the risk-free rate of return as the discount rate, dividend yield for dividends not paid during the restriction period, and
a discount for lack of marketability for a one-year post-vest holding period. The lack of marketability discount used is the
present value of a future put option using Monte-Carlo and Black-Scholes pricing models. The weighted average assumptions
used for the fiscal years ended June 30 are noted in the table following.
Share-based compensation expenses related to performance-based shares recognized in our consolidated statements of
comprehensive income are presented in the following table for the fiscal years ended June 30 (in thousands).
Volatility
Risk-free rate of return
Dividend yield
Expected average life (years)
2019
2018
2017
32.1%
2.72%
3.24%
3.0
32.9%
1.41%
2.47%
1.9
30.8%
0.92%
1.97%
2.0
Fiscal 2016 grants
Fiscal 2017 grants
Fiscal 2018 grants
Fiscal 2019 grants
Total expense
2019
2018
2017
$
5
$
92
$
794
-
(457)
321
(12)
457
-
12
-
-
$
(131)
$
537
$
806
As of June 30, 2019, we estimate $0.7 million of total unrecognized compensation cost related to outstanding stock units
granted under the Plan. That cost is expected to be recognized over a weighted average period of 2.0 years.
Restricted Stock Awards
awards outstanding, respectively.
There was no restricted stock award activity during fiscal 2019. As of June 30, 2019 or 2018, there were no restricted stock
Ethan Allen provides additional benefits to selected members of management in the form of previously entered deferred
compensation arrangements and a management cash bonus and other incentive programs. The total cost of these benefits
was $0.7 million, $0.1 million, and $1.0 million in fiscal 2019, 2018 and 2017, respectively.
(19) Segment Information
Operating segments are defined as (i) components of an enterprise that engage in business activities from which they may
earn revenue and incur expense, (ii) have operating results that are regularly reviewed by the enterprise’s chief operating
decision maker to make decisions about resources to be allocated to the segment and assess its performance, and (iii) for
which discrete financial information is available. The Company’s Chief Executive Officer is its chief operating decision maker
(“CODM”) and reviews financial information at the operating segment level and is responsible for making decisions about
resources allocated amongst the operating segments based on actual results. Our operating segments are aligned with how
the Company, including its CODM, manages the business. As such, our reportable operating segments are the Wholesale
segment and the Retail segment.
Our wholesale and retail operating segments represent strategic business areas of our vertically integrated enterprise that
operate separately and provide their own distinctive services. This vertical structure enables us to offer our complete line of
home furnishings and accents more effectively while controlling quality and cost. We evaluate performance of the respective
segments based upon revenues and operating income. Inter-segment transactions result, primarily, from the wholesale sale
of inventory to the retail segment, including the related profit margin.
As of June 30, 2019, the Company operated 144 design centers (our retail segment) and our independent retailers operated
158 design centers. Our wholesale segment net sales include sales to our retail segment, which are eliminated in
consolidation, and sales to our independent retailers. Our retail segment net sales accounted for 79% of our consolidated net
sales in fiscal 2019. Our wholesale segment net sales to independent retailers and other third parties accounted for the remaining
21%. Our ten largest customers were all within our wholesale segment and represent 12.4% of our consolidated net sales in fiscal
2019. These customers are the GSA and nine independent retailers who operate 116 design centers.
60
61
Information for each of the last three fiscal years ended June 30 is provided below (in thousands):
The following table sets forth long-lived assets by geographic area at June 30 (in thousands):
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Net s a l es
Whol es a l e s egment
Reta i l s egment
El i mi na ti on of i nter-compa ny s a l es
Cons ol i da ted Tota l
Opera ti ng i ncome
Whol es a l e s egment
Reta i l s egment
Adjus tment of i ntercompa ny profi t(1)
2019
2018
2017
$
441,551
589,829
(284,696)
$
475,731
587,502
(296,449)
$
453,326
603,677
(293,618)
$
746,684
$
766,784
$
763,385
$
42,481
(10,529)
$
48,499
(1,738)
$
53,505
1,198
1,995
2,106
3,247
Cons ol i da ted Tota l
$
33,947
$
48,867
$
57,950
(20) Commitments and Contingencies
Depreci a ti on a nd a morti za ti on
Whol es a l e s egment
Reta i l s egment
Cons ol i da ted Tota l
$
7,560
12,077
$
7,752
12,079
$
7,550
12,565
$
19,637
$
19,831
$
20,115
Ca pi ta l expendi tures
Whol es a l e s egment
Reta i l s egment
Cons ol i da ted Tota l
$
3,340
5,780
$
4,286
8,200
$
8,589
9,056
$
9,120
$
12,486
$
17,645
(1) Represents the change in wholesale profit contained in Company-owned design center inventory at the end of the period.
($ in thousands)
Total Assets
Wholesale segment
Retail segment
Inventory profit elimination(1)
2019
June 30,
2018
2017
$
237,354
299,125
$
241,616
317,590
$
279,364
319,341
(26,128)
(28,773)
(30,483)
Consolidated Total
$
510,351
$
530,433
$
568,222
(1) The wholesale profit contained in the retail segment inventory that has not yet been realized. These profits are realized
when the related inventory is sold.
Geographic Information
Our international net sales are comprised of our wholesale segment sales to independent retailers and our retail segment
sales to consumers through the Company operated design centers.
The number of international design centers and the related net sales as a percent of our consolidated net sales is shown in
the following table.
United States
Mexico
Honduras
Canada
Total long-lived assets (1)
2019
2018
2017
$
218,034
$
239,567
$
239,885
18,144
8,057
1,011
18,323
8,637
1,376
20,142
9,011
1,160
$
245,246
$
267,903
$
270,198
(1) Long-lived assets consist of property, plant and equipment, net of accumulated depreciation and amortization and
exclude goodwill, intangible assets, deferred taxes and other assets.
Commitments represent obligations, such as those for future purchases of goods or services that are not yet recorded on the
balance sheet as liabilities. We record liabilities for commitments when incurred (i.e., when the goods or services are
received).
Lease Commitments
We lease real property and equipment under various operating lease agreements expiring at various times through 2039. Of
the 144 Company operated retail design centers, 94 of the properties were leased as of June 30, 2019. Leases covering these
retail design center locations and other equipment may require, in addition to stated minimums, contingent rentals based
on retail sales or equipment usage. Generally, the leases provide for renewal for various periods at stipulated rates.
Total minimum rental payments associated with our leases are recorded as rent expense (a component of Selling, General
& Administrative expenses) on a straight-line basis over the periods of the respective non-cancelable lease terms. Future
minimum lease payments under non-cancelable operating leases for each of the five fiscal years subsequent to June 30, 2019,
and thereafter are shown in the table below. Also shown are minimum future rentals from subleases, which will partially
offset lease payments in the aggregate (in thousands):
Fi s ca l Yea r Ended June 30,
2020
2021
2022
2023
2024
2025 a nd therea fter
Tota l
Future Mi ni mum
Future Mi ni mum
Lea s e Pa yments
Subl ea s e Renta l s
$
33,761
$
1,800
30,534
26,443
20,276
15,345
43,500
1,611
1,491
1,055
403
721
$
169,859
$
7,081
2019
2018
2017
76
34,454
(2,060)
133
33,867
(1,853)
142
33,175
(1,824)
$
32,394
$
32,014
$
31,351
Total rent expense for each of the past three fiscal years ended June 30 was as follows (in thousands):
Bas i c rental s under operati ng l eas es
$
34,378
$
33,734
$
33,033
Conti ngent rental s under operati ng l eas es
Bas i c and conti ngent rental s
Les s : s ubl eas e rent
Total rent expens e
Deferred rent credits and deferred lease incentives are reflected in the consolidated balance sheets under the caption Other
long-term liabilities, and are amortized over the respective underlying lease terms on a straight-line basis as a reduction of
rent expense. Amounts recorded at June 30 are as follows (in thousands):
Deferred rent credits
Deferred lease incentives
2019
2018
$
11,987
$
13,488
5,143
4,532
$
17,130
$
18,020
63
Independent design centers
Company operated design centers
Total international design centers
% of total design centers international
% of consolidated net sales
118
6
124
41.1%
6.8%
104
6
110
37.2%
10.2%
107
6
113
37.3%
10.0%
Sales by Country
United States
All Others
2019
2018
2017
93.2%
6.8%
89.8%
10.2%
90.0%
10.0%
62
Fi s ca l Yea r Ended June 30,
2018
2019
2017
Information for each of the last three fiscal years ended June 30 is provided below (in thousands):
The following table sets forth long-lived assets by geographic area at June 30 (in thousands):
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Net s a l es
Whol es a l e s egment
Reta i l s egment
El i mi na ti on of i nter-compa ny s a l es
Cons ol i da ted Tota l
Opera ti ng i ncome
Whol es a l e s egment
Reta i l s egment
Adjus tment of i ntercompa ny profi t(1)
Cons ol i da ted Tota l
Depreci a ti on a nd a morti za ti on
Whol es a l e s egment
Reta i l s egment
Cons ol i da ted Tota l
Ca pi ta l expendi tures
Whol es a l e s egment
Reta i l s egment
Cons ol i da ted Tota l
2019
2018
2017
$
441,551
$
475,731
$
453,326
589,829
(284,696)
587,502
(296,449)
603,677
(293,618)
$
746,684
$
766,784
$
763,385
$
42,481
$
48,499
$
53,505
(10,529)
1,995
(1,738)
2,106
1,198
3,247
$
33,947
$
48,867
$
57,950
$
7,560
$
7,752
$
7,550
12,077
12,079
12,565
$
19,637
$
19,831
$
20,115
$
3,340
$
4,286
$
8,589
5,780
8,200
9,056
$
9,120
$
12,486
$
17,645
($ in thousands)
Total Assets
Wholesale segment
Retail segment
Inventory profit elimination(1)
2019
2017
June 30,
2018
$
237,354
$
241,616
$
279,364
299,125
(26,128)
317,590
(28,773)
319,341
(30,483)
Consolidated Total
$
510,351
$
530,433
$
568,222
Independent design centers
Company operated design centers
Total international design centers
% of total design centers international
% of consolidated net sales
Sales by Country
United States
All Others
118
6
124
41.1%
6.8%
93.2%
6.8%
Fi s ca l Yea r Ended June 30,
2019
2018
2017
2019
2018
2017
107
6
113
37.3%
10.0%
90.0%
10.0%
104
6
110
37.2%
10.2%
89.8%
10.2%
62
(1) Represents the change in wholesale profit contained in Company-owned design center inventory at the end of the period.
(1) The wholesale profit contained in the retail segment inventory that has not yet been realized. These profits are realized
when the related inventory is sold.
Geographic Information
Our international net sales are comprised of our wholesale segment sales to independent retailers and our retail segment
sales to consumers through the Company operated design centers.
The number of international design centers and the related net sales as a percent of our consolidated net sales is shown in
the following table.
United States
Mexico
Honduras
Canada
Total long-lived assets (1)
$
2019
218,034
18,144
8,057
1,011
$
2018
239,567
18,323
8,637
1,376
$
2017
239,885
20,142
9,011
1,160
$
245,246
$
267,903
$
270,198
(1) Long-lived assets consist of property, plant and equipment, net of accumulated depreciation and amortization and
exclude goodwill, intangible assets, deferred taxes and other assets.
(20) Commitments and Contingencies
Commitments represent obligations, such as those for future purchases of goods or services that are not yet recorded on the
balance sheet as liabilities. We record liabilities for commitments when incurred (i.e., when the goods or services are
received).
Lease Commitments
We lease real property and equipment under various operating lease agreements expiring at various times through 2039. Of
the 144 Company operated retail design centers, 94 of the properties were leased as of June 30, 2019. Leases covering these
retail design center locations and other equipment may require, in addition to stated minimums, contingent rentals based
on retail sales or equipment usage. Generally, the leases provide for renewal for various periods at stipulated rates.
Total minimum rental payments associated with our leases are recorded as rent expense (a component of Selling, General
& Administrative expenses) on a straight-line basis over the periods of the respective non-cancelable lease terms. Future
minimum lease payments under non-cancelable operating leases for each of the five fiscal years subsequent to June 30, 2019,
and thereafter are shown in the table below. Also shown are minimum future rentals from subleases, which will partially
offset lease payments in the aggregate (in thousands):
Fi s ca l Yea r Ended June 30,
2020
2021
2022
2023
2024
2025 a nd therea fter
Tota l
Future Mi ni mum
Lea s e Pa yments
Future Mi ni mum
Subl ea s e Renta l s
$
33,761
$
1,800
30,534
26,443
20,276
15,345
43,500
1,611
1,491
1,055
403
721
$
169,859
$
7,081
Total rent expense for each of the past three fiscal years ended June 30 was as follows (in thousands):
2019
2018
2017
Bas i c rental s under operati ng l eas es
$
34,378
$
33,734
$
33,033
Conti ngent rental s under operati ng l eas es
Bas i c and conti ngent rental s
Les s : s ubl eas e rent
Total rent expens e
76
34,454
(2,060)
133
33,867
(1,853)
142
33,175
(1,824)
$
32,394
$
32,014
$
31,351
Deferred rent credits and deferred lease incentives are reflected in the consolidated balance sheets under the caption Other
long-term liabilities, and are amortized over the respective underlying lease terms on a straight-line basis as a reduction of
rent expense. Amounts recorded at June 30 are as follows (in thousands):
Deferred rent credits
Deferred lease incentives
$
2019
11,987
5,143
$
2018
13,488
4,532
$
17,130
$
18,020
63
Purchase Commitments with Suppliers
mitigates our exposure and may enable us to recover a portion of any future amounts paid. We believe the estimated fair
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
value of these indemnification obligations is immaterial.
(21) Quarterly Financial Data (Unaudited)
The following table presents selected unaudited financial information for each of the quarterly periods in the years ended
June 30, 2019 and 2018. The results for any quarter are not necessarily indicative of future quarterly results and, accordingly,
period-to-period comparisons should not be relied upon as an indication of future performance (in thousands, except per
share data):
Purchase obligations are defined as agreements that are enforceable and legally binding that specify all significant terms,
including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate
timing of the transaction. We do, in the normal course of business, regularly initiate purchase orders for the procurement of
(i) selected finished goods sourced from third-party suppliers, (ii) lumber, fabric, leather and other raw materials used in
production, and (iii) certain outsourced services. All purchase orders are based on current needs and are fulfilled by suppliers
within short time periods. At June 30, 2019, our open purchase orders with respect to such goods and services totaled $23.9
million and are to be paid in less than one year. Other purchase commitments included within this table represent payment
due for other services such as telecommunication, computer-related software, royalties, web development, insurance and
other maintenance contracts. There were no material changes in our purchase commitments with suppliers during fiscal
2019.
Legal Matters
We are routinely party to various legal proceedings, including investigations or as a defendant in litigation, in the ordinary
course of business. We are also subject to various federal, state and local environmental protection laws and regulations and
are involved, from time to time, in investigations and proceedings regarding environmental matters. Such investigations and
proceedings typically concern air emissions, water discharges, and/or management of solid and hazardous wastes. Under
these laws, we and/or our subsidiaries are, or may be, required to remove or mitigate the effects on the environment of the
disposal or release of certain hazardous materials.
Regulations issued under the Clean Air Act Amendments of 1990 required the industry to reformulate certain furniture
finishes or institute process changes to reduce emissions of volatile organic compounds. Compliance with many of these
requirements has been facilitated through the introduction of high solids coating technology and alternative formulations. In
addition, we have instituted a variety of technical and procedural controls, including reformulation of finishing materials to
reduce toxicity, implementation of high velocity low pressure spray systems, development of storm water protection plans
and controls, and further development of related inspection/audit teams, all of which have served to reduce emissions per
unit of production. We remain committed to implementing new waste minimization programs and/or enhancing existing
programs with the objective of (i) reducing the total volume of waste, (ii) limiting the liability associated with waste disposal,
and (iii) continuously improving environmental and job safety programs on the factory floor which serve to minimize
emissions and safety risks for employees. To reduce the use of hazardous materials in the manufacturing process, we will
continue to evaluate the most appropriate, cost-effective control technologies for finishing operations and production
methods. We believe that our facilities are in material compliance with all such applicable laws and regulations. Our currently
anticipated capital expenditures for environmental control facility matters are not material.
On a quarterly basis, we review our litigation activities and determine if an unfavorable outcome to us is considered “remote”,
“reasonably possible” or “probable” as defined by ASC 450, Contingencies. Where we determine an unfavorable outcome is
probable and is reasonably estimable, we accrue for potential litigation losses. The liability we may ultimately incur with
respect to such litigation matters, in the event of a negative outcome, may be in excess of amounts currently accrued, if any;
however, we do not expect that the reasonably possible outcome of these litigation matters would, individually or in the
aggregate, have a material adverse effect on our financial condition, results of operations or cash flows. Where we determine
an unfavorable outcome is not probable or reasonably estimable, we do not accrue for any potential litigation loss.
Although the outcome of the various claims and proceedings against us cannot be predicted with certainty, management
believes that the likelihood is remote that any existing claims or proceedings, individually or in the aggregate, will have a
material adverse effect on our financial position, results of operations or cash flows.
Indemnifications
As permitted or required under Delaware law and to the maximum extent allowable under that law, the Company has certain
obligations to indemnify its current and former officers and directors for certain events or occurrences while the officer or
director is, or was serving, at our request in such capacity. These indemnification obligations are valid as long as the director
or officer acted in good faith and in a manner the person reasonably believed to be in, or not opposed to, the best interests
of the Company, and with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct
was unlawful. The maximum potential amount of future payments Ethan Allen could be required to make under these
indemnification obligations is unlimited; however, the Company has a director and officer insurance policy that it believes
64
65
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
mitigates our exposure and may enable us to recover a portion of any future amounts paid. We believe the estimated fair
value of these indemnification obligations is immaterial.
(21) Quarterly Financial Data (Unaudited)
The following table presents selected unaudited financial information for each of the quarterly periods in the years ended
June 30, 2019 and 2018. The results for any quarter are not necessarily indicative of future quarterly results and, accordingly,
period-to-period comparisons should not be relied upon as an indication of future performance (in thousands, except per
share data):
Purchase Commitments with Suppliers
Purchase obligations are defined as agreements that are enforceable and legally binding that specify all significant terms,
including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate
timing of the transaction. We do, in the normal course of business, regularly initiate purchase orders for the procurement of
(i) selected finished goods sourced from third-party suppliers, (ii) lumber, fabric, leather and other raw materials used in
production, and (iii) certain outsourced services. All purchase orders are based on current needs and are fulfilled by suppliers
within short time periods. At June 30, 2019, our open purchase orders with respect to such goods and services totaled $23.9
million and are to be paid in less than one year. Other purchase commitments included within this table represent payment
due for other services such as telecommunication, computer-related software, royalties, web development, insurance and
other maintenance contracts. There were no material changes in our purchase commitments with suppliers during fiscal
2019.
Legal Matters
We are routinely party to various legal proceedings, including investigations or as a defendant in litigation, in the ordinary
course of business. We are also subject to various federal, state and local environmental protection laws and regulations and
are involved, from time to time, in investigations and proceedings regarding environmental matters. Such investigations and
proceedings typically concern air emissions, water discharges, and/or management of solid and hazardous wastes. Under
these laws, we and/or our subsidiaries are, or may be, required to remove or mitigate the effects on the environment of the
disposal or release of certain hazardous materials.
Regulations issued under the Clean Air Act Amendments of 1990 required the industry to reformulate certain furniture
finishes or institute process changes to reduce emissions of volatile organic compounds. Compliance with many of these
requirements has been facilitated through the introduction of high solids coating technology and alternative formulations. In
addition, we have instituted a variety of technical and procedural controls, including reformulation of finishing materials to
reduce toxicity, implementation of high velocity low pressure spray systems, development of storm water protection plans
and controls, and further development of related inspection/audit teams, all of which have served to reduce emissions per
unit of production. We remain committed to implementing new waste minimization programs and/or enhancing existing
programs with the objective of (i) reducing the total volume of waste, (ii) limiting the liability associated with waste disposal,
and (iii) continuously improving environmental and job safety programs on the factory floor which serve to minimize
emissions and safety risks for employees. To reduce the use of hazardous materials in the manufacturing process, we will
continue to evaluate the most appropriate, cost-effective control technologies for finishing operations and production
methods. We believe that our facilities are in material compliance with all such applicable laws and regulations. Our currently
anticipated capital expenditures for environmental control facility matters are not material.
On a quarterly basis, we review our litigation activities and determine if an unfavorable outcome to us is considered “remote”,
“reasonably possible” or “probable” as defined by ASC 450, Contingencies. Where we determine an unfavorable outcome is
probable and is reasonably estimable, we accrue for potential litigation losses. The liability we may ultimately incur with
respect to such litigation matters, in the event of a negative outcome, may be in excess of amounts currently accrued, if any;
however, we do not expect that the reasonably possible outcome of these litigation matters would, individually or in the
aggregate, have a material adverse effect on our financial condition, results of operations or cash flows. Where we determine
an unfavorable outcome is not probable or reasonably estimable, we do not accrue for any potential litigation loss.
Although the outcome of the various claims and proceedings against us cannot be predicted with certainty, management
believes that the likelihood is remote that any existing claims or proceedings, individually or in the aggregate, will have a
material adverse effect on our financial position, results of operations or cash flows.
Indemnifications
As permitted or required under Delaware law and to the maximum extent allowable under that law, the Company has certain
obligations to indemnify its current and former officers and directors for certain events or occurrences while the officer or
director is, or was serving, at our request in such capacity. These indemnification obligations are valid as long as the director
or officer acted in good faith and in a manner the person reasonably believed to be in, or not opposed to, the best interests
of the Company, and with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct
was unlawful. The maximum potential amount of future payments Ethan Allen could be required to make under these
indemnification obligations is unlimited; however, the Company has a director and officer insurance policy that it believes
64
65
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
PART III
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our
Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules
and forms, and that such information is accumulated and communicated to our management, including our Chairman of the
Board and Chief Executive Officer (“CEO”) and Executive Vice President Administration, Chief Financial Officer and Treasurer
(“CFO”), as appropriate, to allow timely decisions regarding required financial disclosure.
Under the supervision and with the participation of our management, including the CEO and CFO, we have evaluated the
effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-
15(e) under the Exchange Act, as of the end of the period covered by this report. Based on that evaluation, the CEO and CFO
have concluded that, as of June 30, 2019, our disclosure controls and procedures are effective to ensure that information
relating to us (including our consolidated subsidiaries), which is required to be disclosed by us in reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules
and forms, and is accumulated and communicated to our management, including the CEO and CFO, as appropriate, to allow
timely decisions regarding required disclosure.
Management's Report on Internal Control over Financial Reporting
Management’s report on our internal control over financial reporting is included under Part II, Item 8 of the Annual Report
on Form 10-K.
Report of Independent Registered Public Accounting Firm
Our independent registered public accounting firm’s attestation report on our internal control over financial reporting is
included under Part II, Item 8 of this Annual Report on Form 10-K.
MATTERS
Changes in Internal Control over Financial Reporting
Security Ownership of Certain Beneficial Owners and Management
There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) during the fiscal quarter ended June 30, 2019 that has materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
The information required by this item relating to security ownership of certain beneficial owners and management will be
included under the caption Security Ownership of Common Stock of Certain Beneficial Owners and Management in our proxy
statement for our 2019 Annual Meeting of Stockholders and is incorporated herein by reference.
ITEM 9B. OTHER INFORMATION
None.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Code of Ethics
We have adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, principal
accounting officer or controller, all other officers and our directors. A copy of this code of conduct is available at our website
at www.ethanallen.com/governance. We intend to disclose any amendment of our Code of Ethics, or any waiver of any
provision thereof, on our website within four days of the date of such amendment or waiver. In the case of a waiver, the
nature of the waiver, the name of the person to whom the waiver was granted, and the date of the waiver will also be
disclosed.
reference.
Information contained on, or connected to, our website is not incorporated by reference into this Annual Report on Form 10-
K and should not be considered part of this or any other report that we file with, or furnish to, the SEC.
Identification of Executive Officers
The information required relating to our executive officers is included under the heading Information About our Executive
Officers in Part I, Item 1 of this Annual Report on Form 10-K and all of that information is incorporated in this item by
The remaining information required by this Item will be included in our proxy statement for our 2019 Annual Meeting of
Stockholders and is incorporated in this item by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be included in our proxy statement for our 2019 Annual Meeting of Stockholders
and is incorporated in this item by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
Equity Compensation Plan Information
The following table summarizes as of June 30, 2019, the number of outstanding equity awards granted to employees and
non-employee directors, as well as the number of equity awards remaining available for future issuance, under our equity
compensation plans:
Plan Category
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders(3)
Total
(a)
(b)
(c)
Number of securities to
be issued upon exercise
of outstanding options,
Weighted average
exercise price of
Number of securities remaining
available for future issuance under
outstanding options,
equity compensation plans (excluding
warrants and rights
warrants and rights
securities reflected in the first column)
692,793(1)
$21.95(2)
-
692,793
-
$21.95
1,586,906
-
1,586,906
(1) Amount includes stock options outstanding under the Company’s Stock Incentive Plan as well as unvested shares of restricted
stock and vested stock units which have been provided for under the provisions of the option plan.
(2) Calculated without taking into account shares of Company common stock subject to outstanding stock unit awards that will
become issuable as they vest, without any cash consideration or other payment required for such shares.
(3) As of June 30, 2019, we did not maintain any equity compensation plans that have not been approved by our shareholders.
66
67
timely decisions regarding required disclosure.
Management's Report on Internal Control over Financial Reporting
on Form 10-K.
Report of Independent Registered Public Accounting Firm
included under Part II, Item 8 of this Annual Report on Form 10-K.
Changes in Internal Control over Financial Reporting
ITEM 9B. OTHER INFORMATION
None.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
PART III
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our
Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules
and forms, and that such information is accumulated and communicated to our management, including our Chairman of the
Board and Chief Executive Officer (“CEO”) and Executive Vice President Administration, Chief Financial Officer and Treasurer
(“CFO”), as appropriate, to allow timely decisions regarding required financial disclosure.
Under the supervision and with the participation of our management, including the CEO and CFO, we have evaluated the
effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-
15(e) under the Exchange Act, as of the end of the period covered by this report. Based on that evaluation, the CEO and CFO
have concluded that, as of June 30, 2019, our disclosure controls and procedures are effective to ensure that information
relating to us (including our consolidated subsidiaries), which is required to be disclosed by us in reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules
and forms, and is accumulated and communicated to our management, including the CEO and CFO, as appropriate, to allow
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Code of Ethics
We have adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, principal
accounting officer or controller, all other officers and our directors. A copy of this code of conduct is available at our website
at www.ethanallen.com/governance. We intend to disclose any amendment of our Code of Ethics, or any waiver of any
provision thereof, on our website within four days of the date of such amendment or waiver. In the case of a waiver, the
nature of the waiver, the name of the person to whom the waiver was granted, and the date of the waiver will also be
disclosed.
Information contained on, or connected to, our website is not incorporated by reference into this Annual Report on Form 10-
K and should not be considered part of this or any other report that we file with, or furnish to, the SEC.
Identification of Executive Officers
The information required relating to our executive officers is included under the heading Information About our Executive
Officers in Part I, Item 1 of this Annual Report on Form 10-K and all of that information is incorporated in this item by
reference.
The remaining information required by this Item will be included in our proxy statement for our 2019 Annual Meeting of
Stockholders and is incorporated in this item by reference.
Management’s report on our internal control over financial reporting is included under Part II, Item 8 of the Annual Report
ITEM 11. EXECUTIVE COMPENSATION
Our independent registered public accounting firm’s attestation report on our internal control over financial reporting is
The information required by this item will be included in our proxy statement for our 2019 Annual Meeting of Stockholders
and is incorporated in this item by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
Security Ownership of Certain Beneficial Owners and Management
There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) during the fiscal quarter ended June 30, 2019 that has materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
The information required by this item relating to security ownership of certain beneficial owners and management will be
included under the caption Security Ownership of Common Stock of Certain Beneficial Owners and Management in our proxy
statement for our 2019 Annual Meeting of Stockholders and is incorporated herein by reference.
Equity Compensation Plan Information
The following table summarizes as of June 30, 2019, the number of outstanding equity awards granted to employees and
non-employee directors, as well as the number of equity awards remaining available for future issuance, under our equity
compensation plans:
Plan Category
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders(3)
Total
(a)
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
(b)
Weighted average
exercise price of
outstanding options,
warrants and rights
(c)
Number of securities remaining
available for future issuance under
equity compensation plans (excluding
securities reflected in the first column)
692,793(1)
$21.95(2)
-
692,793
-
$21.95
1,586,906
-
1,586,906
(1) Amount includes stock options outstanding under the Company’s Stock Incentive Plan as well as unvested shares of restricted
stock and vested stock units which have been provided for under the provisions of the option plan.
(2) Calculated without taking into account shares of Company common stock subject to outstanding stock unit awards that will
become issuable as they vest, without any cash consideration or other payment required for such shares.
(3) As of June 30, 2019, we did not maintain any equity compensation plans that have not been approved by our shareholders.
66
67
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
3.9
Amended and Restated By-laws of Ethan Allen Inc. (now
S-4
333-131539-06
3(h)
2/3/2006
The information required by this item will be included in our proxy statement for our 2019 Annual Meeting of Stockholders
and is incorporated in this item by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
known as Ethan Allen Retail, Inc.)
3.10
Certificate of Incorporation of Ethan Allen Manufacturing
S-4
333-131539-06
3(i)
2/3/2006
Corporation (now known as Ethan Allen Operations, Inc.)
3.11
Certificate of Amendment of Certificate of Incorporation of
S-4
333-131539-06
3(i)-1
2/3/2006
The information required by this item will be included in our proxy statement for our 2019 Annual Meeting of Stockholders
and is incorporated in this item by reference.
Ethan Allen Manufacturing Corporation (now known as
Ethan Allen Operations, Inc.)
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this Annual Report on Form 10-K:
(1) Financial Statements.
PART IV
The following financial statements are included in Part II, Item 8 of this Annual Report on Form 10-K:
- Management’s Report on Internal Control over Financial Reporting
-
-
-
-
-
- Notes to the Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets at June 30, 2019 and 2018
Consolidated Statements of Comprehensive Income for the years ended June 30, 2019, 2018 and 2017
Consolidated Statements of Cash Flows for the years ended June 30, 2019, 2018 and 2017
Consolidated Statements of Shareholders’ Equity for the years ended June 30, 2019, 2018 and 2017
(2) Financial Statement Schedules.
Separate financial statement schedules have been omitted either because they are not applicable or because
the required information is included in the consolidated financial statements or notes described in Item 15(a)(1)
above.
(3) Exhibits.
The information required by this item is set forth below.
Exhibit
Number
Exhibit Description
Incorporated by Reference
Form
File No.
Exhibit
Filing
Date
Filed
Herewith
3.12
By-laws of Ethan Allen Manufacturing Corporation (now
S-4
333-131539-06
3(j)
2/3/2006
known as, Ethan Allen Operations, Inc.)
Certificate of Formation of Ethan Allen Realty, LLC
S-4
333-131539-06
Limited Liability Company Operating Agreement of Ethan
S-4
333-131539-06
3(k)
3(l)
2/3/2006
2/3/2006
3.15
Amendment No. 1 to Operating Agreement of Ethan Allen
S-4
333-131539-06
3(l)-1
2/3/2006
Allen Realty, LLC
Realty, LLC as of June 30, 2005
Certificate of Incorporation of Lake Avenue Associates, Inc.
S-4
333-131539-06
3(m)
2/3/2006
By-laws of Lake Avenue Associates, Inc.
S-4
333-131539-06
Certificate of Incorporation of Manor House, Inc.
S-4
333-131539-06
Restated By-laws of Manor House, Inc.
S-4
333-131539-06
Description of Securities
-
-
3(n)
3(o)
3(p)
-
2/3/2006
2/3/2006
2/3/2006
-
Restated Directors Indemnification Agreement dated March
S-1
33-57216
10(c)
3/16/1993
3.13
3.14
3.16
3.17
3.18
3.19
4.1
10.1
10.2*
The Ethan Allen Retirement Savings Plan as Amended and
10-Q
001-11692
10(b)-7
11/5/2007
10.3
Sales Finance Agreement, dated June 25, 1999, between the
10-K
001-11692
10(j)
9/13/2000
10.4
Second Amended and Restated Private Label Consumer
10-Q
001-11692
10(e)-3
11/5/2007
10.5
First Amendment to Second Amended and Restated Private
10-Q
001-11692
10(e)-1
5/10/2010
10.6
Second Amendment to Second Amended and Restated
10-Q
001-11692
10(e)-2
5/10/2010
10.7
Third Amendment to Second Amended and Restated Private
10-Q
001-11692
10(e)-3
11/3/2010
10.8
Fourth Amendment to Second Amended and Restated
10-Q
001-11692
10(d)-4
1/31/2014
1993, among the Company and Ethan Allen and their
Directors (incorporated by reference to Exhibit 10(c) to the
Registration Statement on Form S-1 of the Company filed
with the SEC on March 16, 1993)
Restated, effective January 1, 2006
Company and MBNA America Bank, N.A.
Credit Card Program Agreement, dated as of July 23, 2007,
by and between Ethan Allen Global, Inc., Ethan Allen Retail,
Inc. and GE Money Bank
Label Consumer Credit Card Program Agreement, dated as
of July 25, 2008, by and between Ethan Allen Global, Inc.,
Ethan Allen Retail, Inc. and GE Money Bank
Private Label Consumer Credit Card Program Agreement,
dated as of February 16, 2010, by and between Ethan Allen
Global, Inc., Ethan Allen Retail, Inc. and GE Money Bank
Label Consumer Credit Card Program Agreement, dated as
of June 30, 2011, by and between Ethan Allen Global, Inc.,
Ethan Allen Retail, Inc. and GE Money Bank
Private Label Consumer Credit Card Program Agreement
dated as of January 1, 2014, by and between Ethan Allen
Global, Inc., Ethan Allen Retail, Inc., and GE Capital Retail
Bank
69
X
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
By-laws of Ethan Allen Global, Inc.
Restated Certificate of Incorporation of Ethan Allen Inc.
(now known as, Ethan Allen Retail, Inc.)
Certificate of Amendment of Restated Certificate of
Incorporation of Ethan Allen Inc. (now known as Ethan Allen
Retail, Inc.)
68
Certificate of Designations relating to the New Convertible
Preferred Stock dated as of March 23, 1993
Certificate of Designations of Series C Junior Participating
Preferred Stock dated as of July 3, 1996, and Certificate of
Amendment of Certificate of Designations of Series C Junior
Participating Preferred Stock dated as of December 27,
2004
Amended and Restated By-laws of the Company
8-K
001-11692
Certificate of Incorporation of Ethan Allen Global, Inc.
S-4
333-131539-06
3(d)
3(e)
3(f)
3(g)
11/18/2016
2/3/2006
2/3/2006
2/3/2006
Amended and Restated Certificate of Incorporation
8-K
001-11692
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
S-4
333-131539-06
S-4
333-131539-06
3(a)
3(b)
11/18/2016
8/12/2015
10-K
001-11692
3(c)
8/12/2015
S-4
333-131539-06
3(g)-1
2/3/2006
-
-
-
-
-
-
-
-
10-K
001-11692
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item will be included in our proxy statement for our 2019 Annual Meeting of Stockholders
and is incorporated in this item by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item will be included in our proxy statement for our 2019 Annual Meeting of Stockholders
and is incorporated in this item by reference.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this Annual Report on Form 10-K:
(1) Financial Statements.
PART IV
The following financial statements are included in Part II, Item 8 of this Annual Report on Form 10-K:
- Management’s Report on Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets at June 30, 2019 and 2018
Consolidated Statements of Comprehensive Income for the years ended June 30, 2019, 2018 and 2017
Consolidated Statements of Cash Flows for the years ended June 30, 2019, 2018 and 2017
Consolidated Statements of Shareholders’ Equity for the years ended June 30, 2019, 2018 and 2017
-
-
-
-
-
Separate financial statement schedules have been omitted either because they are not applicable or because
the required information is included in the consolidated financial statements or notes described in Item 15(a)(1)
- Notes to the Consolidated Financial Statements
(2) Financial Statement Schedules.
above.
(3) Exhibits.
The information required by this item is set forth below.
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
Exhibit
Number
Exhibit Description
Incorporated by Reference
Form
File No.
Exhibit
Filing
Date
Filed
Herewith
Amended and Restated Certificate of Incorporation
8-K
001-11692
Certificate of Designations relating to the New Convertible
10-K
001-11692
3(a)
3(b)
11/18/2016
8/12/2015
Preferred Stock dated as of March 23, 1993
Certificate of Designations of Series C Junior Participating
10-K
001-11692
3(c)
8/12/2015
Preferred Stock dated as of July 3, 1996, and Certificate of
Amendment of Certificate of Designations of Series C Junior
Participating Preferred Stock dated as of December 27,
2004
Amended and Restated By-laws of the Company
8-K
001-11692
11/18/2016
Certificate of Incorporation of Ethan Allen Global, Inc.
S-4
333-131539-06
By-laws of Ethan Allen Global, Inc.
S-4
333-131539-06
Restated Certificate of Incorporation of Ethan Allen Inc.
S-4
333-131539-06
(now known as, Ethan Allen Retail, Inc.)
3(d)
3(e)
3(f)
3(g)
2/3/2006
2/3/2006
2/3/2006
Certificate of Amendment of Restated Certificate of
S-4
333-131539-06
3(g)-1
2/3/2006
Incorporation of Ethan Allen Inc. (now known as Ethan Allen
Retail, Inc.)
68
-
-
-
-
-
-
-
-
3.9
3.10
3.11
3.12
3.13
3.14
3.15
3.16
3.17
3.18
3.19
4.1
10.1
10.2*
10.3
10.4
10.5
10.6
10.7
10.8
Amended and Restated By-laws of Ethan Allen Inc. (now
known as Ethan Allen Retail, Inc.)
Certificate of Incorporation of Ethan Allen Manufacturing
Corporation (now known as Ethan Allen Operations, Inc.)
Certificate of Amendment of Certificate of Incorporation of
Ethan Allen Manufacturing Corporation (now known as
Ethan Allen Operations, Inc.)
By-laws of Ethan Allen Manufacturing Corporation (now
known as, Ethan Allen Operations, Inc.)
S-4
333-131539-06
3(h)
2/3/2006
S-4
333-131539-06
3(i)
2/3/2006
S-4
333-131539-06
3(i)-1
2/3/2006
S-4
333-131539-06
3(j)
2/3/2006
Certificate of Formation of Ethan Allen Realty, LLC
S-4
333-131539-06
S-4
333-131539-06
3(k)
3(l)
2/3/2006
2/3/2006
Limited Liability Company Operating Agreement of Ethan
Allen Realty, LLC
Amendment No. 1 to Operating Agreement of Ethan Allen
Realty, LLC as of June 30, 2005
S-4
333-131539-06
3(l)-1
2/3/2006
Certificate of Incorporation of Lake Avenue Associates, Inc.
S-4
333-131539-06
3(m)
2/3/2006
By-laws of Lake Avenue Associates, Inc.
S-4
333-131539-06
Certificate of Incorporation of Manor House, Inc.
S-4
333-131539-06
Restated By-laws of Manor House, Inc.
S-4
333-131539-06
3(n)
3(o)
3(p)
-
2/3/2006
2/3/2006
2/3/2006
-
-
S-1
-
33-57216
10(c)
3/16/1993
Description of Securities
Restated Directors Indemnification Agreement dated March
1993, among the Company and Ethan Allen and their
Directors (incorporated by reference to Exhibit 10(c) to the
Registration Statement on Form S-1 of the Company filed
with the SEC on March 16, 1993)
The Ethan Allen Retirement Savings Plan as Amended and
Restated, effective January 1, 2006
Sales Finance Agreement, dated June 25, 1999, between the
Company and MBNA America Bank, N.A.
Second Amended and Restated Private Label Consumer
Credit Card Program Agreement, dated as of July 23, 2007,
by and between Ethan Allen Global, Inc., Ethan Allen Retail,
Inc. and GE Money Bank
First Amendment to Second Amended and Restated Private
Label Consumer Credit Card Program Agreement, dated as
of July 25, 2008, by and between Ethan Allen Global, Inc.,
Ethan Allen Retail, Inc. and GE Money Bank
Second Amendment to Second Amended and Restated
Private Label Consumer Credit Card Program Agreement,
dated as of February 16, 2010, by and between Ethan Allen
Global, Inc., Ethan Allen Retail, Inc. and GE Money Bank
Third Amendment to Second Amended and Restated Private
Label Consumer Credit Card Program Agreement, dated as
of June 30, 2011, by and between Ethan Allen Global, Inc.,
Ethan Allen Retail, Inc. and GE Money Bank
Fourth Amendment to Second Amended and Restated
Private Label Consumer Credit Card Program Agreement
dated as of January 1, 2014, by and between Ethan Allen
Global, Inc., Ethan Allen Retail, Inc., and GE Capital Retail
Bank
69
10-Q
001-11692
10(b)-7
11/5/2007
10-K
001-11692
10(j)
9/13/2000
10-Q
001-11692
10(e)-3
11/5/2007
10-Q
001-11692
10(e)-1
5/10/2010
10-Q
001-11692
10(e)-2
5/10/2010
10-Q
001-11692
10(e)-3
11/3/2010
10-Q
001-11692
10(d)-4
1/31/2014
-
-
-
-
-
-
-
-
-
-
-
X
-
-
-
-
-
-
-
-
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
10.9
Fifth Amendment to Second Amended and Restated Private
Label Consumer Credit Card Program Agreement effective
as of July 1, 2015, by and between Ethan Allen Global, Inc.,
Ethan Allen Retail, Inc., and Synchrony Bank
10.10*
Employment Agreement between the Company and M.
Farooq Kathwari dated October 1, 2015
10.11*
Form of Performance-Based Stock Unit Agreement
10.12*
Change in Control Severance Plan
10.13
10.14
10.15
10.16
10.17
10.18
10.19
Credit Agreement, dated as of May 29, 2009, among Ethan
Allen Global, Inc., Ethan Allen Interiors Inc., JPMorgan Chase
Bank, N.A., and Capital One Leverage Finance Corp
(confidential treatment requested as to certain portions
Amendment No. 1, dated as of October 23, 2009 to the
Credit Agreement dated May 29, 2009, among Ethan Allen
Global, Inc., Ethan Allen Interiors Inc., JPMorgan Chase
Bank, N.A., and the lenders thereunder
Amendment No. 2, dated as of March 25, 2011, to the
Credit Agreement dated May 29, 2009, among Ethan Allen
Global, Inc., Ethan Allen Interiors Inc., JPMorgan Chase
Bank, N.A., and Wells Fargo Bank, National Association
Amended and Restated Credit Agreement, dated October
21, 2014, among Ethan Allen Global, Inc., Ethan Allen
Interiors Inc., JPMorgan Chase Bank, N.A., and Capital One,
National Association
Amendment No. 2 Dated as of September 10, 2015 to
Amended and Restated credit agreement dated as of
October 21, 2014 among Ethan Allen Global, Inc., and
JPMorgan Chase Bank, N.A. as Administrative Agent and
Syndication Agent, and Capital One, National Association as
Documentation Agent dated as of October 21, 2014
Amendment No. 3, dated as of January 22, 2016, to the
Amended and Restated Credit Agreement dated as of
October 21, 2014 among Ethan Allen Global, Inc., Ethan
Allen Interiors Inc., JPMorgan Chase Bank, N.A. and Capital
One, National Association
Second Amended and Restated Credit Agreement among
Ethan Allen Interiors, Inc., most of its domestic subsidiaries,
JPMorgan Chase Bank, N.A., as Administrative Agent and
Syndication Agent, and Capital One, National Association, as
Documentation Agent, dated as of December 21, 2018
10-K
001-11692
10 (d)-5
8/12/2015
8-K
001-11692
10.1
10/2/2015
8-K
8-K
001-11692
001-11692
10.2
10.3
10/2/2015
10/2/2015
10-K
001-11692
10(g)-2
8/24/2009
10-Q
001-11692
10(g)-3
11/9/2009
10-Q
001-11692
10(g)-3
5/5/2011
-
-
-
-
-
-
-
Consent of KPMG LLP
23
31.1
Certification of Principal Executive Officer pursuant to
Exchange Act Rule 13a-14(a)/15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of Principal Financial Officer pursuant to
Exchange Act Rule 13a-14(a)/15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certification of Principal Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
32.2
Certification of Principal Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
†
†
the Sarbanes-Oxley Act of 2002
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101. PRE XBRL Taxonomy Extension Presentation Linkbase Document
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-
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X
X
X
-
-
X
X
X
X
X
X
8-K
001-11692
10.1
10/22/2014
-
* Management contract or compensatory plan, contract or arrangement
Furnished herewith
(cid:3)ITEM 16. FORM 10-K SUMMARY
†(cid:3)
None.
8-K
001-11692
10.1
9/11/2015
-
10-Q
001-11692
10.1
1/27/2016
-
8-K
001-11692
10.1
12/21/2018
-
10.20*
Ethan Allen Interiors Inc. Stock Incentive Plan
10.21*
Form of Option Agreement for Grants to Independent
Directors
DEFC
14A
001-11692
Appendix
A
10/27/2015
10-K
001-11692
10(h)-4
9/13/2005
10.22*
Form of Option Agreement for Grants to Employees
10-K
001-11692
10(h)-5
9/13/2005
10.23*
Form of Restricted Stock Agreement for Executives
10.24*
Form of Restricted Stock Agreement for Directors
10.25*
Form of performance condition option agreement for
employees
8-K
8-K
001-11692
10(f)-1
11/19/2007
001-11692
10(f)-2
11/19/2007
10-Q
001-11692
10(g)-5
5/1/2014
21
List of subsidiaries of Ethan Allen Interiors Inc.
-
-
-
-
-
-
-
-
-
-
X
70
71
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
10.9
Fifth Amendment to Second Amended and Restated Private
10-K
001-11692
10 (d)-5
8/12/2015
Label Consumer Credit Card Program Agreement effective
as of July 1, 2015, by and between Ethan Allen Global, Inc.,
Ethan Allen Retail, Inc., and Synchrony Bank
10.10*
Employment Agreement between the Company and M.
8-K
001-11692
10.1
10/2/2015
Farooq Kathwari dated October 1, 2015
10.11*
Form of Performance-Based Stock Unit Agreement
10.12*
Change in Control Severance Plan
8-K
8-K
001-11692
001-11692
10.2
10.3
10/2/2015
10/2/2015
10.13
Credit Agreement, dated as of May 29, 2009, among Ethan
10-K
001-11692
10(g)-2
8/24/2009
10.14
Amendment No. 1, dated as of October 23, 2009 to the
10-Q
001-11692
10(g)-3
11/9/2009
10.15
Amendment No. 2, dated as of March 25, 2011, to the
10-Q
001-11692
10(g)-3
5/5/2011
23
31.1
31.2
32.1
†
32.2
†
Consent of KPMG LLP
Certification of Principal Executive Officer pursuant to
Exchange Act Rule 13a-14(a)/15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Principal Financial Officer pursuant to
Exchange Act Rule 13a-14(a)/15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Principal Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
Certification of Principal Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101. PRE XBRL Taxonomy Extension Presentation Linkbase Document
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X
X
X
-
-
X
X
X
X
X
X
10.16
Amended and Restated Credit Agreement, dated October
8-K
001-11692
10.1
10/22/2014
-
* Management contract or compensatory plan, contract or arrangement
10.17
Amendment No. 2 Dated as of September 10, 2015 to
8-K
001-11692
10.1
9/11/2015
-
Furnished herewith
†(cid:3)
(cid:3)ITEM 16. FORM 10-K SUMMARY
None.
Allen Global, Inc., Ethan Allen Interiors Inc., JPMorgan Chase
Bank, N.A., and Capital One Leverage Finance Corp
(confidential treatment requested as to certain portions
Credit Agreement dated May 29, 2009, among Ethan Allen
Global, Inc., Ethan Allen Interiors Inc., JPMorgan Chase
Bank, N.A., and the lenders thereunder
Credit Agreement dated May 29, 2009, among Ethan Allen
Global, Inc., Ethan Allen Interiors Inc., JPMorgan Chase
Bank, N.A., and Wells Fargo Bank, National Association
21, 2014, among Ethan Allen Global, Inc., Ethan Allen
Interiors Inc., JPMorgan Chase Bank, N.A., and Capital One,
National Association
Amended and Restated credit agreement dated as of
October 21, 2014 among Ethan Allen Global, Inc., and
JPMorgan Chase Bank, N.A. as Administrative Agent and
Syndication Agent, and Capital One, National Association as
Documentation Agent dated as of October 21, 2014
Amended and Restated Credit Agreement dated as of
October 21, 2014 among Ethan Allen Global, Inc., Ethan
Allen Interiors Inc., JPMorgan Chase Bank, N.A. and Capital
One, National Association
Ethan Allen Interiors, Inc., most of its domestic subsidiaries,
JPMorgan Chase Bank, N.A., as Administrative Agent and
Syndication Agent, and Capital One, National Association, as
Documentation Agent, dated as of December 21, 2018
10.18
Amendment No. 3, dated as of January 22, 2016, to the
10-Q
001-11692
10.1
1/27/2016
-
10.19
Second Amended and Restated Credit Agreement among
8-K
001-11692
10.1
12/21/2018
-
10.20*
Ethan Allen Interiors Inc. Stock Incentive Plan
001-11692
Appendix
10/27/2015
A
10.21*
Form of Option Agreement for Grants to Independent
10-K
001-11692
10(h)-4
9/13/2005
10.22*
Form of Option Agreement for Grants to Employees
10-K
001-11692
10(h)-5
9/13/2005
10.23*
Form of Restricted Stock Agreement for Executives
001-11692
10(f)-1
11/19/2007
10.24*
Form of Restricted Stock Agreement for Directors
001-11692
10(f)-2
11/19/2007
10.25*
Form of performance condition option agreement for
10-Q
001-11692
10(g)-5
5/1/2014
DEFC
14A
8-K
8-K
Directors
employees
21
List of subsidiaries of Ethan Allen Interiors Inc.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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X
70
71
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused
this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: August 9, 2019
ETHAN ALLEN INTERIORS INC.
(Registrant)
By/s/ M. Farooq Kathwari
(M. Farooq Kathwari)
Chairman, President and Chief Executive Officer
Know all persons by these presents, that each person whose signature appears below constitutes and appoints M. Farooq
Kathwari and Corey Whitely, and each of them, as such person’s true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for such person and in such person’s name, place and stead, in any and all capacities, to
sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and all other
documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorneys-in-fact
and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and purposes as such person might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their or such person’s substitute
or substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed
below by the following persons on behalf of the Registrant and in the capacities indicated on August 9, 2019.
Name
/s/ M. Farooq Kathwari
(M. Farooq Kathwari)
/s/ Corey Whitely
(Corey Whitely)
/s/ Matthew J. McNulty
(Matthew J. McNulty)
/s/ James B. Carlson
(James B. Carlson)
/s/ John J. Dooner Jr.
(John J. Dooner Jr.)
/s/ Domenick J. Esposito
(Domenick J. Esposito)
/s/ Mary Garrett
(Mary Garrett)
/s/ James W. Schmotter
(James W. Schmotter)
/s/ Tara I. Stacom
(Tara I. Stacom)
Title
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
Executive Vice President, Administration,
Chief Financial Officer and Treasurer
(Principal Financial Officer)
Vice President, Corporate Controller
(Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
72
T H I S PA G E I N T E N T I O N A L LY L E F T B L A N K
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused
this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: August 9, 2019
ETHAN ALLEN INTERIORS INC.
(Registrant)
By/s/ M. Farooq Kathwari
(M. Farooq Kathwari)
Chairman, President and Chief Executive Officer
Know all persons by these presents, that each person whose signature appears below constitutes and appoints M. Farooq
Kathwari and Corey Whitely, and each of them, as such person’s true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for such person and in such person’s name, place and stead, in any and all capacities, to
sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and all other
documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorneys-in-fact
and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and purposes as such person might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them or their or such person’s substitute
or substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed
below by the following persons on behalf of the Registrant and in the capacities indicated on August 9, 2019.
Title
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
Executive Vice President, Administration,
Chief Financial Officer and Treasurer
(Principal Financial Officer)
Vice President, Corporate Controller
(Principal Accounting Officer)
Name
/s/ M. Farooq Kathwari
(M. Farooq Kathwari)
/s/ Corey Whitely
(Corey Whitely)
/s/ Matthew J. McNulty
(Matthew J. McNulty)
/s/ James B. Carlson
(James B. Carlson)
/s/ John J. Dooner Jr.
(John J. Dooner Jr.)
/s/ Domenick J. Esposito
(Domenick J. Esposito)
/s/ Mary Garrett
(Mary Garrett)
/s/ James W. Schmotter
(James W. Schmotter)
/s/ Tara I. Stacom
(Tara I. Stacom)
Director
Director
Director
Director
Director
Director
72
T H I S PA G E I N T E N T I O N A L LY L E F T B L A N K
the home we all share
ETHAN ALLE N CRE ATE S FUR N I S HI N GS F O R T HE H OM E I N WAYS T H AT
HONOR THE HO ME WE ALL S H ARE . T H ERE ’S N O H OM E TO WH I CH WE AS
A COMPANY AR E MO R E COM M I T T ED BE CAUS E T HE STA K ES H AV E NEV ER
BEEN H IGHER : THE WAY WE T REAT OU R WORL D N OW WI L L D E T E RMINE
THE COURSE O F HU MANITY ’ S F UT UR E.
Our commitment to protect this world, rather than to treat it
fine-tune our processes and deliver more value to our
with disregard, is a commitment that’s good for the heart and
clients and shareholders. New ideas and new technologies
even better for business. Finding ways to use less electricity,
not only lessen our environmental impact but also further
water, and other resources, as well as ways to reduce the
improve our profitability, our products, and our standing in
amount of waste we put into landfills, helps us find ways to
the marketplace.
An ongoing focus on sustainability helps us do the things we
and we’re setting ourselves up for major cost savings at
already to a higher level; for example, when we replace a
the same time. We launched our first environmental health
boiler at a manufacturing plant with an energy-efficient
and safety initiative in 2010. The work was immediately
model, we’re doing the repairs we would have done anyway,
productive, and those efforts were noticed.
Carbon
Footprint
-30%
REDUCED
10.5 MILLION
pounds of CO2e
Electrical
Usage
-7%
REDUCED
2.6 MILLION
kW hours
Recycling
+4%
INCREASED
59,742
pounds
OU R S USTAI NABIL I TY
S UCCE S S STO RY
Domestic Manufacturing
2018 compared to our
2010 baseline year
Water
Usage
-33%
REDUCED
11.9 MILLION
gallons
Greenhouse
Gases
-25%
REDUCED
10 MILLION
pounds of CO2e
Landfill Waste
-35%
REDUCED
1 MILLION
pounds
OUR ACHIEVEMENTS
2013–2018: Named a Vermont Business
Partner by Vermont’s Department of
Environmental Conservation
2012–2018: New Jersey Department of
Environmental Protection, Certificate of
Environmental Stewardship
2012: Sage Awards Honorable Mention,
American Home Furnishings Alliance
2012: Congressional Certificate of Special
Recognition, Representative Chris Murphy (CT–5)
2011: Northeastern Loggers Association,
Outstanding Use of Wood Award
2011: Environmental Merit Award, U.S.
Environmental Protection Agency,
New England Office
2009, 2013: Vermont Governor’s Award
2012: Environmental Excellence Award,
for Environmental Excellence
American Home Furnishings Alliance; continuing
membership in consortium through 2018
the home we all share
ETHAN A LLE N C RE ATES F UR NI S HI N GS F O R T HE H OM E I N WAYS T H AT
HONOR THE H OM E WE ALL S HA RE . T H ERE ’S N O H OM E TO WH I CH WE AS
A COM PA NY ARE M ORE COM M I T T ED BE CAUS E T HE STA K ES H AV E NEV ER
BEEN HI GHER: THE WAY WE T REAT OU R WOR L D N OW WI L L D E T E RMI NE
THE COURS E O F HU MANI TY’S F UT UR E.
Our commitment to protect this world, rather than to treat it
fine-tune our processes and deliver more value to our
with disregard, is a commitment that’s good for the heart and
clients and shareholders. New ideas and new technologies
even better for business. Finding ways to use less electricity,
not only lessen our environmental impact but also further
water, and other resources, as well as ways to reduce the
improve our profitability, our products, and our standing in
amount of waste we put into landfills, helps us find ways to
the marketplace.
An ongoing focus on sustainability helps us do the things we
and we’re setting ourselves up for major cost savings at
already to a higher level; for example, when we replace a
the same time. We launched our first environmental health
boiler at a manufacturing plant with an energy-efficient
and safety initiative in 2010. The work was immediately
model, we’re doing the repairs we would have done anyway,
productive, and those efforts were noticed.
Carbon
Footprint
-30%
REDUCED
10.5 MILLION
pounds of CO2e
Electrical
Usage
-7%
REDUCED
2.6 MILLION
kW hours
Recycling
+4%
INCREASED
59,742
pounds
OUR SUSTAINABILITY
SUCCESS STORY
Domestic Manufacturing
2018 compared to our
2010 baseline year
Water
Usage
-33%
REDUCED
11.9 MILLION
gallons
Greenhouse
Gases
-25%
REDUCED
10 MILLION
pounds of CO2e
Landfill Waste
-35%
REDUCED
1 MILLION
pounds
OUR ACHIEVEMENTS
2013–2018: Named a Vermont Business
Partner by Vermont’s Department of
Environmental Conservation
2012–2018: New Jersey Department of
Environmental Protection, Certificate of
Environmental Stewardship
2012: Sage Awards Honorable Mention,
American Home Furnishings Alliance
2012: Environmental Excellence Award,
American Home Furnishings Alliance; continuing
membership in consortium through 2018
2012: Congressional Certificate of Special
Recognition, Representative Chris Murphy (CT–5)
2011: Northeastern Loggers Association,
Outstanding Use of Wood Award
2011: Environmental Merit Award, U.S.
Environmental Protection Agency,
New England Office
2009, 2013: Vermont Governor’s Award
for Environmental Excellence
2010 – 2019 highlights
BROWNFIELDS CLEANUP
The project: Rehabilitation of an old railroad site near
the Vermont-Canada border, including asbestos and
lead paint disposal and cleanup of a 15,000-gallon
above-ground diesel tank.
The outcome: Reduced contamination risk for our plant,
for associates’ homes and for the Connecticut River.
We even donated a preserved locomotive turntable to
a local railroad museum.
SHRINK SMART
The project: The development of Shrink Smart, a
machine that could cut custom lengths of shrink wrap
for Ethan Allen upholstery packaging.
The outcome: Led by purchasing manager Barry Willis,
the Shrink Smart project cut shrink wrap usage by
132,238 yards – enough to stretch more than 75 miles –
and saved $101,891.
WOOD WISE
The project: Making our Orleans plant, which runs
without #4 fuel oil by burning recycled wood chips and
sawdust generated by our Beecher Falls sawmill, even
more fuel efficient.
The outcome: By keeping wood dry before burning it
rather than storing it out in the open, we were able to
generate nearly twice as many BTUs of energy from an
already green fuel source.
COMMUNITY SERVIC E
The project: To transform our Pomona service center
into a regional recycling hub.
The outcome: Led by service center manager John Barbao,
Pomona has kept more than 2.2 million pounds of material
out of local landfills since 2015. They have also donated
like-new furnishings to Habitat for Humanity, changing
lives in their community.
POWER MOVES
The project: To cut energy usage at our Beecher Falls sawmill by relamping with LED bulbs.
The outcome: Big electricity savings from bulbs that use 60% to 80% less energy, elimination of hazardous waste
from disposal of fluorescent bulb ballasts, and better visibility for assessment of wood quality.
CHEMISTRY CLASS
The project: To lower hazardous air pollutant (HAP)
emissions by reformulating chemicals and putting
self-imposed limitations on permits.
The outcome: By exceeding regulatory standards early,
we were ready for the EPA’s Maximum Achievable Control
Technology (MACT) standards; the cost of coming into
compliance with these standards put many other furniture
companies out of business. For our efforts, we received an
Environmental Merit Award from the U.S. Environmental
Protection Agency, New England Office.
2010 – 2019 highlights
BROWNFIE LDS CL EANUP
The project: Rehabilitation of an old railroad site near
the Vermont-Canada border, including asbestos and
lead paint disposal and cleanup of a 15,000-gallon
above-ground diesel tank.
The outcome: Reduced contamination risk for our plant,
for associates’ homes and for the Connecticut River.
We even donated a preserved locomotive turntable to
a local railroad museum.
SHRINK SMART
The project: The development of Shrink Smart, a
machine that could cut custom lengths of shrink wrap
for Ethan Allen upholstery packaging.
The outcome: Led by purchasing manager Barry Willis,
the Shrink Smart project cut shrink wrap usage by
132,238 yards – enough to stretch more than 75 miles –
and saved $101,891.
WOOD WISE
The project: Making our Orleans plant, which runs
without #4 fuel oil by burning recycled wood chips and
sawdust generated by our Beecher Falls sawmill, even
more fuel efficient.
The outcome: By keeping wood dry before burning it
rather than storing it out in the open, we were able to
generate nearly twice as many BTUs of energy from an
already green fuel source.
COMMUNITY SERVICE
The project: To transform our Pomona service center
into a regional recycling hub.
The outcome: Led by service center manager John Barbao,
Pomona has kept more than 2.2 million pounds of material
out of local landfills since 2015. They have also donated
like-new furnishings to Habitat for Humanity, changing
lives in their community.
POWE R MOVES
The project: To cut energy usage at our Beecher Falls sawmill by relamping with LED bulbs.
The outcome: Big electricity savings from bulbs that use 60% to 80% less energy, elimination of hazardous waste
from disposal of fluorescent bulb ballasts, and better visibility for assessment of wood quality.
C H EM ISTRY CLASS
The project: To lower hazardous air pollutant (HAP)
emissions by reformulating chemicals and putting
self-imposed limitations on permits.
The outcome: By exceeding regulatory standards early,
we were ready for the EPA’s Maximum Achievable Control
Technology (MACT) standards; the cost of coming into
compliance with these standards put many other furniture
companies out of business. For our efforts, we received an
Environmental Merit Award from the U.S. Environmental
Protection Agency, New England Office.
the climate challenge
Climate change is undeniable and well underway. Our
reducing emissions, so we can do our part to impact the 2°C
commitment to lowering greenhouse gas emissions and
scenario goals for the global climate pact established in the
reducing our carbon footprint is unwavering, but we also know
Paris Climate Accords at the UN Framework Convention on
these efforts won’t be enough to stop the changes to come.
Climate Change’s (UNFCCC) Conference of Parties (COP21).
We see global climate change as a challenge we need to
address both by increasing efficiencies in operations and by
MORE
INTENSE STORMS
Damage from wind, flooding, and storm
surge poses risks to our properties, to our
suppliers’ facilities, and to our clients’ homes and
businesses. Potential consequences include property
loss, disruption to our supplier networks (particularly
in South Asia and China), and transportation
disruptions over land, over water, and at
ports of entry.
DROUGHT
& WILDFIRE
Water shortages and increased risk of
wildfire pose a risk to forests, to our facilities,
and to our associates who live in affected
communities. Potential consequences include property
loss from wildfire, pressures on our associates due to
drought-induced migration (particularly in Honduras
and Mexico), and changes to our supplier network in
world migration hotspots like Southeast Asia.
PHYSICAL RISKS
RELATED TO
CLIMATE CHANGE
EXTREME PRECIPITATION
Increasing global temperatures cause heavier
downpours during extreme precipitation
events. According to the Union of Concerned
Scientists, these events now drop 67%
more precipitation in the northeastern
U.S., 31% more in the Midwest,
and 15% more in the Great Plains
than they did 50 years ago.
RISING SEA LEVELS
Permanent flooding of coastal population
centers poses a risk to ports of entry, to our
properties, and to our client base. Rising sea
levels also pose a risk to suppliers in China,
India, and Southeast Asia.
POSSIBLE CLIMATE CHANGE IMPACTS
DEL IVERY DELAYS
CHALLENGES: Property damage and
transportation network disruptions could result
in production and delivery delays. These delays
could result in canceled orders in the short term,
and client dissatisfaction could affect long-term
customer relationships.
OPPORTUNITIES: As we plan for disruption,
we can also examine our current transportation
routes, looking for opportunities to minimize
greenhouse gas emissions and CO2e as well as
delivery disruption.
PROP ERTY DAMAGE
CHALLENGES: Property damage to our plants,
distribution and service centers, and Design
Centers could require significant capital
expenditures and could result in income
disruption for our associates.
OPPORTUNITIES: We can harden existing
buildings and seize opportunities during new
construction to create more energy-efficient
buildings and to use sustainable materials.
IN VENTORY LEVELS
CHALLENGES: An increase in adverse weather
events and natural disasters can create significant
OPPORTUNITIES: We can further help
pockets of demand from clients. Because most
our suppliers implement more sustainable
of our furnishings are made to order, it could be
manufacturing methods and improve labor
challenging to mobilize our manufacturing and
conditions to increase their production capacities.
delivery resources to meet that demand.
POPU LAT ION SHI FTS
CHALLENGES: Climate-related changes that
OPPORTUNITIES: Where population shifts
impact our clients, like disruptions to agriculture
result in insufficient demand to support current
in the central U.S., could significantly affect
Design Center locations, we can anticipate
local communities.
closures and plan for relocations and new openings.
the climate challenge
Climate change is undeniable and well underway. Our
reducing emissions, so we can do our part to impact the 2°C
commitment to lowering greenhouse gas emissions and
scenario goals for the global climate pact established in the
reducing our carbon footprint is unwavering, but we also know
Paris Climate Accords at the UN Framework Convention on
these efforts won’t be enough to stop the changes to come.
Climate Change’s (UNFCCC) Conference of Parties (COP21).
We see global climate change as a challenge we need to
address both by increasing efficiencies in operations and by
MORE
INTENSE STORMS
Damage from wind, flooding, and storm
surge poses risks to our properties, to our
suppliers’ facilities, and to our clients’ homes and
businesses. Potential consequences include property
loss, disruption to our supplier networks (particularly
in South Asia and China), and transportation
disruptions over land, over water, and at
ports of entry.
DROUGHT
& WILDFIRE
Water shortages and increased risk of
wildfire pose a risk to forests, to our facilities,
and to our associates who live in affected
communities. Potential consequences include property
loss from wildfire, pressures on our associates due to
drought-induced migration (particularly in Honduras
and Mexico), and changes to our supplier network in
world migration hotspots like Southeast Asia.
PHYSICAL RISKS
RELATED TO
CLIMATE CHANGE
EXTREME PRECIPITATION
Increasing global temperatures cause heavier
downpours during extreme precipitation
events. According to the Union of Concerned
Scientists, these events now drop 67%
more precipitation in the northeastern
U.S., 31% more in the Midwest,
and 15% more in the Great Plains
than they did 50 years ago.
RISING SEA LEVELS
Permanent flooding of coastal population
centers poses a risk to ports of entry, to our
properties, and to our client base. Rising sea
levels also pose a risk to suppliers in China,
India, and Southeast Asia.
PO SSIB LE C LIM ATE CH ANGE I M PACT S
DELIVERY DEL AYS
CHALLENGES: Property damage and
transportation network disruptions could result
in production and delivery delays. These delays
could result in canceled orders in the short term,
and client dissatisfaction could affect long-term
customer relationships.
OPPORTUNITIES: As we plan for disruption,
we can also examine our current transportation
routes, looking for opportunities to minimize
greenhouse gas emissions and CO2e as well as
delivery disruption.
PRO PERTY DAMAG E
CHALLENGES: Property damage to our plants,
distribution and service centers, and Design
Centers could require significant capital
expenditures and could result in income
disruption for our associates.
OPPORTUNITIES: We can harden existing
buildings and seize opportunities during new
construction to create more energy-efficient
buildings and to use sustainable materials.
INVE NTORY LEVELS
CHALLENGES: An increase in adverse weather
events and natural disasters can create significant
OPPORTUNITIES: We can further help
pockets of demand from clients. Because most
our suppliers implement more sustainable
of our furnishings are made to order, it could be
manufacturing methods and improve labor
challenging to mobilize our manufacturing and
conditions to increase their production capacities.
delivery resources to meet that demand.
PO PULATION SHIF TS
CHALLENGES: Climate-related changes that
OPPORTUNITIES: Where population shifts
impact our clients, like disruptions to agriculture
result in insufficient demand to support current
in the central U.S., could significantly affect
Design Center locations, we can anticipate
local communities.
closures and plan for relocations and new openings.
our environmental impact
THE CARBON FOOTPRINT CALCULATOR
for example, we multiply the emissions of six greenhouse
At Ethan Allen, we consider clean water a basic human
The Carbon Footprint Calculator is the core tool that
gases, plus other fuel emissions (such as emissions from
Ethan Allen uses across every location, from Design
the type of fuel our local electrical supplier uses to
Centers to manufacturing plants to headquarters, to
generate power) by each compound’s global warming
record environmental data and analyze it. It was created
potential (GWP), or carbon factor.
based on the EPA’s Waste Reduction Model (WARM),
which was designed to help businesses quantify how
smarter materials use, recycling, and other activities
affect greenhouse gas emissions, create energy savings,
and impact economic activities.
Every facility at Ethan Allen has its own environmental
goals, targets, and responsibilities related to emissions,
waste disposal, and electricity and water usage. A
designee at each location records the data in the
Carbon Footprint Calculator and submits it quarterly.
We’ve updated the calculator several times over the
The data is then reviewed annually by Ethan Allen’s
past decade to reflect a better understanding of our
corporate EH&S team, who compare it to data from
low-flow restroom fixtures in our facilities. We also use
environmental profile: how our company’s unique mix
the appropriate baseline year to measure our progress
of air emissions and waste products add carbon and other
toward environmental goals.
greenhouse gases to our atmosphere. To measure CO2e,
E LECTRICITY
To reduce the amount of electricity we use to heat our
We use energy-efficient lighting, and we’ve implemented
work spaces and dry our lumber, our plants burn scrap
coordinated startups of our heavy equipment to reduce
In 2018, we decreased our water usage by almost
wood to make steam. At some locations, we also use that
peak electrical demand. In 2018, we reduced electrical
same steam to cogenerate the electricity, heat, and air
usage by 2.6 million kilowatt hours compared to our
pressure needed to run our production equipment.
2010 baseline year.
ELECTRICAL USE IN KWH PER SALES DOLLAR
WATER USAGE IN GALLONS PER SALES DOLLAR
WATER
right, and we expect our business partners and vendors
to act accordingly, in compliance with water standards
and regulations. All of our manufacturing plants are
located in low to medium water-related risk areas, as
defined by the World Resource Institute (WRI) Water
Risk Atlas, and all of our plants meet or exceed
regulatory requirements.
To control and reduce water use, we have installed
flow restrictors to limit water use in certain operations.
Logs, for example, must be kept moist until milled, to
prevent cracks or splits; flow restrictors ensure logs are
sprinkled with a just-right amount of water. Additionally,
steam leak surveys have helped us prevent the escape
of steam into the air, further reducing water waste.
11 million gallons compared to our 2010 baseline year.
.070
.060
.050
.040
.030
.020
.010
.000
Domestic Manufacturing
Upholstery Manufacturing
Accents Production
Domestic Manufacturing
Upholstery Manufacturing
Accents Production
2010
2011
2012
2013
2014
2015
2016
2017
2018
2010
2011
2012
2013
2014
2015
2016
2017
2018
Case Goods Manufacturing
Case Goods Manufacturing
.070
.060
.050
.040
.030
.020
.010
.000
The Carbon Footprint Calculator is the core tool that
gases, plus other fuel emissions (such as emissions from
Ethan Allen uses across every location, from Design
the type of fuel our local electrical supplier uses to
Centers to manufacturing plants to headquarters, to
generate power) by each compound’s global warming
record environmental data and analyze it. It was created
potential (GWP), or carbon factor.
based on the EPA’s Waste Reduction Model (WARM),
which was designed to help businesses quantify how
smarter materials use, recycling, and other activities
affect greenhouse gas emissions, create energy savings,
and impact economic activities.
Every facility at Ethan Allen has its own environmental
goals, targets, and responsibilities related to emissions,
waste disposal, and electricity and water usage. A
designee at each location records the data in the
Carbon Footprint Calculator and submits it quarterly.
We’ve updated the calculator several times over the
The data is then reviewed annually by Ethan Allen’s
environmental profile: how our company’s unique mix
the appropriate baseline year to measure our progress
of air emissions and waste products add carbon and other
toward environmental goals.
greenhouse gases to our atmosphere. To measure CO2e,
ELECTRICITY
To reduce the amount of electricity we use to heat our
We use energy-efficient lighting, and we’ve implemented
wood to make steam. At some locations, we also use that
peak electrical demand. In 2018, we reduced electrical
same steam to cogenerate the electricity, heat, and air
usage by 2.6 million kilowatt hours compared to our
pressure needed to run our production equipment.
2010 baseline year.
our environmental impact
THE CARBON FOOTPRINT CALCULATOR
for example, we multiply the emissions of six greenhouse
At Ethan Allen, we consider clean water a basic human
WATER
right, and we expect our business partners and vendors
to act accordingly, in compliance with water standards
and regulations. All of our manufacturing plants are
located in low to medium water-related risk areas, as
defined by the World Resource Institute (WRI) Water
Risk Atlas, and all of our plants meet or exceed
regulatory requirements.
To control and reduce water use, we have installed
past decade to reflect a better understanding of our
corporate EH&S team, who compare it to data from
low-flow restroom fixtures in our facilities. We also use
flow restrictors to limit water use in certain operations.
Logs, for example, must be kept moist until milled, to
prevent cracks or splits; flow restrictors ensure logs are
sprinkled with a just-right amount of water. Additionally,
steam leak surveys have helped us prevent the escape
of steam into the air, further reducing water waste.
work spaces and dry our lumber, our plants burn scrap
coordinated startups of our heavy equipment to reduce
In 2018, we decreased our water usage by almost
11 million gallons compared to our 2010 baseline year.
ELECTRICAL USE IN KWH PER SALES DOLLAR
WATER USAGE IN GALLONS PER SALES DOLLAR
.070
.060
.050
.040
.030
.020
.010
.000
Domestic Manufacturing
Upholstery Manufacturing
Accents Production
Case Goods Manufacturing
.070
.060
.050
.040
.030
.020
.010
.000
2010
2011
2012
2013
2014
2015
2016
2017
2018
2010
2011
2012
2013
2014
2015
2016
2017
2018
Domestic Manufacturing
Upholstery Manufacturing
Accents Production
Case Goods Manufacturing
GREENHOUSE GAS EMISSIONS IN POUNDS PER SALES DOLLAR
.070
.060
.050
.040
.030
.020
.010
.000
Domestic Manufacturing
Upholstery Manufacturing
Accents Production
Case Goods Manufacturing
2010
2011
2012
2013
2014
2015
2016
2017
2018
Our greenhouse gas (GHG) reduction effort is supported by our carbon footprint reduction efforts. The emissions we
measure include the regulated emissions from our industrial processes. We focus on lowering our energy use,
using cogeneration to produce heat and power, making process improvements, and deploying of GHG reduction
technologies wherever possible.
CO2e AND GREENHOUSE GAS EMISSIONS
When we launched our environmental initiative in 2010,
we set a goal to reduce our CO2 and greenhouse gas
emissions by 10% in our first decade. We have significantly
exceeded that goal: we have cut CO2 emissions by 30%,
and we’ve reduced total greenhouse gas emissions by 25%.
To meet our carbon footprint reduction goals, we
continually review and investigate ways to reduce our
CO2 emissions in our operations. We set annual carbon
footprint reduction goals for our domestic manufacturing
division as a whole, based on data compiled from each
upholstery, accessory, and case goods manufacturing
facility. In 2018, we reduced CO2 emissions by over 10.5
million pounds compared to our 2010 baseline year.
CARBON EMISSIONS IN POUNDS PER SALES DOLLAR
.060
.050
.040
.030
.020
.010
.000
-.010
2010
2011
2012
2013
2014
2015
2016
2017
2018
Domestic Manufacturing
Upholstery Manufacturing
Accents Production
Case Goods Manufacturing
GREENHOUSE GAS EMISSIONS IN POUNDS PER SALES DOLLAR
.070
.060
.050
.040
.030
.020
.010
.000
Domestic Manufacturing
Upholstery Manufacturing
Accents Production
Case Goods Manufacturing
2010
2011
2012
2013
2014
2015
2016
2017
2018
Our greenhouse gas (GHG) reduction effort is supported by our carbon footprint reduction efforts. The emissions we
measure include the regulated emissions from our industrial processes. We focus on lowering our energy use,
using cogeneration to produce heat and power, making process improvements, and deploying of GHG reduction
technologies wherever possible.
CO2e AND GREENHOUSE GAS EMISSIONS
When we launched our environmental initiative in 2010,
we set a goal to reduce our CO2 and greenhouse gas
emissions by 10% in our first decade. We have significantly
exceeded that goal: we have cut CO2 emissions by 30%,
and we’ve reduced total greenhouse gas emissions by 25%.
To meet our carbon footprint reduction goals, we
continually review and investigate ways to reduce our
CO2 emissions in our operations. We set annual carbon
footprint reduction goals for our domestic manufacturing
division as a whole, based on data compiled from each
upholstery, accessory, and case goods manufacturing
facility. In 2018, we reduced CO2 emissions by over 10.5
million pounds compared to our 2010 baseline year.
CARBON EMISSIONS IN POUNDS PER SALES DOLLAR
.060
.050
.040
.030
.020
.010
.000
-.010
2010
2011
2012
2013
2014
2015
2016
2017
2018
Domestic Manufacturing
Upholstery Manufacturing
Accents Production
Case Goods Manufacturing
IT STARTS C LOSE TO HOME…
Seventy-five percent of what Ethan Allen sells is still
manufactured in our North American workshops.
We still use wood milled from logs in our Beecher Falls
sawmill, and we still manufacture wood furniture in
Orleans, Vermont.
…AND EXTENDS AROUND THE WORLD.
When we seek out partnerships with international suppliers
and vendors, we look for artisans who use traditional
methods, source local materials, and have a reputation
for being the best at what they do.
We feel a sense of responsibility both to the communities
we serve and to the workers who manufacture our products.
No matter where we do business around the world, our
values remain the same.
safety, fairness & opportunity
AT ITS CORE , ETHAN ALLE N’S STO RY I S T HE STORY OF A S MAL L FA MILY
BUSINESS THAT B ECAME A Q U I NTE S S EN TI A L AM ERI CAN BRA ND. WE GOT
OUR START WHEN TWO B R OT HE RS , N AT AN C ELL A ND T ED BAUM RIT TER,
BOUGHT A SAWMILL IN BE EC HER FAL LS , VERM ONT, A ND STA RT E D
MANUFACTUR ING HO ME FU R NI S HI NGS .
The dream our founders had then is the dream so many
small business owners have today: They wanted to devote
their lives to a craft they loved, benefiting themselves, their
workers, and their community. Their hard work catapulted
Ethan Allen from small family business to the multinational,
publicly traded, world-renowned furniture brand that it is
today. We’ve generated billions in economic revenue over
our nearly 90 years in business.
Ethan Allen is where it is today because furniture retailers of
yesteryear gave us a shot. They were willing to partner with
a small vendor that manufactured furniture in a remote
corner of a small state. Just as they worked with us, as
a way of paying it forward, we now work with emerging
businesses, both in the U.S. and around the world.
• We believe in the dignity of work and the satisfaction that
comes from a job well done. Employment contributes to
financial prosperity and boosts individual self-esteem and
community well-being.
• We believe that people who craft products for us,
no matter where they are in the world, should work in
a safe environment and receive fair wages and benefits.
• We believe that when we use a community’s natural
resources, we should harvest them responsibly, with
good stewardship and renewability in mind.
AT ITS CO RE , ETH AN ALLEN’S STO RY I S T HE STORY OF A S MAL L FA MILY
IT STARTS CLOSE TO HO ME…
Seventy-five percent of what Ethan Allen sells is still
manufactured in our North American workshops.
We still use wood milled from logs in our Beecher Falls
sawmill, and we still manufacture wood furniture in
Orleans, Vermont.
…AN D EXTENDS ARO UND TH E WORLD.
When we seek out partnerships with international suppliers
and vendors, we look for artisans who use traditional
methods, source local materials, and have a reputation
for being the best at what they do.
We feel a sense of responsibility both to the communities
we serve and to the workers who manufacture our products.
No matter where we do business around the world, our
values remain the same.
safety, fairness & opportunity
BUSINES S THAT BECAME A Q U I NT ES S EN TI A L AM ER I CAN BR A ND. WE GOT
OUR START WH EN TWO BROT HE RS , N AT AN C ELL A N D T ED B AUM RIT T ER,
BOUGHT A SAWM ILL IN BE EC HE R FAL LS , VER M ON T, A N D STA RT E D
MANUFACT UR ING HO ME F URNI S H I NGS .
The dream our founders had then is the dream so many
small business owners have today: They wanted to devote
their lives to a craft they loved, benefiting themselves, their
workers, and their community. Their hard work catapulted
Ethan Allen from small family business to the multinational,
publicly traded, world-renowned furniture brand that it is
today. We’ve generated billions in economic revenue over
our nearly 90 years in business.
Ethan Allen is where it is today because furniture retailers of
yesteryear gave us a shot. They were willing to partner with
a small vendor that manufactured furniture in a remote
corner of a small state. Just as they worked with us, as
a way of paying it forward, we now work with emerging
businesses, both in the U.S. and around the world.
• We believe in the dignity of work and the satisfaction that
comes from a job well done. Employment contributes to
financial prosperity and boosts individual self-esteem and
community well-being.
• We believe that people who craft products for us,
no matter where they are in the world, should work in
a safe environment and receive fair wages and benefits.
• We believe that when we use a community’s natural
resources, we should harvest them responsibly, with
good stewardship and renewability in mind.
safety at work
MONITORING PROGRESS
A commitment to social responsibility begins with a commitment to the safety of our associates. We have well-established
As part of our standing agenda, we review both accidents and close calls within our facilities during monthly and
programs, guidelines, and training materials on a range of environmental health and safety (EH&S) policies. In addition
quarterly conference calls. Reviews include both a listing of accidents and an open discussion of potential root causes
to receiving safety training during their orientation, associates receive periodic, ongoing training to minimize injuries,
and contributing factors.
occupational diseases, and work-related risks.
Each of our locations posts a daily metric: the number of days without time lost because of an accident. In recent years,
our Maiden, North Carolina, plant earned recognition for having over 1 million payroll hours without lost time.
TRACKI NG INC ID ENT S
Our EH&S team collects and analyzes workplace accident information across all company-owned locations. We classify
incidents by seriousness, based on both quantitative metrics like lost time, and qualitative metrics, like types of medical
treatment required beyond first aid.
In addition, we work with our insurance providers to aggregate information that helps us get to the root causes of injuries.
To prevent future incidents, we then take steps to make our physical spaces and our procedures more safe.
INJURIES: CAUSES AND SOLUTIONS
COMMON INJURIES BY FREQUENCY, 2016–2018
LOW-COST, HIGH-FREQUENCY CLAIMS
Shoulder
Lower
Trunk
Head
Shoulder
Back
Face/
Other
Shoulder
Elbow
Lower
Trunk
Arm
Arm
Elbow
Elbow
Lower
Trunk
Wrist/
Hand
Wrist/
Hand
Finger
Wrist/
Hand
Knee
Foot/
Ankle
Leg
Knee
Wrist/
Hand/
Finger
Foot/
Ankle
Leg
Knee
Finger
Leg
Toe
Wrist/
Hand
Knee
OBSTRUCTION
CUT/PUNCTURE
SLIP/TRIP/FALL
SPRAIN/TEAR
INFLAMMATION
Solution: Inspect walking
and work surfaces, clear
aisles, and remove clutter
from the work area.
Solution: Require
cut-resistant gloves,
inspect for sharp tools,
and train associates to cut
away from the body.
Solution: Clear
obstructions and install
non-skid walking surfaces.
Solution: Create a more
ergonomically sound work
environment, train workers on
proper lifting, reduce product
weight, and develop better
engineering controls.
Solution: Develop
local programs that
encourage movement
for ongoing mobility.
safety at work
A commitment to social responsibility begins with a commitment to the safety of our associates. We have well-established
As part of our standing agenda, we review both accidents and close calls within our facilities during monthly and
programs, guidelines, and training materials on a range of environmental health and safety (EH&S) policies. In addition
quarterly conference calls. Reviews include both a listing of accidents and an open discussion of potential root causes
to receiving safety training during their orientation, associates receive periodic, ongoing training to minimize injuries,
and contributing factors.
occupational diseases, and work-related risks.
MON ITORING P RO GR ESS
Each of our locations posts a daily metric: the number of days without time lost because of an accident. In recent years,
our Maiden, North Carolina, plant earned recognition for having over 1 million payroll hours without lost time.
TRAC KING INCIDENTS
treatment required beyond first aid.
Our EH&S team collects and analyzes workplace accident information across all company-owned locations. We classify
incidents by seriousness, based on both quantitative metrics like lost time, and qualitative metrics, like types of medical
In addition, we work with our insurance providers to aggregate information that helps us get to the root causes of injuries.
To prevent future incidents, we then take steps to make our physical spaces and our procedures more safe.
INJURIES: CAUSES AND SOLUTIONS
COMMON INJURIES BY FREQUENCY, 2016–2018
LOW-COST, HIGH-FREQUENCY CLAIMS
Shoulder
Lower
Trunk
Head
Shoulder
Back
Face/
Other
Shoulder
Elbow
Lower
Trunk
Arm
Arm
Elbow
Elbow
Lower
Trunk
Wrist/
Hand
Wrist/
Hand
Finger
Wrist/
Hand
Knee
Leg
Knee
Wrist/
Hand/
Finger
Foot/
Ankle
Leg
Knee
Finger
Leg
Toe
Wrist/
Hand
Knee
Foot/
Ankle
OBSTRUCTION
CUT/PUNCTURE
SLIP/TRIP/FALL
SPRAIN/TEAR
INFLAMMATION
Solution: Inspect walking
and work surfaces, clear
aisles, and remove clutter
from the work area.
Solution: Require
cut-resistant gloves,
Solution: Clear
obstructions and install
inspect for sharp tools,
non-skid walking surfaces.
and train associates to cut
away from the body.
Solution: Create a more
ergonomically sound work
Solution: Develop
local programs that
environment, train workers on
encourage movement
proper lifting, reduce product
for ongoing mobility.
weight, and develop better
engineering controls.
product safety from design to delivery
Ethan Allen has always had a strong
reputation for delivering a quality product
to its clients. A well-defined quality control
program documents testing and product
inspection, improves product quality, and
ensures client satisfaction.
Our compliance team works with in-house
merchants, manufacturing facilities, and
international suppliers to make sure all
Ethan Allen products meet uniform product
standards. This work involves key personnel –
engineering, quality control, and inspection
staff – and a commitment to quality from the
instant a product is designed to the moment
it’s delivered to a client.
Most of our furniture is custom-made,
mostly in our North American plants. When
we do work with import vendors, we ensure
the products they make meet the same
quality standards as those in our North
American plants. We expect plants to
conduct regular factory inspections and
rigorous product testing.
HOW ETHAN ALLEN PRODUCTS ARE MADE
All Ethan Allen products begin with clear-cut design
In addition to conducting inspections for product quality,
INSPECTIONS AT ALL STAG ES
PRODUCT TESTING
Step 1
Step 2
Step 3
Step 4
Design Concept: Designers start with a new product
concept—the driving core and backbone of each
product—which includes the base material, such as
wood or metal.
Design Drawing: Design engineering staff develop a
detailed CAD drawing of the new product, including
important details that contribute to the integrity and
quality. The drawing explains product specifications to
an extraordinary level of detail, so our manufacturers
know exactly what's expected.
Design Package: Compliance staff create a detailed
packet for each design that includes testing procedures,
including regulatory chemical testing and responsible
labeling guidelines. The packet is sent to the designated
factory for review and development.
Factory Sample: While the first sample is built, the
factory’s engineering and quality control team members
remain in constant communication with both designers
and compliance staff.
Step 5
Construction Review: New products are submitted
to performance testing to ensure quality and
regulatory compliance.
Step 6
Final Review: New products and test results are sent
to Ethan Allen headquarters for review. Designers and
compliance staff send detailed comments and corrective
recommendations back to the manufacturing facility.
Step 7
Step 8
Step 9
Final Approval: Factories review and execute
corrective action. They retest each product, submit
reports to Ethan Allen, and start manufacturing the
final product upon approval.
Quality Control: Factories inspect products at all stages,
relying on trained employees who then communicate
their findings to factory management and take corrective
action as needed.
Responsible Packaging and Labeling: Products are
labeled so that all government regulations, plus care
and assembly instructions, are clear and informative.
Ethan Allen ensures that suppliers package products
securely, so they arrive safe and intact in client homes.
specifications and a compliance packet that includes
we test all products to ensure they comply with state,
detailed testing procedures we expect vendors to follow.
federal, and provincial laws. We require suppliers to
When factories build the first sample of a product, their
document that every product passes tests for both
engineers and quality control team members stay in
workmanship and performance standards; from furniture
constant communication with both Ethan Allen designers
to lighting, any product bearing our name meets or
and compliance staff about the results of their inspections
exceeds safety standards.
and product tests. Here are some examples of inspections
an Ethan Allen vendor may perform:
We expect suppliers to set up and maintain a quality
control system that encourages two things: teamwork
TIP-OVER TESTING
and a commitment to always raise the bar on delivering
We follow all ASTM (American
a high-quality product. Quality reviews and insights are
constantly evaluated, and factory personnel implement
changes when needed to maintain a high standard
of quality.
QUAL ITY ASSURANC E AFTE R THE SA LE
Despite rigorous testing, there are times a client’s product
may not perform as expected. Our compliance team works
closely with Ethan Allen’s Client Services department to
address issues that come up after the sale.
Client Services holds regular conference calls with our
merchandising, factory operations, compliance, and retail
teams, letting them know what service requests they’ve
received regarding products. The entire Ethan Allen team –
manufacturing, merchandising, and compliance – then gets
to the root cause of any quality issues, working with vendors
Society for Testing and
Materials) International
standards, which includes
subjecting all clothing storage
units, like dressers, to tip-over
testing to ensure they remain
stable. We also include tip
restraint kits with each
storage piece.
LIGHTING CONSTRUCTION REVIEW
When we introduce new lamps into our product assortment,
a third party conducts an initial construction review. Lamps
are inspected at the factory before shipment, both for
performance and workmanship.
manufacture wood furniture, we inspect the lumber
for quality before sending it to the floor to be used in
building furniture.
LUMBER INSPECTION
to create corrective action plans so the issues don’t continue
When milled lumber comes into a factory where we
to happen.
product safety from design to delivery
HOW ETHAN ALLEN PRODUCTS ARE MADE
All Ethan Allen products begin with clear-cut design
In addition to conducting inspections for product quality,
IN SPECTIONS AT AL L STAGES
PRODUCT TESTING
specifications and a compliance packet that includes
we test all products to ensure they comply with state,
detailed testing procedures we expect vendors to follow.
federal, and provincial laws. We require suppliers to
When factories build the first sample of a product, their
document that every product passes tests for both
engineers and quality control team members stay in
workmanship and performance standards; from furniture
constant communication with both Ethan Allen designers
to lighting, any product bearing our name meets or
and compliance staff about the results of their inspections
exceeds safety standards.
and product tests. Here are some examples of inspections
an Ethan Allen vendor may perform:
We expect suppliers to set up and maintain a quality
control system that encourages two things: teamwork
TIP-OVER TESTING
and a commitment to always raise the bar on delivering
We follow all ASTM (American
a high-quality product. Quality reviews and insights are
Society for Testing and
Materials) International
standards, which includes
subjecting all clothing storage
units, like dressers, to tip-over
testing to ensure they remain
stable. We also include tip
restraint kits with each
storage piece.
LIGHTING CONSTRUCTION REVIEW
When we introduce new lamps into our product assortment,
a third party conducts an initial construction review. Lamps
are inspected at the factory before shipment, both for
performance and workmanship.
constantly evaluated, and factory personnel implement
changes when needed to maintain a high standard
of quality.
QUALITY ASSURANCE AFTER THE SA LE
Despite rigorous testing, there are times a client’s product
may not perform as expected. Our compliance team works
closely with Ethan Allen’s Client Services department to
address issues that come up after the sale.
Client Services holds regular conference calls with our
merchandising, factory operations, compliance, and retail
teams, letting them know what service requests they’ve
received regarding products. The entire Ethan Allen team –
manufacturing, merchandising, and compliance – then gets
to the root cause of any quality issues, working with vendors
LUMBER INSPECTION
to create corrective action plans so the issues don’t continue
When milled lumber comes into a factory where we
to happen.
manufacture wood furniture, we inspect the lumber
for quality before sending it to the floor to be used in
building furniture.
Ethan Allen has always had a strong
reputation for delivering a quality product
to its clients. A well-defined quality control
program documents testing and product
inspection, improves product quality, and
ensures client satisfaction.
Our compliance team works with in-house
merchants, manufacturing facilities, and
international suppliers to make sure all
Ethan Allen products meet uniform product
standards. This work involves key personnel –
engineering, quality control, and inspection
staff – and a commitment to quality from the
instant a product is designed to the moment
it’s delivered to a client.
Most of our furniture is custom-made,
mostly in our North American plants. When
we do work with import vendors, we ensure
the products they make meet the same
quality standards as those in our North
American plants. We expect plants to
conduct regular factory inspections and
rigorous product testing.
Step 1
Design Concept: Designers start with a new product
concept—the driving core and backbone of each
product—which includes the base material, such as
wood or metal.
Step 2
Step 3
Design Drawing: Design engineering staff develop a
detailed CAD drawing of the new product, including
important details that contribute to the integrity and
quality. The drawing explains product specifications to
an extraordinary level of detail, so our manufacturers
know exactly what's expected.
Design Package: Compliance staff create a detailed
packet for each design that includes testing procedures,
including regulatory chemical testing and responsible
labeling guidelines. The packet is sent to the designated
factory for review and development.
Step 4
Factory Sample: While the first sample is built, the
factory’s engineering and quality control team members
remain in constant communication with both designers
and compliance staff.
Step 5
Construction Review: New products are submitted
to performance testing to ensure quality and
regulatory compliance.
Step 6
Step 7
Final Review: New products and test results are sent
to Ethan Allen headquarters for review. Designers and
compliance staff send detailed comments and corrective
recommendations back to the manufacturing facility.
Final Approval: Factories review and execute
corrective action. They retest each product, submit
reports to Ethan Allen, and start manufacturing the
final product upon approval.
Step 8
Quality Control: Factories inspect products at all stages,
relying on trained employees who then communicate
their findings to factory management and take corrective
action as needed.
Step 9
Responsible Packaging and Labeling: Products are
labeled so that all government regulations, plus care
and assembly instructions, are clear and informative.
Ethan Allen ensures that suppliers package products
securely, so they arrive safe and intact in client homes.
manufacturing code of conduct
Ethan Allen merchants travel all over the world
searching for products and crafts that they want
to bring back to our clients: things our clients
won’t find anywhere else. That journey has led
ENSURE NON-
DISCRIMINATION
PROTECT THE
ENVIRONMENT
WHEN AUDI TS HA PPEN
MAINTAIN
ONGOING
COMPLIANCE
MONITOR WITH
TRANSPARENCY
FOLLOW LOCAL
AND NATIONAL
LAWS
PROHIBIT
CHILD LABOR
MANUFACTURING
CODE OF
CONDUCT
PROHIBIT
INVOLUNTARY
LABOR
PROVIDE FAIR
COMPENSATION
ENSURE HEALTH
AND SAFETY
PREVENT
COERCION AND
HARASSMENT
GUARANTEE
FREEDOM OF
ASSOCIATION
ENFORCE
SUBCONTRACTING
STANDARDS
to an unbeatable product selection,
from rugs hand-loomed in India to
sculptures crafted from marble
in Indonesia. It has also led to
relationships with vendors who’ve
never worked with large companies.
Ethan Allen published its Manufacturing
Code of Conduct in 2016. It’s the
standard against which Ethan Allen,
in partnership with third-party auditors,
measures vendor compliance related
to ethical business practices and the
fair treatment of workers.
We are committed to working with
and educating our supplier network
as a way of improving labor conditions
worldwide. For our business partners,
following our Manufacturing Code of
Conduct is just as important as meeting
our product quality standards.
THI RD -PARTY AU DI TS
To assess vendor compliance at individual production
unique production challenges, addressing the continuous
facilities, Ethan Allen partners with industry-recognized
improvement plans that factory managers have developed
third-party auditing companies known for their professionalism,
through ongoing dialogue with our compliance team.
consistency, and credibility. Between 2016 and 2018, ven-
dors like Bureau Veritas and Elevate conducted over 120
labor compliance audits in eleven countries on our behalf.
Our goal is to obtain 100% compliance; as we work to meet
that goal, we address the root causes of noncompliance
within each facility. Our team also attends labor compliance
These audits provide independent, impartial assessments
seminars and meetings, where we can collaborate across
FACILITY PERFORMANCE
AUDIT FREQUENCY
ACCEPTABLE
VERY GOOD
EVERY YEAR
EVERY TWO YEARS
ONGOING CORRECTIVE ACTION PLAN
EVERY THREE MONTHS TO ONE YEAR
WHAT IS AUDIT ED
FACILITY INTEGRITY
Vendor follows anticorruption standards
PERSONNEL RECORDS
Employee ages to ensure no child labor
Full-time vs. part-time status of workers
Worker country of origin (to ensure proper
documentation for migrant workers)
Working hours, including regular hours,
overtime, and rest days
Payroll, compensation, and benefits
Production-related documentation
LICENSES AND PERMITS
Vendor has appropriate factory business
license, equipment licenses, and health
certificates and permits
ENVIRONMENTAL STANDARDS
Safe chemical labeling, storage,
and emergency procedures
Appropriate disposal of wastewater and solid waste
Safe disposal of waste from industrial processes
FACILITY ACCESS
Vendor allows auditor to access
documents and talk to workers
POLICIES & PROCEDURES
No forced labor
Freedom of association
Nondiscrimination
No tolerance of harassment
Minimum legal worker age
HEALTH & SAFETY
Clean air and ventilation
Potable drinking water
Personal protective equipment
First aid kits
Access to medical treatment
Wages and hours worked, including systems
and procedures for recording
of factory performance against our Manufacturing Code of
international and industry lines to address labor compliance
Clean air emissions
Conduct. We tailor factory assessments to each facility’s
topics throughout the global supply chain.
manufacturing code of conduct
Ethan Allen merchants travel all over the world
searching for products and crafts that they want
to bring back to our clients: things our clients
won’t find anywhere else. That journey has led
to an unbeatable product selection,
from rugs hand-loomed in India to
sculptures crafted from marble
in Indonesia. It has also led to
relationships with vendors who’ve
never worked with large companies.
Ethan Allen published its Manufacturing
Code of Conduct in 2016. It’s the
standard against which Ethan Allen,
in partnership with third-party auditors,
measures vendor compliance related
to ethical business practices and the
fair treatment of workers.
We are committed to working with
and educating our supplier network
as a way of improving labor conditions
worldwide. For our business partners,
following our Manufacturing Code of
Conduct is just as important as meeting
our product quality standards.
THIRD-PARTY AUDITS
MAINTAIN
ONGOING
COMPLIANCE
MONITOR WITH
TRANSPARENCY
FOLLOW LOCAL
AND NATIONAL
LAWS
PROHIBIT
CHILD LABOR
MANUFACTURING
CODE OF
CONDUCT
PROHIBIT
INVOLUNTARY
LABOR
PROVIDE FAIR
COMPENSATION
ENSURE HEALTH
AND SAFETY
PREVENT
COERCION AND
HARASSMENT
GUARANTEE
FREEDOM OF
ASSOCIATION
ENFORCE
SUBCONTRACTING
STANDARDS
To assess vendor compliance at individual production
unique production challenges, addressing the continuous
facilities, Ethan Allen partners with industry-recognized
improvement plans that factory managers have developed
third-party auditing companies known for their professionalism,
through ongoing dialogue with our compliance team.
consistency, and credibility. Between 2016 and 2018, ven-
dors like Bureau Veritas and Elevate conducted over 120
labor compliance audits in eleven countries on our behalf.
Our goal is to obtain 100% compliance; as we work to meet
that goal, we address the root causes of noncompliance
within each facility. Our team also attends labor compliance
These audits provide independent, impartial assessments
seminars and meetings, where we can collaborate across
ENSURE NON-
DISCRIMINATION
PROTECT THE
ENVIRONMENT
WHEN AUDITS HAP PEN
FACILITY PERFORMANCE
AUDIT FREQUENCY
ACCEPTABLE
VERY GOOD
EVERY YEAR
EVERY TWO YEARS
ONGOING CORRECTIVE ACTION PLAN
EVERY THREE MONTHS TO ONE YEAR
WHAT IS AUDITED
FACILITY INTEGRITY
Vendor follows anticorruption standards
PERSONNEL RECORDS
Employee ages to ensure no child labor
Full-time vs. part-time status of workers
Worker country of origin (to ensure proper
documentation for migrant workers)
Working hours, including regular hours,
overtime, and rest days
Payroll, compensation, and benefits
Production-related documentation
LICENSES AND PERMITS
Vendor has appropriate factory business
license, equipment licenses, and health
certificates and permits
ENVIRONMENTAL STANDARDS
Safe chemical labeling, storage,
and emergency procedures
Appropriate disposal of wastewater and solid waste
Safe disposal of waste from industrial processes
FACILITY ACCESS
Vendor allows auditor to access
documents and talk to workers
POLICIES & PROCEDURES
No forced labor
Freedom of association
Nondiscrimination
No tolerance of harassment
Minimum legal worker age
Wages and hours worked, including systems
and procedures for recording
HEALTH & SAFETY
Clean air and ventilation
Potable drinking water
Personal protective equipment
First aid kits
Access to medical treatment
of factory performance against our Manufacturing Code of
international and industry lines to address labor compliance
Clean air emissions
Conduct. We tailor factory assessments to each facility’s
topics throughout the global supply chain.
reconciliation of u.s. gaap results
to adjusted financial measures
Financial measures in accordance with U.S. GAAP including gross profit and margin, operating income, net income, and
diluted EPS have been adjusted below. Ethan Allen uses these adjusted financial measures, both in presenting its results to
stockholders and the investment community, and in its internal evaluation and management of the business. The Company
believes that these adjusted financial measures and the information they provide are useful to investors because they permit
investors to view the Company’s performance using the same tools that management uses to gauge progress in achieving its
goals. Adjusted measures may also facilitate comparisons to Ethan Allen’s historical performance.
The following tables below show a reconciliation of non-GAAP financial measures used in the front of this annual report
to the most directly comparable GAAP financial measures (in thousands, except per share data).
A D J U S T E D G R O S S P R O F I T/ M A R G I N
GAAP Gross profit
Adjustments (pre-tax) *
Adjusted gross profit *
Adjusted gross margin *
A D J U S T E D O P E R AT I N G I N CO M E
GAAP Operating income
Adjustments (pre-tax) *
Adjusted operating income *
A D J U S T E D N E T I N CO M E /A D J U S T E D D I L U T E D E P S
GAAP Net income
Adjustments, net of tax *
Adjusted net income
Diluted weighted average common shares
GAAP Diluted EPS
Adjusted diluted EPS *
2019
2018
2017
$409,491
$415,964
$419,723
1,994
-
6,394
$411,485
$415,964
$426,117
55.1%
54.2%
55.8%
$33,947
21,104
$55,051
$25,698
15,934
$41,632
26,751
$0.96
$1.56
$48,867
$57,950
1,278
7,010
$50,145
$64,960
$36,371
$36,194
935
4,449
$37,306
$40,643
27,625
27,958
$1.32
$1.35
$1.29
$1.45
* Adjustments to reported U.S. GAAP financial measures including gross profit and margin, operating income, net
income, and diluted EPS have been adjusted by the following (in thousands):
Inventory write-downs and manufacturing overhead costs
Adjustments to gross profit
Restructuring charges, including inventory write-downs
Impairment of long-lived assets, including lease exit costs
Contingent legal claim
Wholesale and other exit costs
Real estate losses
Retail acquisition and other exit costs
Adjustments to operating income
Early debt extinguishment
Adjustments to income before income taxes
Related income tax effects(1)
Adjustments to net income
2019
$1,994
$1,994
$8,324
12,050
-
174
-
556
$21,104
-
$21,104
(5,170)
$15,934
2018
$-
$-
$-
-
500
535
-
243
$1,278
67
$1,345
(410)
$935
2017
$6,394
$6,394
$6,394
-
-
-
616
-
$7,010
-
$7,010
(2,561)
$4,449
(1) Calculated using an effective tax rate of 24.5% in fiscal 2019, 30.5% in fiscal 2018 and 36.5% in fiscal 2017.
Corporate Headquarters
Ethan Allen Interiors Inc.
DIRECTORS
AS OF AUGUST 31, 2019
EXECUTIVE OFFICERS
AS OF AUGUST 31, 2019
25 Lake Avenue Ext.
Danbury, CT 06811
203.743.8000
ethanallen.com
Independent Registered
Public Accounting Firm
KPMG LLP
3001 Summer Street
Stamford, CT 06905
203.356.9800
Investor Relations
Corey Whitely
Executive Vice President,
Administration, Chief Financial
Officer and Treasurer
IR@ethanallen.com
Stock Exchange Listing
New York Stock Exchange
Ethan Allen Interiors Inc.
Trading Symbol: ETH
Transfer Agent
Computershare Investor
Services, LLC
211 Quality Circle, Suite 210
College Station, TX 77845
computershare.com/investor
Farooq Kathwari
Chairman of the Board,
President and
Chief Executive Officer
James B. Carlson
Partner, Mayer Brown, LLP
John J. Dooner Jr.
Chairman, The Dooner Group
Domenick J. Esposito, CPA
CEO, Esposito CEO2CEO
Mary Garrett
Former CMO, Global Markets,
IBM Corporation
James W. Schmotter
President Emeritus,
University
Tara I. Stacom
Executive Vice Chairman,
Cushman & Wakefield
Farooq Kathwari
Chairman of the Board,
President and Chief
Executive Officer
Daniel M. Grow
Senior Vice President,
Business Development
Eric D. Koster
Vice President,
General Counsel and Secretary
Christopher H. Robertson*
Vice President, Logistics and Service
Clifford Thorn**
Vice President,
Upholstery Manufacturing
Executive Vice President,
Administration, Chief Financial
Officer and Treasurer
Michael Worth**
Vice President,
Case Goods Manufacturing
*Ethan Allen Global, Inc.
**Ethan Allen Operations, Inc.
Western Connecticut State
Corey Whitely
corporate data
reconciliation of u.s. gaap results
to adjusted financial measures
Financial measures in accordance with U.S. GAAP including gross profit and margin, operating income, net income, and
diluted EPS have been adjusted below. Ethan Allen uses these adjusted financial measures, both in presenting its results to
stockholders and the investment community, and in its internal evaluation and management of the business. The Company
believes that these adjusted financial measures and the information they provide are useful to investors because they permit
investors to view the Company’s performance using the same tools that management uses to gauge progress in achieving its
goals. Adjusted measures may also facilitate comparisons to Ethan Allen’s historical performance.
The following tables below show a reconciliation of non-GAAP financial measures used in the front of this annual report
to the most directly comparable GAAP financial measures (in thousands, except per share data).
A D J U S T E D G R O S S P R O F I T/ M A R G I N
GAAP Gross profit
Adjustments (pre-tax) *
Adjusted gross profit *
Adjusted gross margin *
A D J U S T E D O P E R AT I N G I N CO M E
GAAP Operating income
Adjustments (pre-tax) *
Adjusted operating income *
GAAP Net income
Adjustments, net of tax *
Adjusted net income
Diluted weighted average common shares
GAAP Diluted EPS
Adjusted diluted EPS *
A D J U S T E D N E T I N CO M E /A D J U S T E D D I L U T E D E P S
Inventory write-downs and manufacturing overhead costs
Adjustments to gross profit
Restructuring charges, including inventory write-downs
Impairment of long-lived assets, including lease exit costs
Contingent legal claim
Wholesale and other exit costs
Real estate losses
Retail acquisition and other exit costs
Adjustments to operating income
Early debt extinguishment
Adjustments to income before income taxes
Related income tax effects(1)
Adjustments to net income
2019
2018
2017
$409,491
$415,964
$419,723
1,994
-
6,394
$411,485
$415,964
$426,117
55.1%
54.2%
55.8%
$33,947
21,104
$55,051
$25,698
15,934
$41,632
26,751
$0.96
$1.56
2019
$1,994
$1,994
$8,324
12,050
174
-
-
-
556
$21,104
$21,104
(5,170)
$15,934
$48,867
$57,950
1,278
7,010
$50,145
$64,960
$36,371
$36,194
935
4,449
$37,306
$40,643
27,625
27,958
$1.32
$1.35
$1.29
$1.45
2018
$-
$-
$-
-
500
535
-
243
$1,278
67
$1,345
(410)
$935
2017
$6,394
$6,394
$6,394
-
-
-
-
-
616
$7,010
$7,010
(2,561)
$4,449
* Adjustments to reported U.S. GAAP financial measures including gross profit and margin, operating income, net
income, and diluted EPS have been adjusted by the following (in thousands):
(1) Calculated using an effective tax rate of 24.5% in fiscal 2019, 30.5% in fiscal 2018 and 36.5% in fiscal 2017.
Corporate Headquarters
Ethan Allen Interiors Inc.
25 Lake Avenue Ext.
Danbury, CT 06811
203.743.8000
ethanallen.com
Independent Registered
Public Accounting Firm
KPMG LLP
3001 Summer Street
Stamford, CT 06905
203.356.9800
Investor Relations
Corey Whitely
Executive Vice President,
Administration, Chief Financial
Officer and Treasurer
IR@ethanallen.com
Stock Exchange Listing
New York Stock Exchange
Ethan Allen Interiors Inc.
Trading Symbol: ETH
Transfer Agent
Computershare Investor
Services, LLC
211 Quality Circle, Suite 210
College Station, TX 77845
computershare.com/investor
DIRECTORS
AS OF AUGUST 31, 2019
EXECUTIVE OFFICERS
AS OF AUGUST 31, 2019
Farooq Kathwari
Chairman of the Board,
President and
Chief Executive Officer
James B. Carlson
Partner, Mayer Brown, LLP
John J. Dooner Jr.
Chairman, The Dooner Group
Domenick J. Esposito, CPA
CEO, Esposito CEO2CEO
Mary Garrett
Former CMO, Global Markets,
IBM Corporation
James W. Schmotter
President Emeritus,
Western Connecticut State
University
Tara I. Stacom
Executive Vice Chairman,
Cushman & Wakefield
Farooq Kathwari
Chairman of the Board,
President and Chief
Executive Officer
Daniel M. Grow
Senior Vice President,
Business Development
Eric D. Koster
Vice President,
General Counsel and Secretary
Christopher H. Robertson*
Vice President, Logistics and Service
Clifford Thorn**
Vice President,
Upholstery Manufacturing
Corey Whitely
Executive Vice President,
Administration, Chief Financial
Officer and Treasurer
Michael Worth**
Vice President,
Case Goods Manufacturing
*Ethan Allen Global, Inc.
**Ethan Allen Operations, Inc.
corporate data
The paper used for this book comes from certified forests that
are managed in a sustainable way to meet the social, economic,
and environmental needs of present and future generations.
ethanallen.com ©2019 Ethan Allen Global, Inc.