Ethan Allen Interiors
Annual Report 2023

Plain-text annual report

2023 ANNUAL REPORT a t a d Net sales 2023 2022 2021 $791,382 $817,762 $685,169 t n e m e t a t s e m o c n i Adjusted gross margin (a) Adjusted operating income (a) Adjusted net income (a) Adjusted diluted EPS (a) Cash and cash equivalents Total assets Long-term debt Total liabilities Shareholders’ equity Working capital Adjusted return on equity (a) Current ratio Long-term debt to equity Common shares outstanding a t a d t e e h s e c n a a b l s c i r t e m y e k 60.7% $133,514 $103,057 $4.03 $172,707 $745,453 $- $274,447 $471,006 $196,356 23.5% 2.20 0.0% 59.3% $134,240 $100,277 $3.93 $121,118 $719,895 $- $312,572 $407,323 $131,106 26.4% 1.61 0.0% 57.5% $80,335 $60,059 $2.37 $104,596 $683,245 $- $331,827 $351,418 $71,377 17.7% 1.32 0.0% 25,356,462 25,322,792 25,237,415 y t i i d u q i l Cash flows from operating activities Capital expenditures Cash dividends paid Dividend yield $100,664 $13,885 $46,357 5.1% $69,356 $13,387 $48,257 6.3% $129,912 $12,029 $43,290 3.6% Amounts in thousands, except share and per share data (a) See reconciliation of U.S. GAAP to adjusted key financial measures in this annual report FINANCIAL HIGHLIGHTS DEAR FELLOW SHAREHOLDERS As we mark the close of our 91st year, I am pleased to report that we have We are one brand, able to manage workshops and remain committed our experience from the day a product to producing furniture in North continued to strengthen all areas of is designed to the day a client receives America. Investments in manufacturing our vertically integrated enterprise it in their home. technology have made our operations more efficient across our enterprise. including talent, marketing, service, technology, and social responsibility. This focus enabled us to deliver solid financial results to our shareholders while positioning us well for the challenges ahead. Strong financial results A continual focus on reinvention Repositioning our retail network and A culture of social responsibility rebranding ourselves “The Interior In addition to running a socially Design Destination,” we’ve reimagined responsible business, we are the projection of our Design Centers. committed to good corporate During the process, we curated a more governance and environmental For the year ended June 30, 2023, consolidated furniture gallery while stewardship. We are also committed we achieved consolidated net sales using continued investments in design to making positive contributions to of $791.4 million, with a gross margin technology to show the sheer breadth the communities in which we operate of 60.7% and an adjusted operating of what we can offer. and treating every associate with margin of 16.9%. Adjusted diluted earnings per share totaled $4.03. Our balance sheet included total cash and investments of $172.7 million and no dignity and respect. Classic design from a modern point of view Ethan Allen was recently named America’s Best Retailer in the Premium debt. We were pleased to pay cash We continue to project a range of Furnishings category as well as one dividends of $46.4 million, including a lifestyles to show our clients all that of America’s Top 10 Retailers by 12.5% increase to our regular quarterly cash dividend and a special $0.50 cash dividend. they can create with an Ethan Allen Newsweek. This recognition is a credit designer’s help. Thanks to our vertically to each of our associates, and I thank integrated structure, we can provide them, our Board of Directors, our Vertically integrated from concept to delivery Our vertically integrated manufacturing, logistics, and retail our clients with a wide range of custom options. Reinvestment in North American manufacturing operations continue to be one of our We continue to craft about 75% of our greatest competitive advantages. products in our own North American clients, and all shareholders for their continued support, as we look ahead to all that we can achieve together in fiscal 2024. VERTICALLY INTEGRATED FROM CONCEPT TO DELIVERY A CONTINUAL FOCUS ON REINVENTION CL ASSIC DESIGN FROM A MODERN POINT OF VIEW REINVESTMENT IN NORTH AMERICAN MANUFACTURING A CULTURE OF SOCIAL RESPONSIBILIT Y ETHAN ALLEN BY THE NUMBERS 101213864 Welcome to the INTERIOR DESIGN DESTINATION 172 DESIGN CENTERS IN NORTH AMERICA Manufacturing Plants Distribution Centers Home Delivery Centers Design Centers 4 NEW OR RELOCATED DESIGN CENTERS: 13% in the past five years 47% in the past ten years VERTICALLY INTEGRATED from concept to delivery Since we purchased our Beecher Falls workshop in 1936, our vertically integrated structure has been both a strategic and branding advantage. We design our own upholstery and case goods products, manufacturing about 75% in our North American workshops. We sell Ethan Allen-branded products in our retail Design Centers, which are typically located in busy retail settings as freestanding destinations or as part of town centers, lifestyle centers, and suburban shopping malls. Our logistics network is integrated from manufacturing to the the point of delivery at a client’s home. Hartsdale, NY [Farooq] Kathwari has built incomparability into the Ethan Allen brand by keeping his eye firmly fixed on the company, its operations, the customers, and especially its people who bring its tradition, heritage, vision and mission to life. – FORBES MAGAZINE a continual focus on REINVENTION Our quest to continually reinvent ourselves as the Interior Design Destination has prompted unprecedented changes in the projections at Design Centers throughout our retail network. Clients can come into a Design Center, no matter its size, and find incredible resources—furniture, fabrics, accents, window treatments, and more—plus state-of-the-art technology that enables them to preview the future of their homes in 3D and 4K. Following the transformations, even smaller Design Centers will have projections that show the scope of what we offer, from formal to casual to modern, along with programs like custom dining. Then, through touchscreen previews and 3D room planning, along with our library of samples, our designers will help clients create interior designs and customize products to their liking. This commitment to combining technology with personal service is part of why customers, when surveyed by Newsweek and Statista, named us one of America’s Best Retailers and recognized us as America’s #1 Premium Furnishings retailer. 6 a continual focus on REINVENTION GRAND REOPENINGS Starting with our flagship Danbury, Connecticut, Design Center, adjacent to our headquarters, we began marking our transformation with Grand Reopening celebrations. INVOLVING OUR COMMUNITIES Each Design Center was given access to a specially created event kit to promote their events through direct mail, in-store signage, and local media, plus takeways including magazines and design service brochures. Farooq Kathwari with Dean Esposito, Mayor of Danbury, CT Choloma, Honduras CLASSIC DESIGN from a modern point of view Our talented team of more than 1,000 interior designers does more than just place furniture in homes; they provide whole-home interior design solutions for our clients. Centering our business around a made-to-order model enables us to maintain an extensive catalog of products, plus customizations that can be made on demand. Through customization, we project ourselves as an aspirational luxury brand, offering truly handcrafted furnishings that can be personalized with the help of an interior designer. An immense selection of frames, fabrics, leathers, finishes, and accents provides a bottomless toolkit with which designers can showcase our philosophy—classic design, modern perspective—in ways they can personalize to each client. Fiscal 2023 saw product extensions across each category, including a significant expansion to our upholstery Quick Ship program, a new line of custom desks, a new Outdoor collection, and an expanded selection of accents. DESIGN TECHNOLOGY With our 3D room planner, clients can see proposed interior designs from both an overhead and in- room perspective. Via a link sent from their interior designer, clients can also take an immersive 4K walk-through of their proposed room layout. 8 Ethan Allen’s position as a truly exceptional retailer... suggests it is the most loved American furniture brand and the one more Americans aspire to own. – FORBES MAGAZINE A DISCIPLINED MARKETING APPROACH We develop relevant, aspirational creative messaging and convey it through a variety of channels, including digital and direct mail magazines. Recognizing that our clients increasingly spend time in digital spaces, we utilize digital marketing to drive traffic to our Design Centers. reinvestment in NORTH AMERICAN MANUFACTURING Mixing traditional handcraftsmanship techniques that have been part of our manufacturing process for years with recent investments in cutting-edge technology, we make approximately 75% of our products in our own North American workshops. We design our own upholstery and case goods products, all sold under one brand name. We also operate an integrated logistics network, from manufacturing to the client’s home, utilizing air freight, ocean vessels, trucks, and trains for safe, on-time delivery. To uphold our quality commitment, we continue to manage specific processes, including milling much of our own wood, inspecting any lumber that we purchase, and kiln-drying all wood to ensure correct moisture content. We also tailor all upholstery by hand, using fabrics that meet or exceed industry standards and leathers that we cut and color-blend in our workshops. 10 Our workshops Wood furniture Beecher Falls, VT: sawmill and machining, 336,000 sq. ft. of manufacturing capacity Orleans, VT: machining, veneering, and finishing, 666,000 sq. ft. of manufacturing capacity Pine Valley, NC: lumber processing, 63,000 sq. ft. Choloma, Cortes, Honduras: machining through finishing, 241,000 sq. ft. of manufacturing capacity Upholstery Maiden/Claremont, NC: fabric upholstery, 736,000 sq. ft. of manufacturing capacity Silao, Guanajuato, Mexico: fabric and leather upholstery, 572,000 sq. ft. of manufacturing capacity Our distribution centers Our wholesale distribution centers ship to approximately 50 retail service centers as well as to all international retailers. Dublin, VA 631,000 sq. ft. of warehouse and parts fulfillment capacity Pine Valley, NC 490,000 sq. ft. of warehouse capacity Maiden, NC 54,000 sq. ft. of warehouse capacity Upholstery manufacturing Maiden, NC Choloma, Honduras A CULTURE OF SOCIAL RESPONSIBILITY PRESERVING OUR RESOURCES Most of the wood we source for domestic production comes from responsibly managed Appalachian forests, and we have been Verified Sustainable and Legal by Appalachian Hardwood Manufacturers, Inc. We aim to build a collaborative culture that emphasizes proud to say that 70% of our retail division leaders and dignity and respect for all our associates while offering 65% of our company leaders are women. equal opportunity across our global organization. For the fourth year in a row, Ethan Allen’s upholstery manufacturing operation in Silao, Guanajuato, Mexico, has been named “Empresa Socialmente Responsable” (Environmentally and Socially Responsible) by the Mexican Center for Corporate Philanthropy and the Alliance for Corporate Social Responsibility, in addition to receiving multiple Great Place to Work® Mexico awards. The annual health fair that we provide for our associates in Honduras has been named Best Health Fair for multiple years by the Medical Enterprise System of the Honduras Institute of Social Security. We continue to develop impactful practices to make our company more diverse and inclusive by supporting diversity awareness, maintaining an inclusive environment free from discrimination of any kind, including sexual or other discriminatory harassment and offering multiple avenues, including a confidential whistleblower hotline, through which to report inappropriate behavior. We also work to enhance quality of life in the communities in which we work and live, developing partnerships that enable associates to feel both a sense of connection to and pride in their communities. Teams in our North American workshops, including in North Carolina and Vermont, We work every day to capitalize on the talents of our support their communities through local food drives and diverse workforce through recognition and promotion to community sponsorships. leadership positions. Furthermore, as a U.S. government contractor, we follow federal Equal Opportunity Employment standards, ensuring freedom from discrimination on the basis of protected classes. We are Our work to cut our carbon footprint, greenhouse emissions, electrical and water usage, and landfill waste continues, as does our commitment to prioritizing responsible forestry and materials that are not harmful to the environment. 12 by the numbers LEADERSHIP 70% of retail leaders are women 65% of company leaders are women RETAIL More than 1,000 interior designers 172 159,000+ Design Centers in North America 3D room plans created MANUFACTURING 5 case goods (wood furniture) plants 5 upholstery plants 75% of products made in our own workshops 2.6 million sq. ft. of manufacturing and dry-kiln capacity DISTRIBUTION & DELIVERY 1.2 million sq. ft. of warehouse and parts fulfillment capacity 50 North American retail service centers providing Premier In-Home Delivery THIS PAGE LEFT BL ANK INTENTIONALLY THIS PAGE LEFT BL ANK INTENTIONALLY CONSOLIDATED SALES & OPERATING MARGIN Consolidated Net Sales Adjusted Operating Margin (a) Millions $575 $600 $625 $650 $675 $700 $725 $750 $775 $800 $825 2023 2022 2021 $791.4 16.9% $817.8 16.4% $685.2 11.7% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% (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 2023 2022 2021 5.1% $46.4 6.3% $48.3 3.6% $43.3 0% 1% 2% 3% 4% 5% 6% 7% 8% Board of Directors CORPORATE DATA DIRECTORS Farooq Kathwari Chairman of the Board, President and Chief Executive Officer María Eugenia Casar Former Under-Secretary-General, United Nations John J. Dooner Jr. Chairman, The Dooner Group David M. Sable Co-Founder and Partner, DoAble, LLC Tara I. Stacom Executive Vice Chairman, Cushman & Wakefield Cynthia Ekberg Tsai Chief Executive Officer, Tana Systems Corporate Headquarters Ethan Allen Interiors Inc. 25 Lake Avenue Ext. Danbury, CT 06811 203.743.8000 ethanallen.com Independent Registered Public Accounting Firm CohnReznick LLP 1301 6th Avenue New York, NY 10019 212.297.0400 Investor Relations Matt McNulty Senior Vice President, Chief Financial Officer & Treasurer IR@ethanallen.com Stock Exchange Listing New York Stock Exchange Ethan Allen Interiors Inc. Trading Symbol: ETD Transfer Agent Computershare Investor Services, LLC 211 Quality Circle, Suite 210 College Station, TX 77845 computershare.com ©2023 ETHAN ALLEN GLOBAL, INC. 

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