Ethan Allen’s Farooq Kathwari, chairman, president and CEO

DANBURY, Conn. -- Ethan Allen Interiors Inc.  (NYSE: ETH) reported its business and financial results for the fourth quarter and fiscal year ended June 30, 2021.

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

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

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

FISCAL 2021 FOURTH QUARTER HIGHLIGHTS*

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

FULL FISCAL YEAR 2021 HIGHLIGHTS

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

BALANCE SHEET AND CASH FLOW

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

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

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

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

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

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

DIVIDEND DECLARED

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

DESIGN CENTER ACTIVITY

Independent Company-
Design Center activity Retailers Operated Total
Balance at June 30, 2020 160 144 304
New locations 18 3 21
Closures (17 ) (6 ) (23 )
Balance at June 30, 2021 161 141 302
Relocations (in new and closures) - 2 2

U.S. 34 136 170
International 127 5 132

ABOUT ETHAN ALLEN

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