Ethan Allen Interiors Inc 10-Q for FY2025 Q3
Ethan Allen Interiors Inc (ETD)
About this 10-Q
Ethan Allen Interiors Inc filed this 10-Q on May 5, 2025, covering the quarter ended March 31, 2025 (FY2025 Q3).
Headline figures
Quarter ended March 31, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $142.7M
- down 2.5% from $146.42M a year earlier
- Net income
- $9.61M
- down 25.8% from net income of $12.95M a year earlier
- Diluted EPS
- $0.37
- down 26.0% from $0.50 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to __________
Commission File Number:
(Exact name of registrant as specified in its charter)
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(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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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. ☒
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). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.
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Accelerated filer ☐ |
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Non-accelerated filer ☐ |
Smaller reporting company |
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Emerging growth company |
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 Exchange Act).
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
The number of shares outstanding of the registrant’s common stock, $0.01 par value, as of April 28, 2025, was
ETHAN ALLEN INTERIORS INC.
FORM 10-Q THIRD QUARTER OF FISCAL 2025
TABLE OF CONTENTS
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PART I - FINANCIAL INFORMATION |
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Item 1. Financial Statements |
2 |
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CONSOLIDATED BALANCE SHEETS |
2 |
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) |
3 |
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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) |
4 |
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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited) |
5 |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) |
6 |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
18 |
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Item 3. Quantitative and Qualitative Disclosures About Market Risk |
29 |
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Item 4. Controls and Procedures |
31 |
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PART II - OTHER INFORMATION |
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Item 1. Legal Proceedings |
32 |
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Item 1A. Risk Factors |
32 |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
32 |
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Item 3. Defaults Upon Senior Securities |
32 |
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Item 4. Mine Safety Disclosures |
32 |
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Item 5. Other Information |
32 |
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Item 6. Exhibits |
33 |
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SIGNATURES |
34 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
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March 31, 2025 |
June 30, 2024 |
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(Unaudited) |
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| ASSETS | ||||||||
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Current assets: |
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Cash and cash equivalents |
$ | $ | ||||||
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Investments, short-term |
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Accounts receivable, net |
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Inventories, net |
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Prepaid expenses and other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Goodwill |
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Intangible assets |
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Operating lease right-of-use assets |
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Deferred income taxes |
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Investments, long-term |
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Other assets |
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TOTAL ASSETS |
$ | $ | ||||||
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LIABILITIES |
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Current liabilities: |
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Accounts payable and accrued expenses |
$ | $ | ||||||
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Customer deposits |
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Accrued compensation and benefits |
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Current operating lease liabilities |
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Other current liabilities |
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Total current liabilities |
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Operating lease liabilities, long-term |
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Deferred income taxes |
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Other long-term liabilities |
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TOTAL LIABILITIES |
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Commitments and contingencies (see Note 18) |
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SHAREHOLDERS' EQUITY |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Treasury stock, at cost: |
( |
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Retained earnings |
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Accumulated other comprehensive loss |
( |
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Total Ethan Allen Interiors Inc. shareholders' equity |
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Noncontrolling interests |
( |
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TOTAL SHAREHOLDERS' EQUITY |
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
$ | $ | ||||||
See accompanying notes to consolidated financial statements.
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(In thousands, except per share data)
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Three months ended |
Nine months ended |
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March 31, |
March 31, |
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2025 |
2024 |
2025 |
2024 |
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Net sales |
$ | $ | $ | $ | ||||||||||||
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Cost of sales |
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Gross profit |
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Selling, general and administrative expenses |
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Restructuring and other charges, net of gains |
( |
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Operating income |
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Interest and other income, net |
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Interest and other financing costs |
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Income before income taxes |
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Income tax expense |
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Net income |
$ | $ | $ | $ | ||||||||||||
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Per share data |
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Basic earnings per common share |
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Net income per basic share |
$ | $ | $ | $ | ||||||||||||
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Basic weighted average common shares |
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Diluted earnings per common share |
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Net income per diluted share |
$ | $ | $ | $ | ||||||||||||
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Diluted weighted average common shares |
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Comprehensive income |
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Net income |
$ | $ | $ | $ | ||||||||||||
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Other comprehensive income (loss), net of tax |
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Foreign currency translation adjustments |
( |
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Other |
( |
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Other comprehensive income (loss), net of tax |
( |
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Comprehensive income |
$ | $ | $ | $ | ||||||||||||
See accompanying notes to consolidated financial statements.
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
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Nine months ended |
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March 31, |
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Cash Flows from Operating Activities
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2025 |
2024 |
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Net income |
$ | $ | ||||||
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Adjustments to reconcile net income to net cash provided by operating activities |
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Depreciation and amortization |
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Share-based compensation expense |
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Non-cash operating lease cost |
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Deferred income taxes |
( |
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Restructuring and other charges, net of gains |
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Payments on restructuring and other charges, net of proceeds |
( |
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Loss on disposal of property, plant and equipment |
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Other |
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Changes in operating assets and liabilities: |
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Accounts receivable, net |
( |
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Inventories, net |
( |
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Prepaid expenses and other current assets |
( |
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Customer deposits |
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Accounts payable and accrued expenses |
( |
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Accrued compensation and benefits |
( |
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Operating lease liabilities |
( |
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Other assets and liabilities |
( |
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Net cash provided by operating activities |
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Cash Flows from Investing Activities |
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Proceeds from sales of property, plant and equipment |
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Capital expenditures |
( |
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Purchases of investments |
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Proceeds from sales of investments |
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Net cash provided by (used in) investing activities |
( |
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Cash Flows from Financing Activities |
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Payment of cash dividends |
( |
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Proceeds from employee stock plans |
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Taxes paid related to net share settlement of equity awards |
( |
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Payments on financing leases |
( |
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Net cash used in financing activities |
( |
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Effect of exchange rate changes on cash and cash equivalents |
( |
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Net (decrease) increase in cash, cash equivalents and restricted cash |
( |
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Cash, cash equivalents and restricted cash at beginning of period |
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Cash, cash equivalents and restricted cash at end of period |
$ | $ | ||||||
See accompanying notes to consolidated financial statements.
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)
(In thousands)
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Accumulated |
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Additional |
Other |
Non- |
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Common Stock |
Paid-in |
Treasury Stock |
Comprehensive |
Retained |
Controlling |
Total |
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Shares |
Par Value |
Capital |
Shares |
Amount |
Loss |
Earnings |
Interests |
Equity |
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Balance at June 30, 2024 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||||||||||||||
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Net income |
- | - | ||||||||||||||||||||||||||||||||||
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Share-based compensation expense |
- | - | ||||||||||||||||||||||||||||||||||
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Restricted stock vesting |
( |
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Cash dividends declared and paid |
- | - | ( |
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Other comprehensive income (loss) |
- | - | ( |
) | ( |
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Balance at September 30, 2024 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||||||||||||||
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Net income |
- | - | ||||||||||||||||||||||||||||||||||
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Share-based compensation expense |
- | - | ||||||||||||||||||||||||||||||||||
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Cash dividends declared and paid |
- | - | ( |
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Other comprehensive income (loss) |
- | - | ( |
) | ( |
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Balance at December 31, 2024 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||||||||||||||
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Net income |
- | - | ||||||||||||||||||||||||||||||||||
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Share-based compensation expense |
- | - | ||||||||||||||||||||||||||||||||||
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Cash dividends declared and paid |
- | - | ( |
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) | ||||||||||||||||||||||||||||||
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Other comprehensive income (loss) |
- | - | ||||||||||||||||||||||||||||||||||
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Balance at March 31, 2025 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||||||||||||||
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Accumulated |
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Additional |
Other |
Non- |
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Common Stock |
Paid-in |
Treasury Stock |
Comprehensive |
Retained |
Controlling |
Total |
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Shares |
Par Value |
Capital |
Shares |
Amount |
Loss |
Earnings |
Interests |
Equity |
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Balance at June 30, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||||||||||||||
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Net income |
- | - | ||||||||||||||||||||||||||||||||||
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Common stock issued on share-based awards |
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Share-based compensation expense |
- | - | ||||||||||||||||||||||||||||||||||
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Restricted stock vesting |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||
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Cash dividends declared and paid |
- | - | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
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Other comprehensive income (loss) |
- | - | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
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Balance at September 30, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||||||||||||||
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Net income |
- | - | ||||||||||||||||||||||||||||||||||
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Common stock issued on share-based awards |
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Share-based compensation expense |
- | - | ||||||||||||||||||||||||||||||||||
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Cash dividends declared and paid |
- | - | ( |
) | ( |
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Other comprehensive income (loss) |
- | - | ( |
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Balance at December 31, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||||||||||||||
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Net income |
- | - | ||||||||||||||||||||||||||||||||||
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Common stock issued on share-based awards |
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Share-based compensation expense |
- | - | ||||||||||||||||||||||||||||||||||
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Cash dividends declared and paid |
- | - | ( |
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Restricted stock vesting |
( |
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Other comprehensive income (loss) |
- | - | ( |
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Balance at March 31, 2024 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
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(1) |
Organization and Nature of Business |
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 Delaware corporation and leading interior design company, manufacturer and retailer in the home furnishings marketplace. We are a global luxury home fashion brand that is vertically integrated from product design through home delivery, which offers our customers stylish product offerings, artisanal quality, and personalized service. We are known for the quality and craftsmanship of our products as well as for the exceptional personal service from design to delivery, and for our commitment to social responsibility and sustainable operations. Our strong network of entrepreneurial leaders and interior designers provide complimentary interior design service to our clients and sell a full range of home furnishing products through a retail network of design centers located throughout the United States and abroad as well as online at ethanallen.com.
Ethan Allen design centers represent a mix of locations operated by independent licensees and Company-operated locations. At March 31, 2025, there were
We manufacture approximately
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(2) |
Interim Basis of Presentation |
Principles of Consolidation
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, including any related profit on intercompany sales, have been eliminated from the consolidated financial statements.
The interim consolidated financial statements were prepared on a basis consistent with those reflected in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 (the “2024 Annual Report on Form 10-K”) but do not include all disclosures required by U.S. generally accepted accounting principles (“GAAP”). We derived the June 30, 2024 consolidated balance sheet from our audited financial statements included in our 2024 Annual Report on Form 10-K. In our opinion, all adjustments, consisting only of normal recurring adjustments necessary for fair presentation, have been included in the consolidated financial statements. The results of operations for the three and nine months ended March 31, 2025 are not necessarily indicative of results that may be expected for the entire fiscal year.
Use of Estimates
We prepare our consolidated financial statements in accordance with 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, recoverability and useful lives for property, plant and equipment, inventory obsolescence, tax valuation allowances, the evaluation of uncertain tax positions and business insurance reserves.
Restricted Cash
We present restricted cash as a component of total cash and cash equivalents on our consolidated statements of cash flows and within Other assets on our consolidated balance sheets. At March 31, 2025 and June 30, 2024, we held $
We have evaluated subsequent events through the date of issuance of the consolidated financial statements included in this Quarterly Report on Form 10-Q.
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(3) |
Recent Accounting Pronouncements |
The Company evaluates all Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”) for consideration of their applicability to our consolidated financial statements.
New Accounting Standards or Updates Adopted in Fiscal 2025
Segment Reporting. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires all public entities to provide enhanced disclosures about significant segment expenses. This accounting standard will be effective for our fiscal 2025 Form 10-K on a retrospective basis and subsequent interim periods starting in fiscal 2026. We do not anticipate the adoption of this accounting standard to have a material impact on our consolidated financial statements or related disclosures.
Recent Accounting Standards or Updates Not Yet Effective
Income Taxes. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid and to improve the effectiveness of income tax disclosures. This ASU will be effective for our annual financial statements starting in fiscal 2026 and interim periods beginning in the first quarter of fiscal 2027, with early adoption permitted. We are currently evaluating the impact of this accounting standard, but do not expect it to have a material impact on our income tax disclosures.
Disaggregation of Income Statement Expenses. In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU requires disaggregation of certain income statement expense captions into specified categories to be disclosed within the notes to the financial statements, but does not change the expense captions on the income statement. The amendments in this ASU are to be applied prospectively, although retrospective application is permitted, and is effective for our annual financial statements starting in fiscal 2028 and interim periods starting in fiscal 2029, with early adoption permitted. We are currently evaluating the impact that this accounting standard will have on our consolidated financial statements and related notes.
No other new accounting pronouncements issued or effective as of March 31, 2025 have had or are expected to have a material impact on our consolidated financial statements or related disclosures.
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(4) |
Revenue Recognition |
Our reported revenue (net sales) consists 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. The majority of our shipping agreements are freight-on-board shipping point and risk of loss transfers to our wholesale customer once the product is out of our control. Accordingly, revenue is recognized for product shipments on third-party carriers at the point in time that our product is loaded onto the third-party container or truck. For sales in our retail segment, control generally transfers upon delivery to the customer. We recognize the promised amount of consideration without adjusting for the effects of a significant financing component if the contract has a duration of one year or less. As our contracts typically are less than one year in length and do not have significant financing components, we have not adjusted consideration.
Shipping and Handling. 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 (“SG&A”) expenses. 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.
Sales Taxes. 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). Sales tax collected is not recognized as revenue but is included in Accounts payable and accrued expenses on the consolidated balance sheets as it is ultimately remitted to governmental authorities.
Returns and Allowances. Estimated refunds for returns and allowances are based on our historical return patterns. We record these estimated sales refunds 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 Other current liabilities on our consolidated balance sheets. At March 31, 2025 and June 30, 2024, these amounts were immaterial.
Allowance for Credit Losses. Accounts receivable arise from the sale of products on trade credit terms and presented net of our allowances for credit losses. We maintain an allowance for estimated credit losses resulting from the inability of our customers to make required payments. The allowance is based on a review of specifically identified accounts in addition to an overall aging analysis. At March 31, 2025 and June 30, 2024, the allowance for credit losses was immaterial.
Commissions. We capitalize commission fees paid to our employees as contract assets within Prepaid expenses and other current assets on our consolidated balance sheets. These prepaid commissions are subsequently recognized as a selling expense upon delivery (when we have transferred control of our product to our customer). At March 31, 2025, we had prepaid commissions of $
Customer Deposits. We collect deposits from customers on a portion of the total purchase price at the time a written order is placed, but before we have transferred control of our product to our customers, resulting in contract liabilities. These customer deposits are reported as a current liability in Customer deposits on our consolidated balance sheets. At March 31, 2025, we had customer deposits of $
The following table disaggregates our net sales by product category by segment (in thousands):
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Three months ended March 31, 2025 |
Three months ended March 31, 2024 |
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Wholesale |
Retail |
Eliminations(1) |
Total |
Wholesale |
Retail |
Eliminations(1) |
Total |
|||||||||||||||||||||||||
|
Upholstery(2) |
$ | $ | $ | ( |
) | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||
|
Case goods(3) |
( |
) | ( |
) | ||||||||||||||||||||||||||||
|
Accents(4) |
( |
) | ( |
) | ||||||||||||||||||||||||||||
|
Other(5) |
( |
) | ( |
) | ||||||||||||||||||||||||||||
|
Total |
$ | $ | $ | ( |
) | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||
|
Nine months ended March 31, 2025 |
Nine months ended March 31, 2024 |
|||||||||||||||||||||||||||||||
|
Wholesale |
Retail |
Eliminations(1) |
Total |
Wholesale |
Retail |
Eliminations(1) |
Total |
|||||||||||||||||||||||||
|
Upholstery(2) |
$ | $ | $ | ( |
) | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||
|
Case goods(3) |
( |
) | ( |
) | ||||||||||||||||||||||||||||
|
Accents(4) |
( |
) | ( |
) | ||||||||||||||||||||||||||||
|
Other(5) |
( |
) | ( |
) | ||||||||||||||||||||||||||||
|
Total |
$ | $ | $ | ( |
) | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||
|
(1) |
|
|
(2) |
|
|
(3) |
|
|
(4) |
|
|
(5) |
|
|
(5) |
Fair Value Measurements |
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 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 and investments within the fair value hierarchy as follows:
Level 1 – applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. These Level 1 assets include our corporate money market funds that are classified as cash equivalents. We have categorized our cash equivalents as Level 1 assets as there are quoted prices in active markets for identical assets or liabilities.
Level 2 – applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. At March 31, 2025 and June 30, 2024, we categorized our investments as Level 2 assets.
Level 3 – applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. We held Level 3 assets or liabilities at March 31, 2025 or June 30, 2024.
Assets and Liabilities Measured at Fair Value on a Recurring Basis. The following tables show, by level within the fair value hierarchy, our assets and liabilities that are measured at fair value on a recurring basis at March 31, 2025 and June 30, 2024. There were no transfers between levels of fair value measurements during the periods presented.
|
Fair Value Measurements at March 31, 2025 |
|||||||||||||||||
|
Financial Assets |
Balance Sheet Location |
Level 1 |
Level 2 |
Level 3 |
Total |
||||||||||||
|
Corporate money market funds (1) |
Cash and cash equivalents |
$ | $ | $ | $ | ||||||||||||
|
U.S. Treasury bills (2) |
Investments, short-term |
||||||||||||||||
|
U.S. Treasury notes (2) |
Investments, long-term |
||||||||||||||||
|
Total |
$ | $ | $ | $ | |||||||||||||
|
Fair Value Measurements at June 30, 2024 |
|||||||||||||||||
|
Financial Assets |
Balance Sheet Location |
Level 1 |
Level 2 |
Level 3 |
Total |
||||||||||||
|
Corporate money market funds (1) |
Cash and cash equivalents |
$ | $ | $ | $ | ||||||||||||
|
U.S. Treasury bills (2) |
Investments, short-term |
||||||||||||||||
|
U.S. Treasury notes (2) |
Investments, long-term |
||||||||||||||||
|
Total |
$ | $ | $ | $ | |||||||||||||
|
(1) |
|
|
(2) |
|
There were investments that have been in a continuous loss position for more than one year, and there have been no other-than-temporary impairments recognized.
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis. We did not record any other-than-temporary impairments on assets required to be measured at fair value on a non-recurring basis during fiscal 2025 or 2024.
Assets and Liabilities Measured at Fair Value for Disclosure Purposes Only. We had outstanding bank borrowings at March 31, 2025 and June 30, 2024. We have historically categorized our outstanding bank borrowings as a Level 2 liability.
|
(6) |
Leases |
We recognize leases on our consolidated balance sheets as a right-of-use (“ROU”) asset and a lease liability. We have operating leases for many of our design centers that expire at various dates through fiscal 2040. We also lease certain tangible assets, including computer equipment and vehicles, with initial lease terms ranging from to years. We determine if a contract contains a lease at inception based on our right to control the use of an identified asset and our right to obtain substantially all of the economic benefits from the use of that identified asset. For purposes of measuring our ROU asset and lease liability, we determine our incremental borrowing rate by computing the rate of interest that we would have to pay to (i) borrow on a collateralized basis (ii) over a similar term (iii) at an amount equal to the total lease payments and (iv) in a similar economic environment.
The Company's lease terms and discount rates are as follows:
|
March 31, |
||||||||
|
2025 |
2024 |
|||||||
|
Weighted average remaining lease term (in years) |
||||||||
|
Operating leases |
||||||||
|
Financing leases |
||||||||
|
Weighted average discount rate |
||||||||
|
Operating leases |
||||||||
|
Financing leases |
||||||||
The following table discloses the location and amount of our operating and financing lease costs within our consolidated statements of comprehensive income (in thousands):
|
Three months ended March 31, |
Nine months ended March 31, |
||||||||||||||||
|
Statements of Comprehensive Income Location |
2025 |
2024 |
2025 |
2024 |
|||||||||||||
|
Operating lease cost(1) |
SG&A expenses |
$ | $ | $ | $ | ||||||||||||
|
Financing lease cost |
|||||||||||||||||
|
Depreciation of property |
SG&A expenses |
||||||||||||||||
|
Interest on lease liabilities |
Interest and other financing costs |
||||||||||||||||
|
Short-term lease cost(2) |
SG&A expenses |
||||||||||||||||
|
Variable lease cost(3) |
SG&A expenses |
||||||||||||||||
|
Less: Sublease income |
SG&A expenses |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Total lease expense |
$ | $ | $ | $ | |||||||||||||
|
(1) |
|
|
(2) |
|
|
(3) |
|
The following table reconciles the undiscounted future minimum lease payments (by year and in the aggregate) under noncancelable leases with terms of more than one year to the total lease liabilities recognized on our consolidated balance sheets at March 31, 2025 (in thousands):
|
Fiscal Year |
Operating Leases |
Financing Leases |
||||||
|
2025 (remaining three months) |
$ | $ | ||||||
|
2026 |
||||||||
|
2027 |
||||||||
|
2028 |
||||||||
|
2029 |
||||||||
|
Thereafter |
||||||||
|
Total undiscounted future minimum lease payments |
||||||||
|
Less: imputed interest |
( |
) | ( |
) | ||||
|
Total present value of lease obligations(1) |
$ | $ | ||||||
|
(1) |
|
At March 31, 2025, we had two operating leases for retail design centers which have not yet commenced and are therefore not part of the tables above nor included in the lease ROU assets and liabilities. These leases will commence when we obtain possession of the underlying leased assets, which is expected within the next three months. These operating leases are for a period of and years, respectively, and have aggregated undiscounted future lease payments of $
Other supplemental information for our leases is as follows (in thousands):
|
Nine months ended |
||||||||
|
2025 |
2024 |
|||||||
|
Cash paid for amounts included in the measurement of lease liabilities |
||||||||
|
Operating cash flows from operating leases |
$ | $ | ||||||
|
Operating cash flows from financing leases |
$ | $ | ||||||
|
Operating lease assets obtained in exchange for operating lease liabilities |
$ | $ | ||||||
|
Financing lease obligations obtained in exchange for new financing lease assets |
$ | $ | ||||||
|
(7) |
Investments |
We have investments in debt securities intended to enhance returns on our cash as well as to fund future obligations. Our short-term investments consist of U.S. Treasury bills, with maturities of less than one year, and total $
Our debt securities are presented below in accordance with their stated maturities:
|
March 31, 2025 |
||||||||||||||||
|
Amortized cost |
Gross unrealized gains |
Gross unrealized losses |
Fair Value |
|||||||||||||
|
Due within one year |
$ | $ | $ | ( |
) | $ | ||||||||||
|
Due within one and two years |
||||||||||||||||
|
Total |
$ | $ | $ | ( |
) | $ | ||||||||||
|
June 30, 2024 |
||||||||||||||||
|
Amortized cost |
Gross unrealized gains |
Gross unrealized losses |
Fair Value |
|||||||||||||
|
Due within one year |
$ | $ | $ | $ | ||||||||||||
|
Due within one and two years |
( |
) | ||||||||||||||
|
Total |
$ | $ | $ | ( |
) | $ | ||||||||||
|
(8) |
Inventories |
Inventories are stated at the lower of cost, determined on a first-in, first-out basis, and net realizable value and are summarized as follows (in thousands):
|
March 31, |
June 30, |
|||||||
|
2025 |
2024 |
|||||||
|
Finished goods |
$ | $ | ||||||
|
Work in process |
||||||||
|
Raw materials |
||||||||
|
Inventory reserves |
( |
) | ( |
) | ||||
|
Inventories, net |
$ | $ | ||||||
|
(9) |
Property, Plant and Equipment |
Property, plant and equipment are summarized as follows (in thousands):
|
March 31, |
June 30, |
|||||||
|
2025 |
2024 |
|||||||
|
Land and improvements |
$ | $ | ||||||
|
Building and improvements |
||||||||
|
Machinery and equipment |
||||||||
|
Property, plant and equipment, gross |
||||||||
|
Less: accumulated depreciation and amortization |
( |
) | ( |
) | ||||
|
Property, plant and equipment, net |
$ | $ | ||||||
We recorded depreciation and amortization expense of $
|
(10) |
Goodwill and Intangible Assets |
Our goodwill and intangible assets are comprised 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. Both goodwill and indefinite-lived intangible assets are not amortized as they are estimated to have an indefinite life. At March 31, 2025 and June 30, 2024, we had $
We test our wholesale goodwill and indefinite-lived intangibles for impairment on an annual basis in the fourth quarter of each fiscal year, and more frequently if events or changes in circumstances indicate that it might be impaired. Consistent with the timing of prior years, we performed our annual goodwill and indefinite-lived intangible asset impairment tests during the fourth quarter of fiscal 2024 utilizing a qualitative analysis and concluded it was more likely than not the fair value of our trade name was greater than its carrying value and no impairment charge was required.
|
(11) |
Restructuring and Other Charges, Net of Gains |
Restructuring and other charges, net of gains were as follows (in thousands):
|
Three months ended |
Nine months ended |
|||||||||||||||
|
2025 |
2024 |
2025 |
2024 |
|||||||||||||
|
Orleans, Vermont flood (1) |
$ | $ | ( |
) | $ | $ | ||||||||||
|
Gain on sale-leaseback transaction (2) |
( |
) | ( |
) | ( |
) | ||||||||||
|
Severance and other charges |
||||||||||||||||
|
Total Restructuring and other charges, net of gains |
$ | $ | ( |
) | $ | $ | ||||||||||
|
(1) |
|
|
(2) |
|
Restructuring payments made by the Company during the nine months ended March 31, 2025 were $
|
(12) |
Credit Agreement |
On January 26, 2022, the Company and most of its domestic subsidiaries (the “Loan Parties”) entered into a Third Amended and Restated Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A. as administrative agent and syndication agent and Capital One, National Association, as documentation agent. The Credit Agreement amends and restates the Second Amended and Restated Credit Agreement, dated as of December 21, 2018, as amended. The Credit Agreement provides for a $
Availability. The availability of credit at any given time under the Facility will be constrained by the terms and conditions of the Credit Agreement, 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. Total borrowing base availability under the Facility was $
Borrowings. At the Company’s option, borrowings under the Facility bear interest, based on the average quarterly availability, at an annual rate of either (a) Adjusted Term Secured Overnight Financing Rate “SOFR” Rate (defined as the Term SOFR Rate for such interest period plus
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 fixed charge coverage ratio covenant, set at
Letters of Credit. At March 31, 2025 and June 30, 2024, there was $
|
(13) |
Income Taxes |
The Company's process for determining the provision for income taxes involves using an estimated annual effective tax rate which is based on forecasted annual income and statutory tax rates across the various jurisdictions in which we operate. We recorded a provision for income tax expense of $
We recognize interest and penalties related to income tax matters as a component of income tax expense. At March 31, 2025, we had $
|
(14) |
Earnings Per Share |
The following is a reconciliation of the numerators and denominators we used in our computations of basic and diluted earnings per share (“EPS”):
|
Three months ended |
Nine months ended |
|||||||||||||||
|
March 31, |
March 31, |
|||||||||||||||
|
(in thousands, except per share data) |
2025 |
2024 |
2025 |
2024 |
||||||||||||
|
Numerator (basic and diluted): |
||||||||||||||||
|
Net income available to common shareholders |
$ | $ | $ | $ | ||||||||||||
|
Denominator: |
||||||||||||||||
|
Basic weighted average shares common shares outstanding |
||||||||||||||||
|
Dilutive effect of stock options and other share-based awards (1) |
||||||||||||||||
|
Diluted weighted average shares common shares outstanding |
||||||||||||||||
|
Earnings per share: |
||||||||||||||||
|
Basic |
$ | $ | $ | $ | ||||||||||||
|
Diluted |
$ | $ | $ | $ | ||||||||||||
(1)
At March 31, 2025 and 2024, total share-based awards of
At March 31, 2025 and 2024, the number of performance units excluded from the calculation of diluted EPS were
|
(15) |
Accumulated Other Comprehensive Loss |
Accumulated other comprehensive loss consists of foreign currency translation adjustments and unrealized gains or losses on our investments. Foreign currency translation adjustments are the result of changes in foreign currency exchange rates related to our operations in Canada, Honduras and Mexico. 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. All unrealized gains and losses on investments are included in Accumulated Other Comprehensive Loss within our consolidated balance sheets.
The components of accumulated other comprehensive loss are as follows (in thousands):
|
March 31, |
June 30, |
|||||||
|
Accumulated foreign currency translation adjustments |
$ | ( |
) | $ | ( |
) | ||
|
Accumulated unrealized gains on investments, net of tax |
||||||||
| $ | ( |
) | $ | ( |
) | |||
The following table sets forth the activity in accumulated other comprehensive loss (in thousands):
|
2025 |
2024 |
|||||||
|
Beginning balance at July 1 |
$ | ( |
) | $ | ( |
) | ||
|
Other comprehensive (loss) income, net of tax |
( |
) | ||||||
|
Less AOCI attributable to noncontrolling interests |
||||||||
|
Ending balance at March 31 |
$ | ( |
) | $ | ( |
) | ||
|
(16) |
Share-Based Compensation |
We recognized total share-based compensation expense of $
At March 31, 2025, there were
Stock Option Activity
Employee Stock Option Grants. There were stock option awards granted to employees during the nine months ended March 31, 2025 and 2024.
Non-Employee Stock Option Grants. The Plan also provides for the grant of share-based awards to non-employee directors of the Company. During the first nine months of fiscal 2025, we granted
A total of
Restricted Stock Unit Activity
During the first nine months of fiscal 2025, we granted
During the first nine months of fiscal 2025,
Performance Stock Unit Activity
Payout of performance stock units (“PSUs”) depend on the attainment of certain financial and shareholder-return goals over a specific performance period, which is generally 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.
During the first nine months of fiscal 2025, we granted
During the first nine months of fiscal 2025,
|
(17) |
Segment Information |
Ethan Allen conducts business globally and has strategically aligned its business into reportable segments: Wholesale and Retail. These segments represent strategic business areas of our vertically integrated enterprise that operate separately and provide their own distinctive services. Our operating segments are aligned with how the Company, including our chief operating decision maker, manages the business. We evaluate performance of our segments based upon sales and operating income.
Wholesale Segment. The wholesale segment is principally involved in the development of the Ethan Allen brand and encompasses all aspects of design, manufacturing, sourcing, merchandising, marketing and distribution of our broad range of home furnishings and accents. Our wholesale segment net sales include sales to our retail segment, which are eliminated in consolidation, and sales to our independent retailers and other third parties. 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.
Retail Segment. The retail segment sells home furnishings and accents to clients through our
Intersegment. We account for intersegment sales transactions between our segments consistent with independent third-party transactions, that is, at current market prices. As a result, the manufacturing profit related to sales to our retail segment is included within our wholesale segment. Operating income realized on intersegment revenue transactions is therefore generally consistent with the operating income realized on our revenue from independent third-party transactions. Segment operating income is based on profit or loss from operations before interest and other income, net, interest and other financing costs, and income taxes. Sales are attributed to countries on the basis of the customer's location.
Segment information is provided below (in thousands):
|
Three months ended |
Nine months ended |
|||||||||||||||
|
March 31, |
March 31, |
|||||||||||||||
|
2025 |
2024 |
2025 |
2024 |
|||||||||||||
|
Net sales |
||||||||||||||||
|
Wholesale segment |
$ | $ | $ | $ | ||||||||||||
|
Less: intersegment sales |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
|
Wholesale sales to external customers |
||||||||||||||||
|
Retail segment |
||||||||||||||||
|
Consolidated total |
$ | $ | $ | $ | ||||||||||||
|
Income before income taxes |
||||||||||||||||
|
Wholesale segment |
$ | $ | $ | $ | ||||||||||||
|
Retail segment |
||||||||||||||||
|
Elimination of intercompany profit (a) |
( |
) | ( |
) | ||||||||||||
|
Operating income |
||||||||||||||||
|
Interest and other income, net |
||||||||||||||||
|
Interest and other financing costs |
||||||||||||||||
|
Consolidated total |
$ | $ | $ | $ | ||||||||||||
|
Depreciation and amortization |
||||||||||||||||
|
Wholesale segment |
$ | $ | $ | $ | ||||||||||||
|
Retail segment |
||||||||||||||||
|
Consolidated total |
$ | $ | $ | $ | ||||||||||||
|
Capital expenditures |
||||||||||||||||
|
Wholesale segment |
$ | $ | $ | $ | ||||||||||||
|
Retail segment |
||||||||||||||||
|
Consolidated total |
$ | $ | $ | $ | ||||||||||||
|
(a) |
|
|
(in thousands) |
March 31, |
June 30, |
||||||
|
Total Assets |
2025 |
2024 |
||||||
|
Wholesale segment |
$ | $ | ||||||
|
Retail segment |
||||||||
|
Inventory profit elimination (a) |
( |
) | ( |
) | ||||
|
Consolidated total |
$ | $ | ||||||
|
(a) |
|
|
(18) |
Commitments and Contingencies |
Commitments represent obligations, such as those for future purchases of goods or services that are not yet recorded on the consolidated balance sheets as liabilities. We record liabilities for commitments when incurred (specifically when the goods or services are received). Fluctuations in our operating results, levels of inventory on hand, the degree of success of our accounts receivable collection efforts, the timing of tax and other payments, as well as capital expenditures will impact our liquidity and cash flows in future periods.
Material Cash Requirements from Contractual Obligations. As disclosed in our 2024 Annual Report on Form 10-K, we had total contractual obligations of $
Legal Matters. We are routinely party to various legal proceedings in the ordinary course of business, including investigations or as a defendant in litigation. 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. Although the outcome of the various claims and proceedings against us cannot be predicted with certainty, management believes that, based on information available at March 31, 2025, 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.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (the “MD&A”) is designed to provide a reader of our consolidated 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 2024 Annual Report on Form 10-K, Current Reports on Form 8-K and other filings with the SEC, and the consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q.
The MD&A is presented in the following sections:
|
- |
Cautionary Note Regarding Forward-Looking Statements |
|
|
- |
Executive Overview |
|
|
- |
Key Operating Metrics |
|
|
- |
Results of Operations |
|
|
- |
Regulation G Reconciliations of Non-GAAP Financial Measures |
|
|
- |
Liquidity |
|
|
- |
Capital Resources, including Material Cash Requirements |
|
|
- |
Other Arrangements |
|
|
- |
Significant Accounting Policies |
|
|
- |
Critical Accounting Estimates |
|
|
- |
Recent Accounting Pronouncements |
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q, including the MD&A, contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Generally, forward-looking statements represent management’s beliefs and assumptions concerning current expectations, projections or trends relating to results of operations, financial results, financial condition, strategic objectives and plans, expenses, dividends, share repurchases, liquidity, use of cash and cash requirements, borrowing capacity, investments, future economic performance, and our business and industry. Such forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. These forward-looking statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “continue,” “may,” “will,” “short-term,” “target,” “outlook,” “forecast,” “future,” “strategy,” “opportunity,” “would,” “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. We derive many of our forward-looking statements from operating budgets and forecasts, which are based upon many detailed assumptions. While the Company believes that its assumptions are reasonable, we caution 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.
Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that are expected. Actual results could differ materially from those anticipated in the forward-looking statements due to a number of risks and uncertainties including, but not limited to the following: declines in certain economic conditions, which impact consumer confidence and spending; financial or operational difficulties due to competition in the residential home furnishings industry; a significant shift in consumer preference toward purchasing products online; inability to maintain and enhance the Ethan Allen brand; failure to successfully anticipate or respond to changes in consumer tastes and trends in a timely manner; inability to maintain current design center locations at current costs; failure to select and secure appropriate retail locations; disruptions in the supply chain and supply chain management; fluctuations in the price, availability and quality of raw materials and imported finished goods resulting in increased costs and production delays; competition from overseas manufacturers and domestic retailers; the number of manufacturing and distribution sites may increase exposure to business disruptions and could result in higher transportation costs; current and former manufacturing and retail operations and products are subject to increasingly stringent environmental, health and safety requirements; product recalls or product safety concerns; significant increased costs or potential liabilities as a result of environmental laws and regulations aimed at combating climate change; risk to reputation and stock price related to future disclosures on Environmental, Social and Governance matters; extensive reliance on information technology systems to process transactions, summarize results, and manage the business and that of certain independent retailers; disruptions in both primary and back-up systems; cyber-attacks and the failure to maintain adequate cyber-security systems and procedures; loss, corruption and misappropriation of data and information relating to customers; global and local economic uncertainty may materially adversely affect manufacturing operations or sources of merchandise and international operations; changes in U.S. trade and tax policies; reliance on certain key personnel, loss of key personnel or inability to hire additional qualified personnel; a shortage of qualified labor within our operations and our supply chain; potential future asset impairment charges resulting from changes to estimates or projections used to assess assets’ fair value, financial results that are lower than current estimates or determinations to close underperforming locations; access to consumer credit could be interrupted as a result of external conditions; risks associated with self-insurance related to health benefits; failure to protect the Company’s intellectual property; hazards and risks which may not be fully covered by insurance; potential for increased costs and decreased profitability due to tariffs; and other factors disclosed in Part I, Item 1A, Risk Factors, in our 2024 Annual Report on Form 10-K, and elsewhere here in this Quarterly Report on Form 10-Q.
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 Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q are made only as of the date hereof. We undertake 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.
Executive Overview
Who We Are. Ethan Allen is a leading interior design company, manufacturer and retailer in the home furnishings marketplace. We are a global luxury home fashion brand that is vertically integrated from product design through home delivery, which offers clients stylish product offerings, artisanal quality and personalized service. We are known for the quality and craftsmanship of our products as well as for the exceptional personal service from design to delivery. We provide complimentary interior design service to our clients and sell a full range of home furnishings through a retail network of design centers located throughout the U.S. and internationally as well as online at ethanallen.com.
Ethan Allen design centers represent a mix of locations operated by independent licensees and Company-operated locations. At March 31, 2025, the Company operates 143 retail design centers, 138 located in the U.S. and 5 in Canada. We also have 46 independently owned and operated Ethan Allen design centers located in the U.S., Asia, the Middle East and Europe. We manufacture approximately 75% of our furniture in our North American manufacturing plants and have been recognized for product quality and craftsmanship since 1932. At March 31, 2025, we own and operate eleven manufacturing facilities, including four manufacturing plants, one sawmill, one rough mill and a kiln dry lumberyard in the U.S., three manufacturing plants in Mexico and one manufacturing plant in Honduras. We also partner with suppliers located in the U.S., Europe and Asia to produce and import various products that support our business.
Business Model. Our vertical integration is a competitive advantage for us. Our North American manufacturing and logistics operations are an integral part of an overall strategy to maximize production efficiencies and maintain this competitive advantage. We strive to deliver value to our shareholders through the execution of our strategic initiatives focused on the concept of constant reinvention. Ethan Allen has a distinct vision of classic American style with a modern perspective, which we believe differentiates us from our competitors. Our business model is to maintain continued focus on (i) providing relevant product offerings, (ii) capitalizing on the professional and personal service offered to our clients by our interior design professionals, (iii) leveraging the benefits of our vertical integration including a strong manufacturing presence in North America, (iv) regularly investing in new technologies across all aspects of our vertically integrated business, (v) maintaining a strong logistics network, (vi) communicating our messages with strong marketing campaigns, and (vii) utilizing our website, ethanallen.com, as a key marketing tool to drive traffic to our retail design centers. We aim to position Ethan Allen as a premier interior design destination and a preferred brand offering products of superior style, quality, and value to clients with a comprehensive solution for their home furnishing and interior design needs. We operate our business with an entrepreneurial attitude and treat our employees, vendors, and clients with dignity and respect.
Talent. At March 31, 2025, our employee count totaled 3,294, with 2,306 in our wholesale segment and 988 in our retail segment. We continue to invest in technology, which helped further streamline and automate processes. By leveraging technology and identifying workflow efficiencies, we have reduced headcount by 4.5% in the last 12 months and by 35.7% since March 31, 2019.
Fiscal 2025 Third Quarter in Review (1). We were pleased with our results in maintaining a strong gross margin, positive operating cash flow and ended the quarter with cash, cash equivalents and investments of $183.0 million and no outstanding debt. Our fiscal 2025 third quarter results reflect our ability to operate in an industry faced with reciprocal and retaliatory tariffs, uncertainty in the economy, elevated interest rates and a stagnant housing market that together have impacted consumer confidence and interest in the home. We continued our history of returning capital to shareholders by paying a regular quarterly cash dividend of $10.0 million or $0.39 per share. Cash provided by operating activities was $10.2 million compared with $23.7 million a year ago. Consolidated net sales were $142.7 million, a 2.5% decrease from the prior year quarter due to a decline in delivered unit volume combined with fewer incoming written orders, lower available backlog, and reduced designer floor sample sales partially offset by higher average retail ticket price, improved contract sales and lower returns. Wholesale and retail written orders declined 11.2% and 13.0%, respectively, while our wholesale backlog decreased by 5.5% to $54.6 million at March 31, 2025. We maintained a strong consolidated gross margin of 61.2% due to lower raw material input costs, reduced headcount, a price increase that drove a higher average ticket price and leveraging investments in technology partially offset by lower unit volume sales, a change in sales mix, elevated freight and higher financing costs. Our adjusted operating margin was 8.0% compared to 10.0% a year ago while adjusted diluted EPS was $0.38 compared with $0.48 a year ago. The introduction of new products drove a $5.9 million increase in our inventory levels compared with a year ago, which we expect to reduce during the fourth quarter. New state-of-the-art design centers in Middleton, Wisconsin and Toronto, Canada were opened during the just completed third quarter that showcase our home furnishings while combining complimentary interior design services with technology. We ended the quarter with 189 Ethan Allen retail design centers, including 143 Company-operated and 46 independently owned and operated locations.
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(1) |
Refer to the Regulation G Reconciliations of Non-GAAP Financial Measures section within the MD&A for the reconciliation of GAAP to adjusted key financial metrics. |
Key Operating Metrics
A summary of our key operating metrics is presented in the following table (in millions, except per share data):
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% of Sales |
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% of Sales |
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% of Sales |
2024 |
% of Sales |
% Chg |
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Net sales |
$ | 142.7 | $ | 146.4 | (2.5 | %) | $ | 454.3 | $ | 477.6 | (4.9 | %) | ||||||||||||||||||||||||||||
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Gross profit |
$ | 87.4 | 61.2 | % | $ | 89.8 | 61.3 | % | (2.7 | %) | $ | 276.1 | 60.8 | % | $ | 290.6 | 60.8 | % | (5.0 | %) | ||||||||||||||||||||
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Operating income |
$ | 11.0 | 7.7 | % | $ | 15.3 | 10.5 | % | (28.2 | %) | $ | 46.7 | 10.3 | % | $ | 55.4 | 11.6 | % | (15.6 | %) | ||||||||||||||||||||
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Adjusted operating income(1) |
$ | 11.3 | 8.0 | % | $ | 14.6 | 10.0 | % | (22.1 | %) | $ | 47.3 | 10.4 | % | $ | 55.9 | 11.7 | % | (15.3 | %) | ||||||||||||||||||||
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Net income |
$ | 9.6 | 6.7 | % | $ | 13.0 | 8.8 | % | (25.8 | %) | $ | 39.3 | 8.7 | % | $ | 45.3 | 9.5 | % | (13.2 | %) | ||||||||||||||||||||
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Adjusted net income(1) |
$ | 9.9 | 6.9 | % | $ | 12.4 | 8.5 | % | (20.4 | %) | $ | 39.8 | 8.8 | % | $ | 45.7 | 9.6 | % | (12.9 | %) | ||||||||||||||||||||
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Diluted EPS |
$ | 0.37 | $ | 0.50 | (26.0 | %) | $ | 1.53 | $ | 1.77 | (13.6 | %) | ||||||||||||||||||||||||||||
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Adjusted diluted EPS(1) |
$ | 0.38 | $ | 0.48 | (20.8 | %) | $ | 1.55 | $ | 1.78 | (12.9 | %) | ||||||||||||||||||||||||||||
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Cash flow from operating activities |
$ | 10.2 | $ | 23.7 | (57.0 | %) | $ | 36.9 | $ | 54.0 | (31.6 | %) | ||||||||||||||||||||||||||||
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Wholesale written orders |
(11.2 | %) | (2.0 | %) | ||||||||||||||||||||||||||||||||||||
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Retail written orders |
(13.0 | %) | (2.5 | %) | ||||||||||||||||||||||||||||||||||||
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(1) |
Refer to the Regulation G Reconciliations of Non-GAAP Financial Measures section within the MD&A for the reconciliation of GAAP to adjusted key financial metrics. |
Design center activity and geographic distribution of our retail network are as follows:
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retailers |
operated |
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retailers |
operated |
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Retail Design Center activity: |
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Balance at July 1 |
45 | 142 | 187 | 48 | 139 | 187 | ||||||||||||||||||
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New locations |
2 | 4 | 6 | - | 3 | 3 | ||||||||||||||||||
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Closures |
(1 | ) | (3 | ) | (4 | ) | (1 | ) | (1 | ) | (2 | ) | ||||||||||||
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Balance at March 31 |
46 | 143 | 189 | 47 | 141 | 188 | ||||||||||||||||||
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Relocations (in new and closures) |
- | 2 | 2 | - | 1 | 1 | ||||||||||||||||||
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Retail Design Center geographic locations: |
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United States |
31 | 138 | 169 | 32 | 137 | 169 | ||||||||||||||||||
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Canada |
- | 5 | 5 | - | 4 | 4 | ||||||||||||||||||
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Europe |
1 | - | 1 | 1 | - | 1 | ||||||||||||||||||
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Middle East and Asia |
14 | - | 14 | 14 | - | 14 | ||||||||||||||||||
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Total |
46 | 143 | 189 | 47 | 141 | 188 | ||||||||||||||||||
Results of Operations
For an understanding of the significant factors that influenced our financial performance during the three and nine months ended March 31, 2025 and 2024, respectively, the following discussion should be read in conjunction with the consolidated financial statements and related notes presented in this Quarterly Report on Form 10-Q.
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Consolidated net sales |
$ | 142,695 | $ | 146,421 | (2.5% | ) | $ | 454,292 | $ | 477,589 | (4.9% | ) | ||||||||||||
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Wholesale net sales |
$ | 98,990 | $ | 89,825 | 10.2 | % | $ | 271,857 | $ | 279,882 | (2.9% | ) | ||||||||||||
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Retail net sales |
$ | 117,622 | $ | 122,616 | (4.1% | ) | $ | 384,654 | $ | 395,414 | (2.7% | ) | ||||||||||||
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Consolidated gross profit |
$ | 87,356 | $ | 89,824 | (2.7% | ) | $ | 276,062 | $ | 290,601 | (5.0% | ) | ||||||||||||
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Consolidated gross margin |
61.2 | % | 61.3 | % | 60.8 | % | 60.8 | % | ||||||||||||||||
Net Sales
Consolidated net sales decreased $3.7 million or 2.5% and $23.3 million or 4.9% for the three and nine months ended March 31, 2025, respectively, compared with the same prior year periods. The decrease during the third quarter was driven by a decline in delivered unit volume combined with fewer incoming written orders, lower available backlog, and reduced designer floor sample sales partially offset by higher average retail ticket price, improved contract sales and fewer returns. The first nine months of fiscal 2025 were impacted by lower demand levels and less design center traffic combined with fewer contract sales and a decline in delivered unit volume from lower backlog at the beginning of the year. The housing recession, inflationary pressures, and cautious consumer spending due to economic uncertainty contributed to lower demand levels and related sales.
Wholesale - Wholesale net sales increased $9.2 million or 10.2% for the three months ended March 31, 2025. However, during the first nine months of fiscal 2025, our wholesale net sales were down $8.0 million or 2.9% compared with the same prior year period. The increase during the third quarter was driven by elevated levels of intercompany sales to our retail segment related to new products introductions, higher contract sales, improved shipments to our U.S. independent dealers and an increase in price per unit shipped partially offset by a decrease in sales to our non-U.S. independent dealers. The first nine months of fiscal 2025 were impacted by lower available backlog and fewer contract sales due to less incoming orders from the U.S. government General Services Administration (“GSA”). International sales represented 1.4% of total wholesale net sales during the third quarter of fiscal 2025 compared to 2.2% in the prior year quarter. For the first nine months of fiscal 2025, international sales were 1.5% of total wholesale net sales compared to 2.0% a year ago.
Wholesale written orders, which represent undelivered orders booked through all of our channels, were down 11.2% and 2.0% for the three and nine months ended March 31, 2025, respectively, compared to the same prior year periods. Orders from both our intersegment Company-operated design centers and independent dealers decreased while our contract orders increased by 3.0% in the just completed third quarter. For the nine months ended March 31, 2025, each portion of our wholesale business experienced a decline in incoming written orders. Wholesale backlog was $54.6 million at March 31, 2025, down 5.5% from a year ago. Since the start of the fiscal 2025 third quarter, our wholesale backlog decreased by $3.1 million primarily from lower incoming written orders and improved manufacturing production, which helped reduce the number of weeks of wholesale backlog.
Retail - Retail net sales decreased $5.0 million or 4.1% and $10.8 million or 2.7% for the three and nine months ended March 31, 2025, respectively, compared with the same prior year periods. The decrease during the third quarter was driven by lower delivered unit volumes, fewer available delivery days, a decline in written orders and less designer floor sample sales partially offset by a higher average ticket price and fewer returns. The first nine months of fiscal 2025 were impacted by lower demand, reduced delivered unit volumes and less design center traffic.
Retail written orders for the three and nine months ended March 31, 2025 decreased 13.0% and 2.5%, respectively, compared to the same prior year periods. Incoming order activity was impacted by consumers growing more concerned over uncertainty in the economy, including the impact of tariffs, elevated interest rates and a stagnant housing market. The Company continues to strategically review ways to engage the consumer through increased promotional activities including higher discounts and stronger financing programs. We believe the strong value proposition of our current assortment along with the addition of several new products being introduced complement the wide array of custom home furnishings Ethan Allen has to offer.
Gross Profit and Margin
Consolidated gross profit decreased $2.5 million and $14.5 million for the three and nine months ended March 31, 2025, respectively, compared with the same prior year periods. The decrease during the third quarter was driven by a decline in retail net sales, a change in the sales mix with a lower percentage of our total sales coming from the retail segment, elevated inbound freight, increased promotional activity and higher financing costs from increased usage of our Ethan Allen private label platinum card. These decreases were partially offset by lower raw material and fuel input costs, fewer designer floor sample sales that carry a lower average margin and an increase in average ticket price. Wholesale gross profit for the quarter increased 21.4% due to higher intercompany sales to our retail segment and a 330-basis point rise in gross margin. Retail gross profit decreased 4.7% due to the 4.1% decrease in net sales and a 40-basis point reduction in gross margin. The first nine months of fiscal 2025 saw consolidated gross profit decline by 5.0% primarily from the 4.9% decline in consolidated net sales partially offset by a favorable sales mix, lower manufacturing input costs, an increase in average ticket price, lower designer floor sample sales and reduced headcount, which helped keep our fiscal year-to-date consolidated gross margin consistent with last year.
Consolidated gross margin was 61.2% and 60.8% for the three and nine months ended March 31, 2025, respectively, compared with 61.3% and 60.8% in the prior year periods. Our third quarter consolidated gross margin was 10 basis points lower compared with the prior year period due to deleveraging from lower delivered sales, change in sales mix and higher inbound freight and financing costs partially offset by reduced headcount, lower raw material input costs, fewer designer floor sample sales and a higher retail average ticket price. Driven by higher contract sales within our wholesale segment, our sales mix, which represents the percentage of retail sales compared to total consolidated sales, decreased to 82.4% in the current year third quarter, down from 83.7% in the prior year. Wholesale gross margin for the third quarter was up 330 basis points over the prior year period due to improved volumes, which led to decreased manufacturing variances, higher contract sales, reduced headcount and lower raw material and fuel input costs. Retail gross margin declined 40 basis points compared with the prior year period due to higher financing costs, increased promotional activity and a change in product mix partially offset by higher average ticket price and a decline in sales of designer floor samples. For the first nine months of fiscal 2025 we maintained a strong consolidated gross margin of 60.8%, the same as a year ago, despite lower sales volumes as we were able to lower our raw material input costs, reduce headcount and push through selective price increases, which led to a higher average ticket price.
SG&A Expenses and Operating Income
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SG&A expenses |
$ | 76,253 | $ | 75,253 | 1.3 | % | $ | 228,999 | $ | 234,734 | (2.4 | %) | ||||||||||||
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Restructuring and other charges, net of gains |
$ | 106 | $ | (754 | ) | (114.1 | %) | $ | 344 | $ | 503 | (31.6 | %) | |||||||||||
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Consolidated operating income |
$ | 10,997 | $ | 15,325 | (28.2 | %) | $ | 46,719 | $ | 55,364 | (15.6 | %) | ||||||||||||
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Consolidated GAAP operating margin |
7.7 | % | 10.5 | % | 10.3 | % | 11.6 | % | ||||||||||||||||
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Consolidated adjusted operating margin |
8.0 | % | 10.0 | % | 10.4 | % | 11.7 | % | ||||||||||||||||
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Wholesale operating income |
$ | 14,331 | $ | 11,243 | 27.5 | % | $ | 35,823 | $ | 36,437 | (1.7 | %) | ||||||||||||
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Retail operating income |
$ | 659 | $ | 2,275 | (71.0 | %) | $ | 14,800 | $ | 14,399 | 2.8 | % | ||||||||||||
SG&A expenses increased $1.0 million or 1.3% for the three months ended March 31, 2025 compared with the same prior year period. When expressed as a percentage of sales, SG&A expenses for the quarter were 53.4%, an uptick from 51.4% in the prior year third quarter primarily due to fixed cost deleveraging from lower delivered sales. With SG&A expenses up 1.3% and consolidated net sales down 2.5%, our operating leverage and income declined.
Consolidated selling expenses were up 1.4% during the third quarter of fiscal 2025. Wholesale selling expenses, which include our logistics operation, increased 20.2% primarily from a higher volume of units shipped, a rise in outgoing distribution expenses, and increased digital and web-technology spend partially offset by reduced headcount. Retail selling expenses were down 4.5% during the third quarter due to reduced delivery costs and variable compensation from lower delivered revenue combined with less headcount. Our consolidated advertising expenses during the third quarter of fiscal 2025 decreased by 4.4% compared to the prior year due to timing of our direct mail campaigns partially offset by increased digital media spend, including paid social campaigns, and represented 3.4% of net sales in both the current and prior year periods.
Consolidated general and administrative expenses in the third quarter were up 1.3% compared to the prior year period as higher occupancy costs and incremental merchandising and display costs for the new proto displays were partially offset by lower employee benefit costs, efficient corporate technology support spend and prior year costs associated with the design center projection refreshes.
SG&A expenses for the nine months ended March 31, 2025 decreased $5.7 million or 2.4% primarily due to lower selling expenses from reduced net sales. Consolidated selling expenses were down 4.2% while general and administrative costs decreased 0.1%. When expressed as a percentage of sales, SG&A expenses were 50.4% compared to 49.1% in the prior year period, an increase of 130 basis points driven by lower sales relative to fixed costs. Wholesale selling expenses in the first nine months of fiscal 2025 decreased 1.7% primarily from a lower volume of units shipped and fewer outgoing distribution expenses partially offset by higher advertising costs. Retail selling expenses were down 5.0% during the first nine months of fiscal 2025 due to reduced delivery costs from lower delivered revenue, less headcount and lower designer variable compensation. Consolidated general and administrative expenses decreased 0.1% for the nine months ended March 31, 2025 primarily due to reduced headcount, lower employee benefit costs and elevated prior year design center refresh costs partially offset by an increase in incentive compensation.
Compared to a year ago, our consolidated headcount is down 4.5% or 154 associates, including 102 at wholesale and 52 at retail, as we continue to identify operational efficiencies and leverage the use of technology to streamline workflows throughout our vertically integrated enterprise.
Restructuring and other charges, net of gains
Restructuring and other charges, net of gains for the third quarter of fiscal 2025 was $0.1 million. The prior year third quarter included a gain of $0.7 million from the amortization of a deferred liability generated from the sale-leaseback transaction completed on August 1, 2022 as well as $0.1 million in additional insurance proceeds received from the 2023 Vermont flood.
For the nine months ended March 31, 2025, we recorded $0.3 million in restructuring charges primarily related to severance. The prior year charge of $0.5 million related to $2.2 million in net losses from the Vermont flood and $0.2 in severance and other charges, partially offset by a $1.9 million gain from the amortization of the deferred liability generated from the sale-leaseback transaction.
Consolidated Operating Income
Consolidated operating income of $11.0 million and $46.7 million for the three and nine months ended March 31, 2025, respectively, decreased by $4.3 million and $8.6 million when compared to the same prior year periods. As a percentage of net sales, consolidated operating income for the third quarter of fiscal 2025 was 7.7%, compared to 10.5% in the prior year quarter. Adjusted operating income for the third quarter was $11.3 million, or 8.0% of net sales compared with $14.6 million, or 10.0% of net sales in the prior year quarter. For the first nine months of fiscal 2025, adjusted operating income was $47.3 million or 10.4% of net sales compared with $55.9 million or 11.7% of net sales in the prior year period. The primary driver of reduced operating income during both periods presented was lower consolidated net sales partially offset by our ability to manage SG&A expenses and maintaining gross margin preservation. We remain focused on a disciplined approach to cost savings and expense control in a challenging customer demand environment, which helped mitigate the impact of reduced consolidated net sales.
Wholesale operating income was $14.3 million and $35.8 million for the three and nine months ended March 31, 2025, respectively, compared with $11.2 million and $36.4 million for the same prior year periods. As a percentage of net sales, wholesale operating income for the third quarter was 14.5% compared to 12.5% in the prior year quarter. Adjusted wholesale operating income in the just completed third quarter was $14.7 million or 14.8% of net sales compared with $11.1 million or 12.4% of net sales a year ago. For the first nine months of fiscal 2025 adjusted wholesale operating income was $36.5 million or 13.4% of net sales compared with $38.8 million or 13.9% of net sales in the prior year period. The increase in wholesale operating income during the just completed third quarter was driven by higher net sales, including elevated levels of intercompany sales to the retail segment, and gross margin improvement partially offset by incremental SG&A expenses. For the first nine months of fiscal 2025 the decrease in wholesale operating income was driven by lower net sales partially offset by higher restructuring charges in the prior year from the Vermont flood.
Retail operating income was $0.7 million and $14.8 million for the three and nine months ended March 31, 2025, respectively, compared with $2.3 million and $14.4 million for the same prior year periods. As a percentage of net sales, retail operating income for the third quarter was 0.6% compared with 1.9% in the prior year quarter. Adjusted retail operating income during the third quarter of fiscal 2025 was $0.7 million or 0.6% of net sales compared with $1.6 million or 1.3% of net sales in the prior year quarter. The decrease in retail operating income during the third quarter was primarily due to the $5.0 million decline in sales combined with the 40-basis point gross margin erosion partially offset by a 3.2% decrease in SG&A expenses. For the first nine months of fiscal 2025 retail operating income was $14.8 million or 3.8% of net sales compared with $14.4 million or 3.6% of net sales in the prior year. The increase during the first nine months of fiscal 2025 was driven by a 20-basis point gross margin improvement and a decline in SG&A expenses partially offset by lower retail net sales.
Income Tax Expense, Net Income and Diluted EPS
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Income tax expense |
$ | 2,931 | $ | 4,345 | (32.5 | %) | $ | 13,034 | $ | 15,425 | (15.5 | %) | ||||||||||||
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Effective tax rate |
23.4 | % | 25.1 | % | 24.9 | % | 25.4 | % | ||||||||||||||||
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Net income |
$ | 9,605 | $ | 12,953 | (25.8 | %) | $ | 39,328 | $ | 45,303 | (13.2 | %) | ||||||||||||
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Adjusted Net income |
$ | 9,865 | $ | 12,390 | (20.4 | %) | $ | 39,765 | $ | 45,679 | (12.9 | %) | ||||||||||||
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Diluted EPS |
$ | 0.37 | $ | 0.50 | (26.0 | %) | $ | 1.53 | $ | 1.77 | (13.6 | %) | ||||||||||||
|
Adjusted Diluted EPS |
$ | 0.38 | $ | 0.48 | (20.8 | %) | $ | 1.55 | $ | 1.78 | (12.9 | %) | ||||||||||||
Income Tax Expense
Income tax expense was $2.9 million and $13.0 million for the three and nine months ended March 31, 2025, respectively, compared with $4.3 million and $15.4 million in the same prior year periods. Lower income tax expense during fiscal 2025 was primarily driven by the decrease in income before income taxes combined with a lower effective tax rate from recognizing tax benefits due to recent audit settlements.
Net Income
Net income was $9.6 million and $39.3 million for the three and nine months ended March 31, 2025, respectively, compared with $13.0 million and $45.3 million in the same prior year periods. Adjusted net income was $9.9 million and $39.8 million for the three and nine months ended March 31, 2025, respectively, down 20.4% and 12.9% from the same prior year periods. The decrease in net income during the third quarter of fiscal 2025 was driven primarily from lower consolidated net sales. For the first nine months of fiscal 2025 the decrease in net income was driven by lower consolidated net sales partially offset by lower SG&A expenses.
Diluted EPS
Diluted EPS was $0.37 and $1.53 for the three and nine months ended March 31, 2025, respectively, compared to $0.50 and $1.77 in the same prior year periods. Adjusted diluted EPS was $0.38 and $1.55 for the three and nine months ended March 31, 2025, respectively, compared to $0.48 and $1.78 in the same prior year periods. The decrease in diluted EPS during the third quarter of fiscal 2025 was driven by a $3.7 million reduction in consolidated net sales. For the first nine months of fiscal 2025 the decrease in diluted EPS was due to the 4.9% reduction in consolidated net sales partially offset by lower SG&A expenses.
Regulation G Reconciliations of Non-GAAP Financial Measures
To supplement the financial measures prepared in accordance with GAAP, we use non-GAAP financial measures, including adjusted operating income and margin, adjusted wholesale operating income and margin, adjusted retail operating income and margin, adjusted net income and adjusted diluted EPS. 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 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 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 GAAP. Other companies may calculate similarly titled non-GAAP financial measures differently than we do, limiting the usefulness of those measures for 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 amounts) |
Three months ended |
Nine months ended |
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March 31, |
March 31, |
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|
2025 |
2024 |
% Change |
2025 |
2024 |
% Change |
|||||||||||||||||||
|
Consolidated Adjusted Operating Income / Operating Margin |
||||||||||||||||||||||||
|
GAAP Operating income |
$ | 10,997 | $ | 15,325 | (28.2 | %) | $ | 46,719 | $ | 55,364 | (15.6 | %) | ||||||||||||
|
Adjustments (pre-tax) * |
350 | (754 | ) | 588 | 503 | |||||||||||||||||||
|
Adjusted operating income * |
$ | 11,347 | $ | 14,571 | (22.1 | %) | $ | 47,307 | $ | 55,867 | (15.3 | %) | ||||||||||||
|
Consolidated Net sales |
$ | 142,695 | $ | 146,421 | (2.5 | %) | $ | 454,292 | $ | 477,589 | (4.9 | %) | ||||||||||||
|
GAAP Operating margin |
7.7 | % | 10.5 | % | 10.3 | % | 11.6 | % | ||||||||||||||||
|
Adjusted operating margin * |
8.0 | % | 10.0 | % | 10.4 | % | 11.7 | % | ||||||||||||||||
|
Consolidated Adjusted Net Income / Adjusted Diluted EPS |
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|
GAAP Net income |
$ | 9,605 | $ | 12,953 | (25.8 | %) | $ | 39,328 | $ | 45,303 | (13.2 | %) | ||||||||||||
|
Adjustments, net of tax * |
260 | (563 | ) | 437 | 376 | |||||||||||||||||||
|
Adjusted net income |
$ | 9,865 | $ | 12,390 | (20.4 | %) | $ | 39,765 | $ | 45,679 | (12.9 | %) | ||||||||||||
|
Diluted weighted average common shares |
25,629 | 25,650 | 25,624 | 25,632 | ||||||||||||||||||||
|
GAAP Diluted EPS |
$ | 0.37 | $ | 0.50 | (26.0 | %) | $ | 1.53 | $ | 1.77 | (13.6 | %) | ||||||||||||
|
Adjusted diluted EPS * |
$ | 0.38 | $ | 0.48 | (20.8 | %) | $ | 1.55 | $ | 1.78 | (12.9 | %) | ||||||||||||
|
Wholesale Adjusted Operating Income / Adjusted Operating Margin |
||||||||||||||||||||||||
|
Wholesale GAAP operating income |
$ | 14,331 | $ | 11,243 | 27.5 | % | $ | 35,823 | $ | 36,437 | (1.7 | %) | ||||||||||||
|
Adjustments (pre-tax) * |
350 | (94 | ) | 706 | 2,371 | |||||||||||||||||||
|
Adjusted wholesale operating income * |
$ | 14,681 | $ | 11,149 | 31.7 | % | $ | 36,529 | $ | 38,808 | (5.9 | %) | ||||||||||||
|
Wholesale net sales |
$ | 98,990 | $ | 89,825 | 10.2 | % | $ | 271,857 | $ | 279,882 | (2.9 | %) | ||||||||||||
|
Wholesale GAAP operating margin |
14.5 | % | 12.5 | % | 13.2 | % | 13.0 | % | ||||||||||||||||
|
Adjusted wholesale operating margin * |
14.8 | % | 12.4 | % | 13.4 | % | 13.9 | % | ||||||||||||||||
|
Retail Adjusted Operating Income / Adjusted Operating Margin |
||||||||||||||||||||||||
|
Retail GAAP operating income |
$ | 659 | $ | 2,275 | (71.0 | %) | $ | 14,800 | $ | 14,399 | 2.8 | % | ||||||||||||
|
Adjustments (pre-tax) * |
- | (660 | ) | (118 | ) | (1,868 | ) | |||||||||||||||||
|
Adjusted retail operating income * |
$ | 659 | $ | 1,615 | (59.2 | %) | $ | 14,682 | $ | 12,531 | 17.2 | % | ||||||||||||
|
Retail net sales |
$ | 117,622 | $ | 122,616 | (4.1 | %) | $ | 384,654 | $ | 395,414 | (2.7 | %) | ||||||||||||
|
Retail GAAP operating margin |
0.6 | % | 1.9 | % | 3.8 | % | 3.6 | % | ||||||||||||||||
|
Adjusted retail operating margin * |
0.6 | % | 1.3 | % | 3.8 | % | 3.2 | % | ||||||||||||||||
* Adjustments to reported GAAP financial measures including operating income and margin, net income and diluted EPS have been adjusted by the following:
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|
(in thousands) |
March 31, |
March 31, |
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|
2025 |
2024 |
2025 |
2024 |
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|
Orleans, Vermont flood (wholesale) |
$ | 52 | $ | (103 | ) | $ | 73 | $ | 2,243 | |||||||
|
Gain on sale-leaseback transaction (retail) |
- | (656 | ) | (218 | ) | (1,966 | ) | |||||||||
|
Severance and other charges (wholesale) |
298 | 9 | 633 | 128 | ||||||||||||
|
Severance and other charges (retail) |
- | (4 | ) | 100 | 98 | |||||||||||
|
Adjustments to operating income |
$ | 350 | $ | (754 | ) | $ | 588 | $ | 503 | |||||||
|
Related income tax effects on non-recurring items(1) |
(90 | ) | 191 | (151 | ) | (127 | ) | |||||||||
|
Adjustments to net income |
$ | 260 | $ | (563 | ) | $ | 437 | $ | 376 | |||||||
(1) Calculated using the marginal tax rate for each period presented.
Liquidity
Our sources of liquidity include cash and cash equivalents, short-term and long-term investments, cash generated from operations and amounts available under our credit facility. We believe these sources remain adequate to meet our short-term and long-term liquidity requirements, finance our long-term growth plans, invest in capital expenditures and fulfill other cash requirements for day-to-day operations and contractual obligations. We are committed to maintaining a strong balance sheet and monitoring our liquidity closely.
Our available liquidity is summarized below:
|
March 31, |
June 30, |
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|
(in thousands) |
2025 |
2024 |
||||||
|
Cash and cash equivalents |
$ | 65,731 | $ | 69,710 | ||||
|
Investments, short-term |
107,202 | 91,319 | ||||||
|
Investments, long-term |
10,041 | 34,772 | ||||||
|
Availability under existing credit facility |
120,952 | 120,952 | ||||||
|
Total Available Liquidity |
$ | 303,926 | $ | 316,753 | ||||
At March 31, 2025, we had working capital of $203.6 million compared with $179.0 million at June 30, 2024 and a current ratio of 2.3 at March 31, 2025, comparable to 2.2 at June 30, 2024 and 2.1 a year ago. Our non-U.S. subsidiaries held $3.3 million in cash and cash equivalents at March 31, 2025, which we have determined to be indefinitely reinvested.
Summary of Cash Flows
At March 31, 2025, we held cash and cash equivalents of $65.7 million compared with $69.7 million at June 30, 2024. Cash and cash equivalents aggregated to 8.9% of our total assets at March 31, 2025 compared with 9.4% at June 30, 2024. In addition to cash and cash equivalents, we had aggregated investments of $117.2 million at March 31, 2025 compared with $126.1 million at June 30, 2024. Our investments are U.S. Treasury bills and notes, which we expect will further enhance our returns on excess cash. Our short-term U.S. Treasury bills totaled $107.2 million with maturities of less than one year while our long-term U.S. Treasury notes totaled $10.0 million with maturities ranging between one and two years. We believe our cash, cash equivalents and investments are available to meet short-term liquidity needs.
Our cash and cash equivalents decreased $4.0 million or 5.7% during the first nine months of fiscal 2025 due to $40.1 million in cash dividends paid, capital expenditures of $9.4 million and $2.2 million in taxes paid related to net share settlement of equity awards partially offset by $36.9 million of net cash provided by operating activities and $11.6 million in proceeds from sales of investments, net of purchases.
The following table illustrates the main components of our cash flows:
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Nine months ended |
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(in millions) |
March 31, |
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|
2025 |
2024 |
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|
Operating activities |
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|
Net income |
$ | 39.3 | $ | 45.3 | ||||
|
Non-cash operating lease cost |
24.5 | 23.8 | ||||||
|
Restructuring and other charges, net of gains |
0.3 | 0.5 | ||||||
|
Payments on restructuring and other charges, net of proceeds |
(0.6 | ) | (0.9 | ) | ||||
|
Depreciation and amortization and other non-cash items |
12.8 | 13.3 | ||||||
|
Deferred income taxes |
(0.7 | ) | (0.3 | ) | ||||
|
Change in operating assets and liabilities |
(38.7 | ) | (27.7 | ) | ||||
|
Total provided by operating activities |
$ | 36.9 | $ | 54.0 | ||||
|
Investing activities |
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|
Capital expenditures |
$ | (9.4 | ) | $ | (7.5 | ) | ||
|
Proceeds from sales of investments, net of purchases |
11.6 | (2.6 | ) | |||||
|
Total provided by (used in) investing activities |
$ | 2.2 | $ | (10.1 | ) | |||
|
Financing activities |
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|
Dividend payments |
$ | (40.1 | ) | $ | (40.3 | ) | ||
|
Taxes paid related to net share settlement of equity awards |
(2.2 | ) | (2.1 | ) | ||||
|
Proceeds from employee stock plans |
- | 0.5 | ||||||
|
Payments on financing leases |
(0.3 | ) | (0.4 | ) | ||||
|
Total used in financing activities |
$ | (42.6 | ) | $ | (42.3 | ) | ||
Cash Provided by Operating Activities
Cash provided by operating activities in fiscal 2025 was primarily attributable to net income, adjusted for non-cash items, partially offset by changes in working capital. We generated $36.9 million in cash from operating activities during the first nine months of fiscal 2025 compared with $54.0 million in the prior year period. This decrease was the result of changes in working capital coupled with lower net income. Changes in working capital reflect an increase in inventory within our retail segment combined with the timing of software and insurance renewal payments. During the third quarter of fiscal 2025 we introduced new products, which led to an increase in inventory carrying levels at both our retail service centers and design centers. Restructuring payments during the first nine months of fiscal 2025 were $0.6 million compared to $0.9 million in the prior year period.
Cash Provided by (Used in) Investing Activities
Cash provided by investing activities was $2.2 million during the first nine months of fiscal 2025 compared with cash used of $10.1 million in the prior year. During fiscal 2025, we had $11.6 million of net proceeds from sales of investments, which related to $46.8 million of U.S. treasuries that matured and were subsequently reinvested for $35.2 million. In the prior year, we had $2.6 million of net purchases of investments, which related to $77.3 million of short-term U.S. treasuries that matured during the year and the subsequent reinvestment of $79.9 million. Capital expenditures during the first nine months of fiscal 2025 were $9.4 million, up from $7.5 million in the prior year period as we further expanded our manufacturing facilities in Mexico, remodeled our hotel, built-out several new retail design centers and continued to invest in new manufacturing equipment and technology.
Cash Used in Financing Activities
Cash used in financing activities was $42.6 million in the current year compared with $42.3 million a year ago. Total dividends paid were $40.1 million during the first nine months of fiscal 2025, a decrease of 0.5% from a year ago due to a reduction in the special cash dividend paid, which went from $0.50 per share last year to $0.40 in the current year. This decrease in our special cash dividend was mostly offset by an 8.3% increase in our regular quarterly dividend, which rose from $0.36 to $0.39 per share, effective May 2024. In addition, during the first nine months of fiscal 2025, a total of 70,495 shares valued at $2.2 million were repurchased from employees to satisfy their withholding tax obligations upon vesting of RSUs and PSUs. This compared to $2.1 million repurchased for similar withholding tax obligations in the prior year period.
Restricted Cash
We present restricted cash as a component of total cash and cash equivalents on our consolidated statements of cash flows and within Other assets on our consolidated balance sheets. At March 31, 2025 and June 30, 2024, we held $0.6 million and $0.5 million, respectively, of restricted cash related to our insurance captive.
Exchange Rate Changes
Due to changes in foreign currency exchange rates, namely the Mexican Peso, Canadian Dollar and Honduran Lempira against the U.S. Dollar, our cash and cash equivalents decreased by $0.4 million during the first nine months of fiscal 2025 compared with an increase of $0.1 million in the prior year period. These changes had an immaterial impact on our cash balances held in Canada, Mexico and Honduras.
Capital Resources, including Material Cash Requirements
Sources of Liquidity
Capital Needs. On January 26, 2022, we entered into a Third Amended and Restated Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A. as administrative agent and syndication agent and Capital One, National Association, as documentation agent. The Credit Agreement amended and restated the Second Amended and Restated Credit Agreement, dated as of December 21, 2018, as amended. The Credit Agreement provides for a $125 million revolving credit facility (the “Facility”), subject to borrowing base availability, with a maturity date of January 26, 2027. The Credit Agreement also provides us with an option to increase the size of the Facility up to an additional amount of $60 million. Availability under the Facility fluctuates according to a borrowing base calculated on eligible accounts receivable and inventory, net of customer deposits and reserves. The Facility includes covenants that apply under certain circumstances, including a fixed-charge coverage ratio requirement that applies when excess availability under the credit line is less than certain thresholds. At March 31, 2025, we were not subject to the fixed-charge coverage ratio requirement, had no borrowings outstanding under the Facility, were in compliance with all other covenants and had borrowing availability of $121.0 million of the $125.0 million credit commitment. We incurred financing costs of $0.5 million during fiscal 2022, which are being amortized as interest expense over the remaining life of the Facility using the effective interest method.
Letters of Credit. At March 31, 2025 and June 30, 2024, respectively, there were $4.0 million of standby letters of credit outstanding under the Facility.
Uses of Liquidity
Capital Expenditures. Capital expenditures during the first nine months of fiscal 2025 totaled $9.4 million compared with $7.5 million in the prior year period. Current year capital expenditures related primarily to the further expansion of our manufacturing facilities in Mexico, retail design center relocations and grand openings, investments in technology, and remodeling costs associated with our hotel. During the first nine months of fiscal 2025, we further strengthened our vertically integrated enterprise through the purchase of certain property, plant and equipment for $1.6 million, which increased our manufacturing operations in Silao, Mexico. New and relocated state-of-the-art design centers in Watchung, NJ, Peoria, AZ, Middleton, WI and Toronto, Canada were opened during fiscal 2025 that showcase our unique style while combining complimentary interior design services with technology.
We have no material contractual commitments outstanding for future capital expenditures and anticipate that cash from operations will be sufficient to fund future capital expenditures.
Dividends. Our Board of Directors has sole authority to determine if and when we will declare future dividends and on what terms. We have a strong history of returning capital to shareholders and continued this practice during fiscal 2025 by paying a special dividend of $0.40 per share in addition to regular quarterly dividends of $0.39 per share. During the first nine months of fiscal 2025, we paid total cash dividends of $40.1 million. We have paid a special cash dividend in each of the past five years and paid an annual cash dividend in every year since 1996. Although we expect to continue to declare and pay quarterly cash dividends for the foreseeable future, the payment of future cash dividends is within the discretion of our Board of Directors and will depend on our earnings, operations, financial condition, capital requirements and general business outlook, among other factors. Our credit agreement also includes covenants that set limitations on our ability to pay dividends.
Share Repurchase Program. There were no share repurchases under our existing multi-year share repurchase program (the “Share Repurchase Program”) during the first nine months of fiscal 2025 or 2024. At March 31, 2025, we had a remaining authorization to repurchase 2,007,364 shares of our common stock pursuant to our Share Repurchase Program. The timing and amount of any future share repurchases in the open market and through privately negotiated transactions will be determined by the Company’s officers at their discretion and based on a number of factors, including an evaluation of market and economic conditions while also maintaining financial flexibility.
Material Cash Requirements from Contractual Obligations.
Fluctuations in our operating results, levels of inventory on hand, operating lease commitments, the degree of success of our accounts receivable collection efforts, the timing of tax payments, the rate of written orders and net sales, levels of customer deposits on hand, the payment of cash dividends, and capital expenditures to support the growth of our operations will impact our liquidity and cash flows in future periods. The effect of our contractual obligations on our liquidity and capital resources in future periods should be considered in conjunction with the factors mentioned here. At June 30, 2024, we had total contractual obligations of $197.9 million, including $151.3 million related to operating lease commitments and $30.7 million of open purchase orders. Except for $25.9 million in operating lease payments made to our landlords and $15.0 million of operating lease assets obtained in exchange for $15.0 million of operating lease liabilities during fiscal 2025, there were no other material changes in our contractual obligations as previously disclosed in our 2024 Annual Report on Form 10-K.
Other Arrangements
We do not utilize or employ any other arrangements in operating our business. As such, we do not maintain any retained or contingent interests, derivative instruments or variable interests which could serve as a source of potential risk to our future liquidity, capital resources and results of operations.
Significant Accounting Policies
We disclose our significant accounting policies in Note 3, Summary of Significant Accounting Policies, in the notes to our consolidated financial statements included in our 2024 Annual Report on Form 10-K. There have been no changes in our significant accounting policies during the first nine months of fiscal 2025 from those disclosed in our 2024 Annual Report on Form 10-K.
Critical Accounting Estimates
We prepare our consolidated financial statements in conformity with 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 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.
We disclose our critical accounting estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2024 Annual Report on Form 10-K. There have been no significant changes in our critical accounting estimates during the first nine months of fiscal 2025 from those disclosed in our 2024 Annual Report on Form 10-K.
Recent Accounting Pronouncements
See Note 3, Recent Accounting Pronouncements, to the consolidated financial statements included under Part I, Item 1 of this Quarterly Report on Form 10-Q for a full description of recent accounting pronouncements, including the expected dates of adoption.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
In the normal course of business, we are exposed to the following market risks, which could impact our financial position and results of operations.
Interest Rate Risk
Debt
Interest rate risk exists primarily through our borrowing activities. Short-term debt, if required, is used to meet working capital requirements and long-term debt, if required, 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. While we had no fixed or variable rate borrowings outstanding at March 31, 2025, we could be exposed to market risk from changes in risk-free interest rates if we incur variable rate debt in the future as interest expense will fluctuate with changes in the SOFR. We believe that a hypothetical 100 basis point change (up or down) in interest rates based on one-month SOFR would not have a material impact on our results of operations and financial condition.
Cash, Cash Equivalents and Investments
The fair market value of our cash and cash equivalents at March 31, 2025 was $65.7 million while our investments (short and long-term) totaled $117.2 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. Our investments consist of U.S. treasuries with maturities ranging up to two years and are reported at fair value based on observable inputs. Our primary objective for holding available-for-sale securities is to achieve appropriate investment returns consistent with preserving principal and managing risk. Pursuant to our established investment policy guidelines, we try to achieve high levels of credit quality, liquidity and diversification. At any time, a sharp rise in market interest rates could have an impact on the fair value of our available-for-sale securities portfolio. Conversely, declines in interest rates, including the impact from lower credit spreads, could have an adverse impact on interest income for our investment portfolio. However, because of our investment policy and the nature of our investments, 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 equivalents and investments have been materially impacted by current market events. Our available-for-sale securities are held for purposes other than trading and are not leveraged at March 31, 2025. We monitor our interest rate and credit risks and believe the overall credit quality of our portfolio is strong. It is anticipated that the fair market value of our cash equivalents and investments will continue to be immaterially affected by fluctuations in interest rates.
Foreign Currency Exchange Risk
Foreign currency exchange risk is primarily limited to the operation of our Company-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. 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 effect 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.
The financial statements of our 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 Quarterly Report on Form 10-Q.
A hypothetical 10% weaker U.S. dollar against all foreign currencies at March 31, 2025 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 have no intention of doing so in the foreseeable future.
Duties and Tariffs Risk
We are a vertically integrated enterprise focused primarily in North America where we make about 75% of our furniture in these workshops. Our strategy to continue investing in our North America manufacturing and distribution has enabled us to focus on our longstanding reputation for quality and to continue offering products at competitive values while also ensuring consistent, high levels of service to our clients. We are exposed to risk with respect to tariffs assessed on raw materials, component parts and finished goods we import into the U.S. Additionally, we are exposed to tariffs on our finished goods that we export from our plants located in the U.S., Mexico and Honduras to other countries.
During and shortly after the fiscal 2025 third quarter, the U.S. introduced actions to increase import tariffs at various rates, including on certain products imported from almost all countries and individualized higher tariffs on certain other countries, such as China. Other countries have announced reciprocal tariffs or other similar actions. Some of these tariff announcements have since been followed by announcements of limited exemptions and temporary pauses. Given these events, there continues to be significant uncertainty about the future relationship between the U.S. and other countries regarding such trade policies, treaties and tariffs, and so we can make no assurance about the eventual impact on our operating results and business. However, the introduction of tariffs by the U.S. or of reciprocal tariffs by other countries is expected to result in incremental costs for our imported raw materials and finished goods. These higher costs could negatively impact our margins and lead to an increase in our retail selling prices, causing lower customer demand. As duties rise and new tariffs are enacted, we determine whether a price increase to our customers to help offset these incremental costs is warranted. Our inability to minimize the impact of tariffs on our raw material input costs, pass through price increases or find alternative sources for our raw materials may have a material adverse impact on sales volume, earnings and liquidity. To the extent that an increase in these costs would have a material impact on our results of operations, we believe that our competitors would experience a similar impact.
Raw Materials and Other Commodity Price Risk
We are exposed to market risk from changes in the cost of raw materials used in our manufacturing processes, principally logs, lumber, plywood, fabric and foam products. The cost of foam products, which are petroleum-based, is sensitive to changes in the price of oil. We are also exposed to risk with respect to transportation costs for delivering our products, including the cost of fuel. As commodity prices and transportation costs remain volatile and, in some cases, rise, we determine whether a price increase to our customers to offset these costs is warranted. To the extent that an increase in these costs would have a material impact on our results of operations, we believe that our competitors would experience a similar impact.
Inflation Risk
Our results of operations and financial condition are presented based on historical cost. Inflation has slowed during February and March 2025, falling to the levels experienced a year ago before it rose between November 2024 and January 2025. We believe any material inflationary impact on our product and operating costs would be partially offset by our ability to increase retail selling prices and seek lower cost alternatives. We have been able to reduce certain manufacturing input costs by identifying lower cost alternatives in raw materials as well as implemented operational efficiencies, including reduced headcount, which have helped to minimize the impact of inflation.
Commercial Real Estate Market Risk
We have potential exposure to market risk related to conditions in the commercial real estate market. At March 31, 2025, there were 143 Company-operated retail design centers, of which 48 are owned and 95 are leased. Our retail segment real estate holdings could suffer significant impairment in value if we are forced to close design centers and sell or lease the related properties during periods of weakness in certain markets. We are also exposed to risk related to conditions in the commercial real estate rental market with respect to the right-of-use assets we carry on our consolidated balance sheets for leased design center locations and warehouse and distribution facilities. At March 31, 2025, the unamortized balance of such right-of-use assets totaled $108.4 million. Should we have to close or otherwise abandon one of these leased locations, we could incur additional impairment charges if rental market conditions do not support a fair value for the right-of-use asset in excess of its carrying value.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, including our Chairman, President and Chief Executive Officer (“CEO”) and Senior Vice President, Chief Financial Officer and Treasurer (“CFO”), has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our CEO and CFO have concluded that, as of March 31, 2025, our disclosure controls and procedures are effective to provide reasonable assurance 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.
Changes in Internal Control over Financial Reporting
There were 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 third quarter of fiscal 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material changes during the first nine months of fiscal 2025 to the legal matters discussed in Part I, Item 3, Legal Proceedings, in our 2024 Annual Report on Form 10-K.
Item 1A. Risk Factors
There have been no material changes during the first nine months of fiscal 2025 to the risk factors discussed in Part I, Item 1A, Risk Factors, in our 2024 Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Items 2(a) and (b) are not applicable as there have been no unregistered sales of equity securities.
(c) Issuer Purchases of Equity Securities
Our Board of Directors has authorized management, at its discretion, to make repurchases of its common stock in the open market and through privately negotiated transactions, subject to market conditions, pursuant to our previously announced repurchase program. There is no expiration date on the repurchase authorization and the amount and timing of future share repurchases, if any, will be determined by our officers at their discretion, and as allowed by securities laws, covenants under existing bank agreements and other legal and contractual requirements, and will be based on a number of factors, including an evaluation of general market and economic conditions and the trading price of the common stock. The share repurchase program may be suspended or discontinued at any time without prior notice.
We did not repurchase any shares of our outstanding common stock during the third quarter of fiscal 2025 under the existing share repurchase program. At March 31, 2025, we had a remaining authorization to repurchase 2,007,364 shares of our common stock pursuant our program.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Securities Trading Plans of Directors and Officers
of our directors or officers (as defined in Section 16 of the Securities Exchange Act of 1934, as amended) adopted or terminated a Rule 10b5-1 trading arrangement or any non-Rule 10b5-1 trading arrangement (each as defined in Item 408(a) and (c) of Regulation S-K) during the three months ended March 31, 2025.
Item 6. Exhibits
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(a) |
Exhibits |
The following documents are filed as exhibits to this report:
|
Exhibit Number |
Exhibit Description |
Incorporated by Reference |
Filed Herewith |
Furnished Herewith |
|||||
|
Form |
File No. |
Exhibit |
Filing Date |
|
|||||
|
3.1 |
8-K |
001-11692 |
3(a) |
11/18/2016 |
|
||||
|
3.2 |
8-K |
001-11692 |
3(d) |
11/18/2016 |
|
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|
31.1 |
Certification of Principal Executive Officer pursuant to Exchange Act Rule 13a-14(a)/15d-14(a) |
X |
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|
31.2 |
Certification of Principal Financial Officer pursuant to Exchange Act Rule 13a-14(a)/15d-14(a) |
X |
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32.1 |
X | ||||||||
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32.2 |
X | ||||||||
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101.INS |
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
X |
|
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101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
X |
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||||||
|
101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
X |
|
||||||
|
101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
X |
|
||||||
|
101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document |
X |
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||||||
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101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
X |
|
||||||
|
104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
X |
|
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ETHAN ALLEN INTERIORS INC. | ||
| (Registrant) | ||
|
Date: May 5, 2025 |
BY: /s/ M. Farooq Kathwari |
|
|
M. Farooq Kathwari |
||
|
Chairman, President and Chief Executive Officer |
||
|
(Principal Executive Officer and Authorized Signatory) |
|
Date: May 5, 2025 |
BY: /s/ Matthew J. McNulty |
|
|
Matthew J. McNulty |
||
|
Senior Vice President, Chief Financial Officer and Treasurer |
||
|
(Principal Financial Officer and Principal Accounting Officer) |
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO
EXCHANGE ACT RULE 13a-14(a)/15d-14(a)
I, M. Farooq Kathwari, certify that:
|
1. |
I have reviewed this Quarterly Report on Form 10-Q of Ethan Allen Interiors Inc. (the “registrant”); |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 5, 2025
|
/s/ M. Farooq Kathwari |
Chairman, President and Chief Executive Officer |
||
|
M. Farooq Kathwari |
(Principal Executive Officer) |
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO
EXCHANGE ACT RULE 13a-14(a)/15d-14(a)
I, Matthew J. McNulty, certify that:
|
1. |
I have reviewed this Quarterly Report on Form 10-Q of Ethan Allen Interiors Inc. (the “registrant”); |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 5, 2025
|
/s/ Matthew J. McNulty |
Senior Vice President, Chief Financial Officer and Treasurer |
||
|
Matthew J. McNulty |
(Principal Financial Officer and Principal Accounting Officer) |
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Exhibit 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
I, M. Farooq Kathwari, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge, the Quarterly Report on Form 10-Q (the “Quarterly Report”) for the period ended March 31, 2025, as filed by Ethan Allen Interiors Inc. (the “Company”), which contains the Company's financial statements, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and that the information contained in such Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 5, 2025
|
/s/ M. Farooq Kathwari |
Chairman, President and Chief Executive Officer |
||
|
M. Farooq Kathwari |
(Principal Executive Officer) |
This certification accompanies this Quarterly Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Exchange Act. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.
This written statement is being furnished to the Securities and Exchange Commission as an exhibit to the Quarterly Report. A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES
Exhibit 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
I, Matthew J. McNulty, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge, the Quarterly Report on Form 10-Q (the “Quarterly Report”) for the period ended March 31, 2025, as filed by Ethan Allen Interiors Inc. (the “Company”), which contains the Company's financial statements, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and that the information contained in such Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 5, 2025
|
/s/ Matthew J. McNulty |
Senior Vice President, Chief Financial Officer and Treasurer |
||
|
Matthew J. McNulty |
(Principal Financial Officer and Principal Accounting Officer) |
This certification accompanies this Quarterly Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Exchange Act. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.
This written statement is being furnished to the Securities and Exchange Commission as an exhibit to the Quarterly Report. A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.