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Ethan Allen announces Q1 sales & earnings

23
Oct '08

Ethan Allen Interiors Inc. ("Ethan Allen" or the "Company") reported operating results for the three months ended September 30, 2008.

Net delivered sales for the quarter ended September 30, 2008 were $205.8 million, representing a decline of 17.2% compared with $248.7 million in the prior year quarter. Net delivered sales for the Company's Retail division were $155.9 million representing a decline of 14.7% from the prior year period.

Wholesale sales were $121.3 million representing a decline of 22.4% from the prior year period. Comparable Ethan Allen design center delivered sales were down 19.0% compared to the prior year quarter.

As of September 30, 2008 there were a total of 292 retail location design centers of which 160 were Company owned compared with a total of 311 of which 159 were Company owned as of September 30, 2007.

For the quarter ended September 30, 2008, diluted earnings per share amounted to $0.26 on net income of $7.4 million, including a restructuring benefit of $1.0 million net of tax due to the gain on the sale of one of the properties closed last fiscal year.

Excluding this net restructuring benefit, diluted earnings per share was $0.22 on $6.4 million in net income. This compares to diluted earnings per share and net income of $0.57 and $17.5 million, respectively, in the prior year comparable period.

During the quarter, the Company implemented the "Team Concept" in the Retail division whereby design associates are paid a base salary with an opportunity for the team to earn a bonus. There was an incremental one-time overlap of selling expenses as prepaid commissions of $4.6 million (or $0.10 per diluted share) were expensed.

Also during the quarter, historical tax exposures were resolved resulting in a one-time tax benefit to the income statement of $0.8 million (or $0.03 per diluted share).

Farooq Kathwari, Chairman and CEO, commented, "We have been able to maintain decent profitability during these challenging times. While our sales have decreased, our gross margins increased due to many factors including maintaining our every day best price policy.

In addition, our many initiatives during the last several years are also a major factor in reducing costs and improving our performance. These initiatives have included developing knowledgeable and motivated associates, the repositioning of our brand to project a modern attitude with a classic perspective, maintaining a consistent strong national advertising program and continued structural changes in our retail, manufacturing and logistics network."

Mr. Kathwari added, "Our focus has also been to maintain liquidity. We are pleased that during the quarter we increased our cash position by $5.5 million with an ending balance of about $80 million. As we indicated previously, we have completed most of the repositioning of the retail network and expect a major reduction in capital expenditures in this fiscal year which should further help strengthen our cash position."

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