Ethan Allen Announces Third Quarter Sales and Earnings

Business Wire, April 30, 2009

Replacing Current Unsecured Revolver Facility with a Secured Line

DANBURY, Conn. -- Ethan Allen Interiors Inc. (“Ethan Allen” or the “Company”) (NYSE:ETH) today reported operating results for the three and nine months ended March 31, 2009.

Three Months Ended March 31, 2009

Net delivered sales for the quarter ended March 31, 2009 amounted to $140.2 million as compared to $235.9 million in the prior year quarter. Net delivered sales for the Company’s Retail division were $103.3 million as compared to $172.8 million in the prior year quarter. Retail division comparable delivered sales were down 41.8% as compared to the prior year quarter. Wholesale sales were $88.1 million, as compared to $156.3 million in the prior year quarter.

For the quarter ended March 31, 2009, diluted loss per share amounted to $1.69 on a loss of $48.7 million, which includes a goodwill impairment charge based on our best estimate of $30.6 million net of tax ($1.06 per diluted share), and $4.6 million in restructuring and impairment charges net of tax ($0.16 per diluted share) due to previously announced actions. Excluding these impairment and restructuring charges, diluted loss per share was $0.46 on $13.4 million in net loss. This compares to diluted earnings per share and net income of $0.30 and $8.8 million, respectively, in the prior year comparable period ($0.39 and $11.4 million, respectively, excluding restructuring and impairment charges).

Nine Months Ended March 31, 2009

For the nine months ended March 31, 2009, net delivered sales totaled $535.6 million as compared to $744.1 million in the prior year comparable period. Net delivered sales for the Company’s Retail division were $406.4 million as compared to $548.1 million in the prior year. Retail division comparable delivered sales were down 28.9% as compared to the prior year comparable period. Wholesale sales were $318.2 million as compared to $468.5 in the prior year.

For the nine months ended March 31, 2009, diluted loss per share amounted to $1.24 on a net loss of $35.8 million, which includes a goodwill impairment charge based on our best estimate of $30.6 million net of tax, and $3.5 million in restructuring and impairment charges net of tax due to previously announced actions. Excluding these impairment and restructuring charges, diluted loss per share was $0.06 on $1.6 million in net loss. This compares to diluted earnings per share and net income of $1.58 and $47.0 million, respectively, in the prior year comparable period ($1.67 and $49.5 million, respectively, excluding restructuring and impairment charges).

Revolver Termination

The Company announced that it has initiated the termination of the $100 million cash flow based revolving credit facility. It expects to complete an asset based revolving credit facility in the coming weeks that is expected to provide greater flexibility, though the Company has no plans to use the facility in the near term.

Farooq Kathwari, Chairman and CEO, commented, “This was a challenging quarter, with major declines in sales and profitability. As stated in our April 21st press release, during this period of sharp decline in consumer confidence and major competitive home furnishings liquidations, we improved many aspects of our business. We introduced new products – many with eco-friendly finishes; maintained a strong national advertising presence; launched a cutting-edge new website; created a Membership Rewards program, and offered strong finance options. We also took major steps to reduce our costs and expenses, and on an annual basis, reduced over $100 million from our underlying cost structure. We have reduced our inventories during the quarter by $13.5 million and ended with a $51 million cash balance. We maintained a cash dividend, although at a reduced level.”

Mr. Kathwari continued, “Our decision to terminate the $100 million unsecured revolving credit facility expiring July 2010 and replace it in the coming weeks with a secured three-year facility of about $60 million, stems from our desire to have in place a revolver that provides greater flexibility. We have also recorded this quarter a charge for our best estimate of the impairment against the recorded value of goodwill. This goodwill has accumulated over many years. With this non-cash charge, we have eliminated entirely the goodwill in the Retail side of the business. However, no impairment charge was warranted for the wholesale division or our trade name.”

Commenting further, Mr. Kathwari stated, “Although the economic environment remains very difficult, we are pleased that the Retail environment seems to show some indications of improvement. Accordingly, we have launched aggressive new initiatives to build sales. On April 23rd, we introduced a major marketing campaign entitled “Celebrating American Innovation” to showcase the key elements that combine to create the unique Ethan Allen value proposition. “Celebrating American Innovation” will encompass a number of important initiatives. Last week we kicked off the campaign by reintroducing new, eco-friendly, and other selected products at special ‘celebration’ pricing through June 15, 2009. A list of celebration products can be found at ethanallen.com. In the next nine months, “Celebrating American Innovation” will highlight the many ways we are innovating today, including maintaining an American manufacturing base – with about 65% of our products made in America. The campaign will focus on our quality and craftsmanship. It will also communicate the distinctive nature of our professional design service, which is free to our clients and includes visits to their home. In addition, the campaign will draw attention to our uncommon – and valuable -- free local white glove delivery and set-up service. And the campaign will vigorously project an Ethan Allen that has aggressively introduced technology to provide better and faster service of all kinds.”