Ethan Allen(ETD) - 2025 Q4 - Annual Report

Cautionary Note Regarding Forward-Looking Statements This section provides a cautionary note regarding forward-looking statements, highlighting inherent risks and uncertainties PART I This part provides a comprehensive overview of the company's business, risk factors, properties, and legal matters Item 1. Business Ethan Allen is a vertically integrated luxury home fashion brand, manufacturer, and retailer, known for quality, craftsmanship, and personalized design services. The company operates a global network of retail design centers, with a significant portion of its furniture manufactured in North America. Its strategy emphasizes product offerings, professional design services, leveraging vertical integration, technology investment, strong logistics, marketing, and social responsibility Overview - Ethan Allen is a leading interior design company, manufacturer, and retailer in the home furnishings marketplace, operating as a global luxury home fashion brand vertically integrated from product design through home delivery[17] - The company operates 142 Company-operated retail design centers (137 in the U.S., 5 in Canada) and 45 independently operated design centers (U.S., Asia, Middle East, Europe)[18] - Approximately 75% of Ethan Allen's furniture is manufactured in its North American plants, which include 11 facilities across the U.S., Mexico, and Honduras[18] Business Strategy - Vertical integration and North American manufacturing/logistics are key competitive advantages, with a strategy focused on constant reinvention and a distinct vision of classic American style with a modern perspective[20] - Strategic initiatives include providing relevant product offerings, capitalizing on interior design professionals' services, leveraging vertical integration, investing in new technologies, maintaining a strong logistics network, and utilizing strong marketing campaigns and ethanallen.com[20] - For the third consecutive year, Ethan Allen was named America's 1 Premium Furniture Retailer by Newsweek[22] Product - 75% of the furniture offered is manufactured in North American facilities, combining skilled craftsmanship with technology, ensuring distinctive quality[23] - The company owns seven manufacturing facilities in the U.S., three upholstery plants in Mexico, and a case goods facility in Honduras, selectively outsourcing the remaining 25% of products primarily from Asia[25] Combining Technology with Personal Service - Design centers utilize technology-driven projections, touchscreens, and freestanding designer workstations with large flat-panel displays for floorplans and 3D renderings[26] - The company leverages EA inHome®, an augmented reality mobile app, and a 3D Room Planner to empower clients to preview products and create immersive 3D walk-throughs of interior designs[28] - A state-of-the-art fabric-to-frame configurator allows designers to visualize over 1,000 fabrics and construction options on upholstered frames in real-time[28] Marketing & E-Commerce - Marketing emphasizes core brand values of quality, craftsmanship, personal service with technology, and social responsibility, conveyed through digital marketing (social media, email), direct mail, TV, and radio[29] - The ethanallen.com website is considered an extension of retail design centers, offering enhanced search, live chat, online appointment booking, and a virtual design center for client inspiration and shopping[30] Raw Materials and Supply Chain - Principal raw materials include lumber (soft maple, red oak, cherry), veneers, plywood, hardware, glue, finishing materials, glass, steel, fabrics, leather, foam, and filling material[32] - Raw materials are purchased both domestically and internationally, with no significant long-term supply contracts or dependence on any one supplier, ensuring sufficient alternate sources[33] - Manufacturing approximately 75% of furniture in North American facilities limits exposure to any single country for the remaining 25% of imported products[33] Seasonality - Demand for home furnishings is sensitive to overall economic conditions, including consumer confidence, discretionary spending, housing market trends, interest rates, and inflation[34] - Historically, no single fiscal quarter contributes more than 28% of annual net sales volume, limiting exposure to seasonality[34] Segments - The business is strategically aligned into two reportable segments: wholesale and retail, which operate separately and provide distinctive services[35] - Segment performance is evaluated based on net sales and operating income, with intersegment transactions (wholesale sales to retail) eliminated in consolidation[35] Client Base - Home furnishings and accents are sold through 142 Company-operated design centers (retail segment) and 45 independently operated design centers (wholesale segment) in the U.S., Asia, the Middle East, and Europe[36] - No single client represented more than 10% of consolidated net sales in fiscal 2025; the ten largest clients (nine independent retailers and the U.S. government GSA) accounted for 11% of consolidated net sales[36] Backlog - Backlog is defined as any written order received that has not yet been delivered, fluctuating based on net orders, production, imported product receipts, shipments, and promotional events[37] Wholesale Backlog | Metric | June 30, 2025 | | :----- | :------------ | | Wholesale Backlog | $48.9 million | | Change from prior year | (8.7%) | | Weeks of wholesale backlog | 7.0 weeks | Distribution and Logistics - Products are distributed primarily through three national distribution centers in North Carolina and Virginia, which support a retail network of Company and independently operated home delivery centers[38] - At June 30, 2025, Company-operated retail design centers were supported by 17 Company-operated and five third-party operated retail home delivery centers[38] Competition - The home furnishings industry is highly fragmented and competitive, with increased competition from both digital and brick-and-mortar retailers[41] - Competition is primarily based on product styling, quality, personal service, prompt delivery, product availability, and price[41] - Ethan Allen believes its vertical integration, complimentary interior design service, direct manufacturing, logistics network, and product offerings create a competitive advantage[41] Intellectual Property - The company holds trademarks, service marks, and copyrights for the Ethan Allen name, logos, and designs, and maintains the ethanallen.com internet domain name[42] - An ongoing program monitors and defends against unauthorized use of its intellectual property, which is viewed as valuable assets[42] Government Contracts - Ethan Allen sells to the U.S. government through GSA Multiple Award Schedule Contracts and competitive bids[43] - Total net sales to the U.S. government represented 6% of consolidated net sales in fiscal 2025[43] Human Capital Management Employee Count (June 30, 2025) | Segment | Employees | | :-------- | :-------- | | Wholesale | 2,239 | | Retail | 972 | | Total | 3,211 | - Employee count decreased by 5.7% (193 associates) during fiscal 2025 due to operational efficiencies[140] - Key human capital objectives include health and safety, social responsibility, competitive compensation and benefits, and talent development, fostering a culture of integrity and innovation[44][45][47][49][50][51] Sustainability - Committed to sustainable business practices, incorporating social, environmental, health, and safety programs across global manufacturing, distribution, and retail operations[52] - Environmental initiatives include using responsibly harvested Appalachian woods (over 50% of wood furniture from certified, recycled, or reclaimed sources), low VOC finishes, eliminating heavy metals and HCFCs in packaging, and converting to PFAS-free products[54] - Awarded 'Most Improved' by The Sustainable Furnishings Council and National Wildlife Federation in fiscal 2025 for wood sourcing policies and commitment to sustainable wood[54] Corporate Contact Information - Headquarters located at 25 Lake Avenue Ext., Danbury, Connecticut 06811-5286[56][60] - Company website is ethanallen.com[60] Information about our Executive Officers - M. Farooq Kathwari serves as Chairman of the Board, President, and Chief Executive Officer since 1988, with his employment agreement extended to June 30, 2027[57][101] - Other executive officers include Douglas H. Diefenbach (SVP, Business Development), Matthew J. McNulty (SVP, CFO and Treasurer), Amy Phillips (EVP, Retail Division), and Catherine A. Plaisted (SVP, Marketing)[57][61] Available Information - Information filed with the SEC, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, is available free of charge on the company's Investor Relations website (https://ir.ethanallen.com) and the SEC's website (www.sec.gov)[58](index=58&type=chunk) Item 1A. Risk Factors This section outlines various risks that could materially and adversely affect Ethan Allen's business, financial condition, and results of operations. These risks span economic conditions, industry competition, brand and product challenges, manufacturing and supply chain vulnerabilities, environmental and safety compliance, technology and data security threats, legal and regulatory changes, and human capital management issues Home Furnishings Industry Risks - Declines in economic conditions, consumer confidence, and spending (e.g., weak housing market, persistent inflation) could negatively impact sales, results of operations, and liquidity[65] - The highly competitive and fragmented home furnishings industry, with increased competition from digital and brick-and-mortar retailers, poses a risk of losing market share[66] - A significant shift in consumer preference towards exclusively purchasing products online could materially adversely impact sales and operating margin, despite the company's efforts to expand online capabilities[67] Risks Related to our Brand and Product Offerings - Inability to maintain and enhance the brand or failure to successfully anticipate and respond to changes in consumer tastes and trends in a timely manner could materially adversely impact business, operating results, and financial condition[70][71] - Competition from manufacturers and retailers, including those with lower production costs (especially foreign manufacturers), could materially adversely affect financial performance[72][73] - The company faces risks in maintaining current design center locations at current costs and successfully selecting/securing new appropriate retail locations[74] - Exposure to market risk related to commercial real estate, particularly for its 94 leased Company-operated design centers, could lead to significant impairment charges if locations are closed during market weakness[75] Manufacturing and Supply Chain Risks - A limited number of manufacturing locations (U.S., Mexico, Honduras) increases exposure to business disruptions and could result in higher transportation costs if fuel prices increase significantly[76][77] - Disruptions of the supply chain due to trade restrictions, political instability, tariffs, natural disasters, public health crises, or operational instability of key suppliers could materially adversely affect operating and financial results[79][80] - Fluctuations in the price, availability, and quality of raw materials (wood, fabrics, foam) and imported finished goods (approximately 25% of consolidated sales) could lead to increased costs and production delays, impacting earnings[81][82] Environmental, Health and Safety Risks - The company's manufacturing and retail operations are subject to environmental, health, and safety requirements, with potential for substantial fines, criminal sanctions, costly pollution control equipment, and liabilities for contamination or personal injury[83][84] - Product recalls or product safety concerns could materially adversely affect sales and operating results, leading to decreased sales, increased costs, government enforcement actions, private litigation, and reputational damage[85] Technology and Data Security Risks - Extensive reliance on information technology systems means disruptions from power outages, cyberattacks, security breaches, or errors could adversely affect business and operating results, potentially leading to longer production times, reputational damage, and reduced sales[87][88] - Successful cyberattacks, which are becoming more sophisticated, and the failure to maintain adequate cybersecurity systems could materially harm operations, leading to unauthorized release of confidential information, system failures, business disruptions, and negative brand impacts[89][90][91] - Loss, corruption, or misappropriation of customer data could adversely affect reputation, diminish customer confidence, and lead to legal claims, regulatory investigations, and enforcement actions[94] Legal and Regulatory Risks - Global and local economic uncertainty, including fuel costs, wage inflation, global trade policies (tariffs), and currency fluctuations, may disrupt manufacturing operations and increase input costs[95] - Changes in U.S. trade and tax policy, such as increased tariffs, could materially increase costs, reduce margins, and potentially reduce consumer demand and sales volume[96][98] - Initiatives aimed at reducing U.S. government spending, such as those by the Department of Government Efficiency (DOGE), may result in lower future revenues from government contracts, which represented 6% of consolidated net sales in fiscal 2025[99] - Failure to protect intellectual property (copyrights, trademarks, service marks, trade secrets) could materially adversely affect the business or its ability to compete, potentially resulting in significant litigation expenses[100] Human Capital Risk - The business is dependent on retaining key personnel, including Chairman, President, and CEO M. Farooq Kathwari, and faces risks related to changes in senior leadership executive positions[101] - The highly competitive market for qualified employees in the retail and manufacturing industries poses a risk to attracting, retaining, and motivating talent, potentially requiring enhanced wage and benefits packages[102] - Labor challenges, including competition for skilled manufacturing and production employees, pressure to increase wages due to inflation, and shortages of qualified full-time labor, could negatively impact production and operating results[103][104] Financial Risks - Changes to estimates or projections used to assess the fair value of long-lived assets, or decisions to close underperforming locations, may cause future impairment charges, negatively affecting financial results[106] - The company is subject to self-insurance risks for health benefits and operational hazards, where unforeseen or significant losses in excess of insured limits could materially adversely affect financial condition and operating results[107][108] - Access to consumer credit for customers could be interrupted by conditions outside the company's control, such as tightening credit markets or increased borrowing rates, which could reduce sales and profitability[109] Item 1B. Unresolved Staff Comments This section states that there are no unresolved staff comments from the SEC regarding the company's filings - There are no unresolved staff comments[110] Item 1C. Cybersecurity Ethan Allen outlines its cybersecurity risk management and strategy, including policies, procedures, and board oversight, to identify, assess, and monitor threats. The company employs a risk-based approach, informed by the NIST Cybersecurity Framework, and has not experienced any material cybersecurity incidents to date Risk Management and Strategy - The company has policies, procedures, and processes to identify, assess, and monitor material risks from cybersecurity threats, integrated into its overall enterprise risk management strategy[111] - A cybersecurity framework, informed by the National Institute of Standards and Technology (NIST) Cybersecurity Framework, is implemented to protect information, systems, and networks[111] - Key cybersecurity processes include risk-based controls, an incident response plan with testing, employee security awareness training, and supplier risk assessments[116] - No cybersecurity incidents to date have materially affected or are reasonably likely to materially affect the company's business strategy, results of operations, or financial condition[113] Governance - The Board of Directors has oversight responsibility for strategic and operational risks, regularly reviewing and discussing information technology operations and cybersecurity threat landscape with management[114] - The Information Technology team, led by the Vice President of Information Technology and Manager of Security (collectively over 50 years of experience), is responsible for the day-to-day assessment and management of cybersecurity risks[115] Item 2. Properties Ethan Allen's properties include its corporate headquarters, 11 manufacturing facilities, three national distribution centers, and 142 Company-operated retail design centers. The company owns 48 and leases 94 of its design centers, with a significant presence in the U.S. and Canada, and additional independent locations globally - Corporate headquarters is located in Danbury, Connecticut[118] - The company owns and operates 11 manufacturing facilities (U.S., Mexico, Honduras) and three national distribution centers (U.S.)[119] - There are 142 Company-operated retail design centers in the U.S. and Canada, averaging 14,000 square feet, of which 48 are owned and 94 are leased[119] Retail Design Center Geographic Locations (Fiscal 2025) | Location | Independent Retailers | Company-operated | Total | | :------------------- | :-------------------- | :--------------- | :---- | | United States | 30 | 137 | 167 | | Canada | - | 5 | 5 | | Middle East and Asia | 14 | - | 14 | | Europe | 1 | - | 1 | | Total | 45 | 142 | 187 | Item 3. Legal Proceedings Ethan Allen is routinely involved in various legal proceedings, claims, litigation, and environmental matters in the ordinary course of business. However, management believes that the final resolution of these matters will not have a material adverse effect on the company's consolidated financial position, results of operations, or cash flows - The company is subject to legal proceedings, claims, litigation, and environmental matters arising in the ordinary course of business[121] - Management believes it is remote that any existing claims or proceedings, individually or in the aggregate, will have a material adverse effect on the company's financial position, results of operations, or cash flows[121] Item 4. Mine Safety Disclosures This section states that the disclosure requirements for mine safety are not applicable to Ethan Allen Interiors Inc - This item is not applicable[122] PART II This part details the company's common equity market, financial performance, market risks, and audited financial statements Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities This section provides an overview of Ethan Allen's common stock market information, including its trading symbol, number of holders, dividend payments, and stock performance. It also details the company's share repurchase program, noting no repurchases in fiscal 2025 but remaining authorization - Ethan Allen's common stock (ETD) is traded on the New York Stock Exchange (NYSE)[124] - As of August 15, 2025, there were 263 registered holders of Ethan Allen common stock[125] Cash Dividends Paid (Fiscal 2025) | Metric | Value | | :-------------------- | :------------ | | Total cash dividends per share | $1.96 | | Total cash dividends paid | $50.1 million | | Special cash dividend per share | $0.40 | Stock Performance Graph (June 30, 2020 = $100) | Company/Index/Market | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | | :------------------- | :--- | :--- | :--- | :--- | :--- | :--- | | Ethan Allen Interiors Inc. | $100.00 | $233.31 | $170.84 | $239.05 | $235.76 | $235.42 | | S&P 500 Index | $100.00 | $138.62 | $122.10 | $143.55 | $176.13 | $200.14 | | Dow Jones U.S. Furnishings Index | $100.00 | $163.14 | $116.61 | $113.34 | $104.65 | $133.21 | - No shares were repurchased under the existing Share Repurchase Program during the fourth quarter of fiscal 2025; a remaining Board authorization exists to repurchase 2,007,364 shares[131][203] Item 6. [Reserved] This item is explicitly reserved and contains no information - This item is reserved[133] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's Discussion and Analysis (MD&A) provides a narrative on Ethan Allen's financial condition, results of operations, and liquidity for fiscal year 2025. It highlights a challenging environment with lower net sales and operating income, but strong margins, positive operating cash flow, and a robust balance sheet. The company maintained focus on talent, service, marketing, technology, and social responsibility Executive Overview - Ethan Allen is a leading interior design company, manufacturer, and retailer in home furnishings, vertically integrated from product design through home delivery, offering stylish products, artisanal quality, and personalized service[135] - The company operates 142 Company-operated retail design centers and 45 independently operated design centers globally, manufacturing approximately 75% of its furniture in North American plants[136][137] - Fiscal 2025 focused on talent, service, marketing, technology, and social responsibility, contributing to Ethan Allen being named America's 1 Premium Retailer by Newsweek for the third consecutive year[138] - Employee headcount decreased by 5.7% (193 associates) during fiscal 2025, with reductions in both retail and wholesale segments, attributed to operational efficiencies[140] Fiscal 2025 Financial Year in Review Key Financial Metrics (Fiscal 2025 vs. 2024, in millions) | Metric | FY2025 | FY2024 | Change | % Change | | :-------------------------- | :------- | :------- | :------- | :------- | | Consolidated Net Sales | $614.6 | $646.2 | $(31.6) | (4.9%) | | Consolidated Gross Margin | 60.5% | 60.8% | (0.3%) | - | | Adjusted Operating Margin | 10.2% | 12.1% | (1.9%) | - | | Adjusted Diluted EPS | $2.04 | $2.49 | $(0.45) | (18.1%) | | Operating Cash Flow | $61.7 | $80.2 | $(18.5) | (23.1%) | | Cash, Cash Equivalents & Investments | $196.2 | $196.0 | $0.2 | 0.1% | | Total Dividends Paid | $50.1 | $50.3 | $(0.2) | (0.4%) | | Wholesale Backlog | $48.9 | $53.6 | $(4.7) | (8.7%) | - The company generated strong operating cash flow of $61.7 million and maintained a robust balance sheet with $196.2 million in cash, cash equivalents, and investments[142] - Challenges included lower consumer confidence, a weak housing market, and uncertainty surrounding global trade policies, including tariffs[143] Results of Operations Consolidated Net Sales (Fiscal 2025 vs. 2024, in thousands) | Metric | FY2025 | FY2024 | % Change | | :-------------------- | :-------------------- | :-------------------- | :------- | | Consolidated Net Sales | $614,649 | $646,221 | (4.9%) | - Consolidated net sales decreased due to lower delivered unit volume, reduced available backlog, less design center traffic, and fewer contract sales, partially offset by higher average ticket prices[151] Wholesale Segment Performance (Fiscal 2025 vs. 2024, in thousands) | Metric | FY2025 | FY2024 | % Change | | :-------------------- | :-------------------- | :-------------------- | :------- | | Wholesale Net Sales | $359,057 | $371,087 | (3.2%) | | Wholesale Written Orders | - | - | (3.2%) | | Contract Sales (YoY) | - | - | (23.7%) | | International Sales (YoY) | - | - | (27.6%) | Retail Segment Performance (Fiscal 2025 vs. 2024, in thousands) | Metric | FY2025 | FY2024 | % Change | | :-------------------- | :-------------------- | :-------------------- | :------- | | Retail Net Sales | $523,142 | $540,505 | (3.2%) | | Retail Written Orders | - | - | (1.5%) | Gross Profit and Margin (Fiscal 2025 vs. 2024, in thousands) | Metric | FY2025 | FY2024 | % Change | | :-------------------- | :-------------------- | :-------------------- | :------- | | Consolidated Gross Profit | $372,121 | $393,062 | (5.3%) | | Consolidated Gross Margin | 60.5% | 60.8% | (0.3%) | | Wholesale Gross Margin (YoY) | - | - | +0.7% | | Retail Gross Margin (YoY) | - | - | (0.3%) | SG&A Expenses (Fiscal 2025 vs. 2024, in thousands) | Metric | FY2025 | FY2024 | % Change | | :-------------------- | :-------------------- | :-------------------- | :------- | | SG&A Expenses | $309,790 | $315,148 | (1.7%) | | SG&A as % of Sales | 50.4% | 48.8% | +1.6% | | Consolidated Selling Expenses (YoY) | - | - | (3.6%) | | Consolidated G&A Expenses (YoY) | - | - | +1.0% | Operating Income (Fiscal 2025 vs. 2024, in thousands) | Metric | FY2025 | FY2024 | % Change | | :-------------------- | :-------------------- | :-------------------- | :------- | | Consolidated Operating Income | $61,988 | $77,991 | (20.5%) | | Adjusted Operating Income | $62,895 | $77,914 | (19.3%) | | Wholesale Operating Income | $46,989 | $48,707 | (3.5%) | | Retail Operating Income | $19,781 | $24,704 | (19.9%) | Net Income and Diluted EPS (Fiscal 2025 vs. 2024, in thousands) | Metric | FY2025 | FY2024 | % Change | | :-------------------- | :-------------------- | :-------------------- | :------- | | Net Income | $51,596 | $63,816 | (19.1%) | | Adjusted Net Income | $52,271 | $63,758 | (18.0%) | | Diluted EPS | $2.01 | $2.49 | (19.3%) | | Adjusted Diluted EPS | $2.04 | $2.49 | (18.1%) | Regulation G Reconciliations of Non-GAAP Financial Measures This section provides reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures, offering additional insights into the company's performance - The company uses non-GAAP financial measures (adjusted operating income/margin, adjusted net income, adjusted diluted EPS) to provide a meaningful comparison of results to industry peers and prior years[172][173] Adjustments to GAAP Financial Measures (Fiscal 2025 vs. 2024, in thousands) | Adjustment Type | FY2025 | FY2024 | | :-------------------------------- | :----- | :----- | | Gain on sale-leaseback transaction | $(218) | $(2,620) | | Orleans, Vermont flood | $92 | $2,243 | | Severance and other charges | $469 | $300 | | Other non-restructuring charges | $564 | - | | Adjustments to operating income | $907 | $(77) | | Related income tax effects | $(232) | $19 | | Adjustments to net income | $675 | $(58) | Liquidity This section details Ethan Allen's liquidity position, including cash, investments, and credit facility availability, to meet its financial obligations and fund operations - Sources of liquidity include cash and cash equivalents, short-term and long-term investments, cash generated from operations, and amounts available under the credit facility[178] Available Liquidity (June 30, 2025 vs. 2024, in thousands) | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------- | :------------ | :------------ | | Cash and cash equivalents | $76,178 | $69,710 | | Investments, short-term | $59,955 | $91,319 | | Investments, long-term | $60,030 | $34,772 | | Availability under credit facility | $120,952 | $120,952 | | Total available liquidity | $317,115 | $316,753 | - Working capital was $157.1 million at June 30, 2025, with a current ratio of 2.03[183] Summary of Cash Flows This section provides a summary of the company's cash flows from operating, investing, and financing activities for the past three fiscal years Summary of Cash Flows (Fiscal 2025 vs. 2024 vs. 2023, in millions) | Activity | FY2025 | FY2024 | FY2023 | | :-------------------------- | :------- | :------- | :------- | | Operating activities | $61.7 | $80.2 | $100.7 | | Investing activities | $(2.4) | $(20.0) | $(101.5) | | Financing activities | $(52.6) | $(52.3) | $(47.6) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $6.7 | $7.6 | $(48.2) | | Cash, cash equivalents and restricted cash at end of year | $76.9 | $70.2 | $62.6 | - Cash provided by operating activities decreased to $61.7 million in fiscal 2025 from $80.2 million in the prior year, primarily due to lower net income and changes in working capital[187] - Cash used in investing activities was $2.4 million in fiscal 2025, a decrease from $20.0 million in the prior year, driven by $8.9 million in net proceeds from investment sales offsetting $11.3 million in capital expenditures[188] - Cash used in financing activities was $52.6 million in fiscal 2025, primarily for $50.1 million in dividend payments[191] Capital Resources, including Material Cash Requirements This section details Ethan Allen's capital resources, including its revolving credit facility, and outlines material cash requirements from contractual obligations - The company has a $125 million revolving credit facility maturing in January 2027, with $121.0 million borrowing availability and no outstanding borrowings at June 30, 2025[194] - Capital expenditures totaled $11.3 million in fiscal 2025, primarily for expanding manufacturing facilities in Mexico, building new retail design centers, and investing in technology[196] - Total contractual obligations at June 30, 2025, were $182.8 million, down from $197.9 million a year ago, mainly due to lower retail design center lease obligations and timing of purchase orders[204] Material Cash Requirements from Contractual Obligations (June 30, 2025, in thousands) | Obligation Type | 2026 | 2027 | 2028 | 2029 | 2030 | Thereafter | Total | | :---------------------- | :----- | :----- | :----- | :----- | :----- | :--------- | :------ | | Operating Leases | $33,917 | $28,218 | $24,979 | $20,363 | $13,677 | $25,098 | $146,252 | | Financing Leases | $398 | $326 | - | - | - | - | $724 | | Open Purchase Orders | $21,000 | - | - | - | - | - | $21,000 | | Other Purchase Commitments | $14,800 | - | - | - | - | - | $14,800 | Other Arrangements This section confirms that the company does not utilize complex financial arrangements and details its product warranty liability - The company does not utilize or employ any other arrangements such as retained or contingent interests, derivative instruments, or variable interests[208] - Product warranty liability totaled $1.0 million at both June 30, 2025, and 2024[209] Contingencies This section addresses the company's involvement in various claims, litigation, and environmental matters, asserting that their resolution will not materially impact financial results - The company is involved in various claims, litigation, and environmental matters in the normal course of business[210] - Management believes that the final resolution of these matters will not have a material adverse effect on the company's financial position or future results of operations[210] Critical Accounting Estimates This section outlines the critical accounting estimates that require significant judgment and assumptions, including impairment of long-lived assets, goodwill, inventories, income taxes, and business insurance reserves - Critical accounting estimates include impairment of long-lived assets, goodwill and indefinite-lived intangible assets, inventories, income taxes, and business insurance reserves, which require significant judgment and assumptions[211][214] - No goodwill or indefinite-lived intangible asset impairment charges were required in fiscal 2025, based on qualitative analyses[220][224][307][308] Inventory Reserves (June 30, 2025 vs. 2024, in thousands) | Metric | June 30, 2025 | June 30, 2024 | | :--------------- | :------------ | :------------ | | Inventory reserves | $1,534 | $1,796 | Income Tax Metrics (Fiscal 2025 vs. 2024) | Metric | FY2025 | FY2024 | | :-------------------- | :----- | :----- | | Effective tax rate | 25.2% | 25.3% | | Gross unrecognized tax benefits | $3.9 million | $3.9 million | Business Insurance Reserves (June 30, 2025, in millions) | Claim Type | Amount | | :-------------------- | :----- | | Healthcare claims (IBNR) | $1.5 | | Workers' compensation claims | $4.5 | Item 7A. Quantitative and Qualitative Disclosures About Market Risk This section details Ethan Allen's exposure to various market risks, including interest rate fluctuations, foreign currency exchange rates, duties and tariffs, raw material and commodity price changes, inflation, and commercial real estate market conditions. The company outlines its strategies and current impact assessments for each risk Interest Rate Risk - Interest rate risk primarily exists through borrowing activities, but the company had no fixed or variable rate borrowings outstanding at June 30, 2025[235] - A hypothetical 100 basis point change in interest rates (based on one-month SOFR) is estimated to have an immaterial impact on results of operations and financial condition[235] - Investments consist of U.S. Treasuries (bills and notes) with maturities up to two years, classified as available-for-sale, and are managed to achieve appropriate investment returns while preserving principal and managing risk[236] Foreign Currency Exchange Risk - Foreign currency exchange risk is primarily limited to retail design centers in Canada and manufacturing plants in Mexico and Honduras, as most imported purchases are denominated in U.S. dollars[238] - Foreign exchange gains or losses have not had a material impact on consolidated results of operations during any presented fiscal period[238][239] - A hypothetical 10% weaker U.S. dollar against all foreign currencies at June 30, 2025, would have an immaterial impact on consolidated results[240] Duties and Tariffs Risk - The company is exposed to tariffs on imported raw materials, component parts, and finished goods, particularly case goods from Indonesia, select fabrics from East Asia, and lighting from China[242] - North American manufacturing (approximately 75% of furniture sold) provides a strategic advantage to mitigate the impact of higher tariffs[243] - Uncertainty about future U.S. and international trade policies and tariffs could result in incremental costs, impact margins, and potentially lead to increased retail selling prices, reducing consumer demand[241][244] Raw Materials and other Commodity Price Risk - The company is exposed to market risk from changes in the cost of raw materials (principally wood, fabric, and petroleum-based foam products) and transportation costs (shipping containers and fuel prices)[246] - Should commodity prices and transportation costs rise, the company will evaluate retail price increases to offset these costs, expecting competitors to experience similar impacts[246] Inflation Risk - Any material inflationary impact on product and operating costs is expected to be partially offset by the ability to increase retail selling prices[247] - The company has mitigated inflation by identifying lower-cost raw material alternatives and implementing operational efficiencies, including reduced headcount[247] Commercial Real Estate Market Risk - The company has exposure to market risk related to conditions in the commercial real estate market, with 94 of its 142 Company-operated retail design centers being leased[248] - Significant impairment in value of retail real estate holdings could occur if design centers are forced to close and properties are sold or leased during periods of market weakness[248] Item 8. Financial Statements and Supplementary Data This section presents the audited consolidated financial statements of Ethan Allen Interiors Inc. and its subsidiaries for the fiscal years ended June 30, 2025, 2024, and 2023. It includes the Consolidated Balance Sheets, Statements of Comprehensive Income, Statements of Cash Flows, Statements of Shareholders' Equity, and comprehensive Notes to Consolidated Financial Statements, along with management's report on internal control and the independent auditor's report Management's Report on Internal Control over Financial Reporting This section outlines management's responsibility for financial information and its conclusion on the effectiveness of internal control over financial reporting - Management is responsible for the consistency, integrity, and preparation of financial information in accordance with GAAP[252] - Management concluded that the company's internal control over financial reporting was effective as of June 30, 2025, providing reasonable assurance regarding financial reporting reliability[258] Report of Independent Registered Public Accounting Firm This section presents the independent auditor's report on the consolidated financial statements and internal control over financial reporting, including critical audit matters - CohnReznick LLP, an independent registered public accounting firm, audited the consolidated financial statements and internal control over financial reporting[262] - The firm expressed an opinion that the consolidated financial statements present fairly in all material respects and that internal control over financial reporting was effective as of June 30, 2025[263] - The assessment of impairment of retail design center long-lived assets, including right-of-use lease assets, was identified as a critical audit matter due to the complexity of management's judgments[270][271] Consolidated Balance Sheets This section presents the company's consolidated balance sheets, detailing assets, liabilities, and shareholders' equity at the end of fiscal years 2025 and 2024 Consolidated Balance Sheet Highlights (June 30, 2025 vs. 2024, in thousands) | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------- | :------------ | :------------ | | Total Current Assets | $309,933 | $332,683 | | Total Assets | $737,099 | $744,917 | | Total Current Liabilities | $152,851 | $153,696 | | Total Liabilities | $254,830 | $262,001 | | Total Shareholders' Equity | $482,269 | $482,916 | Consolidated Statements of Comprehensive Income This section presents the company's consolidated statements of comprehensive income, including net sales, gross profit, operating income, net income, and diluted EPS for the past three fiscal years Consolidated Statements of Comprehensive Income Highlights (FY2025 vs. FY2024 vs. FY2023, in thousands) | Metric | FY2025 | FY2024 | FY2023 | | :-------------------------- | :------- | :------- | :------- | | Net Sales | $614,649 | $646,221 | $791,382 | | Gross Profit | $372,121 | $393,062 | $480,370 | | Operating Income | $61,988 | $77,991 | $137,196 | | Net Income | $51,596 | $63,816 | $105,807 | | Diluted EPS | $2.01 | $2.49 | $4.13 | | Comprehensive Income | $50,075 | $62,370 | $109,488 | Consolidated Statements of Cash Flows This section presents the company's consolidated statements of cash flows, detailing cash generated from or used in operating, investing, and financing activities for the past three fiscal years Consolidated Statements of Cash Flows Highlights (FY2025 vs. FY2024 vs. FY2023, in thousands) | Activity | FY2025 | FY2024 | FY2023 | | :-------------------------- | :------- | :------- | :------- | | Net cash provided by operating activities | $61,696 | $80,195 | $100,664 | | Net cash used in investing activities | $(2,357) | $(19,991) | $(101,523) | | Net cash used in financing activities | $(52,599) | $(52,331) | $(47,591) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $6,739 | $7,594 | $(48,249) | | Cash, cash equivalents and restricted cash at end of year | $76,955 | $70,216 | $62,622 | Consolidated Statements of Shareholders' Equity This section presents the company's consolidated statements of shareholders' equity, detailing changes in common stock, additional paid-in capital, treasury stock, retained earnings, and comprehensive loss for the past three fiscal years Shareholders' Equity Highlights (June 30, 2025 vs. 2024 vs. 2023, in thousands) | Metric | June 30, 2025 | June 30, 2024 | June 30, 2023 | | :-------------------------- | :------------ | :------------ | :------------ | | Common Stock (Par Value) | $496 | $495 | $494 | | Additional Paid-in Capital | $389,672 | $388,104 | $386,146 | | Treasury Stock (Amount) | $(687,003) | $(684,796) | $(682,646) | | Retained Earnings | $784,878 | $783,366 | $769,819 | | Accumulated Other Comprehensive Loss | $(5,688) | $(4,189) | $(2,785) | | Total Shareholders' Equity | $482,269 | $482,916 | $471,006 | Notes to Consolidated Financial Statements This section provides detailed notes explaining the company's organization, significant accounting policies, and specific financial statement line items - Note 1: Organization and Nature of Business describes Ethan Allen as a Delaware Corporation and a vertically integrated luxury home fashion brand, manufacturer, and retailer[285][286] - Note 3: Summary of Significant Accounting Policies details the company's accounting principles for cash, investments, accounts receivable, inventories, property, plant & equipment, impairment, goodwill, leases, customer deposits, insurance, income taxes, and revenue recognition[291] Inventory Reserves (June 30, 2025 vs. 2024, in thousands) | Metric | June 30, 2025 | June 30, 2024 | | :--------------- | :------------ | :------------ | | Inventory reserves | $1,534 | $1,796 | - Note 10: Goodwill and Intangible Assets states that goodwill ($25.4 million) and indefinite-lived intangible assets ($19.7 million) are assigned to the wholesale segment, with no impairment recognized in fiscal 2025[375][377] - Note 12: Credit Agreement details a $125 million revolving credit facility with $121.0 million availability at June 30, 2025, and no outstanding borrowings[381][382][383] Income Tax Metrics (Fiscal 2025 vs. 2024) | Metric | FY2025 | FY2024 | | :-------------------- | :----- | :----- | | Effective tax rate | 25.2% | 25.3% | | Gross unrecognized tax benefits | $3.9 million | $3.9 million | - Note 21: Commitments and Contingencies outlines lease commitments, open purchase orders ($21.0 million at June 30, 2025), and other purchase commitments ($14.8 million at June 30, 2025)[445][447][448] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure This section confirms that there were no changes in or disagreements with the company's independent accountants on accounting and financial disclosure matters during the reported period - There were no changes in or disagreements with accountants on accounting and financial disclosure[456] Item 9A. Controls and Procedures Management, with the participation of the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures and concluded they were effective as of June 30, 2025. No material changes in internal control over financial reporting occurred during the fourth quarter of fiscal 2025 - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective as of June 30, 2025[457] - There were no material changes in internal control over financial reporting during the fourth quarter of fiscal 2025[460] Item 9B. Other Information This section discloses that M. Farooq Kathwari, Chairman, President, and CEO, adopted a Rule 10b5-1 trading plan for the sale of up to 320,400 shares of common stock, effective September 15, 2025 - M. Farooq Kathwari, Chairman, President, and CEO, adopted a Rule 10b5-1 trading plan for the sale of up to 320,400 shares of Ethan Allen common stock, effective September 15, 2025[461] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This section states that the disclosure requirements regarding foreign jurisdictions that prevent inspections are not applicable to Ethan Allen Interiors Inc - This item is not applicable[463] PART III This part covers corporate governance, executive compensation, security ownership, and principal accountant fees Item 10. Directors, Executive Officers and Corporate Governance This section refers to the company's Code of Business Conduct and Ethics and Insider Trading Policy, and incorporates information about directors and executive officers from the definitive Proxy Statement for its 2025 Annual Meeting of Stockholders - The company has adopted a Code of Business Conduct and Ethics applicable to all directors, officers, and employees, available on its Investor Relations website[465] - An Insider Trading Policy is in place to promote compliance with insider trading laws, rules, and regulations[467] - Information regarding directors and executive officers is incorporated by reference from the company's definitive Proxy Statement for its 2025 Annual Meeting of Stockholders[468][469] Item 11. Executive Compensation This section incorporates detailed information regarding executive compensation by reference from the company's definitive Proxy Statement for its 2025 Annual Meeting of Stockholders - Information regarding executive compensation is incorporated by reference from the company's definitive Proxy Statement for its 2025 Annual Meeting of Stockholders[470] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This section provides a summary of the company's equity compensation plan information as of June 30, 2025, detailing outstanding awards and shares available for future issuance. It also incorporates security ownership information by reference from the 2025 Annual Meeting of Stockholders proxy statement - Information relating to security ownership of certain beneficial owners and management is incorporated by reference from the company's definitive Proxy Statement for its 2025 Annual Meeting of Stockholders[471] Equity Compensation Plan Information (June 30, 2025) | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance | | :------------------------------------------ | :------------------------------------------------------------------------ | :-------------------------------------------------------- | :--------------------------------------------------------- | | Equity compensation plans approved by security holders | 490,689 | $25.69 | 1,198,196 | | Equity compensation plans not approved by security holders | - | - | - | | Total | 490,689 | $25.69 | 1,198,196 | Item 13. Certain Relationships and Related Transactions, and Director Independence This section incorporates information regarding certain relationships, related transactions, and director independence by reference from the company's definitive Proxy Statement for its 2025 Annual Meeting of Stockholders - Information regarding certain relationships and related transactions, and director independence is incorporated by reference from the company's definitive Proxy Statement for its 2025 Annual Meeting of Stockholders[474] Item 14. Principal Accountant Fees and Services This section incorporates information regarding fees and services provided by the principal accountant, CohnReznick LLP, by reference from the company's definitive Proxy Statement for its 2025 Annual Meeting of Stockholders - Information concerning fees and services provided by the principal accountant, CohnReznick LLP, is incorporated by reference from the company's definitive Proxy Statement for its 2025 Annual Meeting of Stockholders[475] PART IV This part lists all exhibits and financial statement schedules included in the annual report Item 15. Exhibits and Financial Statement Schedules This section confirms that financial statement schedules are omitted as the required information is included elsewhere in the report. It also provides a comprehensive list of exhibits filed as part of this Annual Report on Form 10-K, including corporate documents, employment agreements, and certifications - Separate financial statement schedules have been omitted because the required information is included in the consolidated financial statements or related notes[478] - The section lists various exhibits filed with the Annual Report on Form 10-K, including the Amended and Restated Certificate of Incorporation, By-laws, Employment Agreements, Stock Incentive Plan, Credit Agreement, Insider Trading Policy, and certifications[479][482] Item 16. Form 10-K Summary This section states that a Form 10-K Summary is not applicable for this report - This item is not applicable[483]