1、2016ANNUAL REPORTAmounts in thousands,except share data.Fiscal years ended June 30.Certain reclassifications have been made to prior years to conform to current years presentation of deferred financing fees as a component of debt.(A)Includes cash and cash equivalents,marketable securities,and restri
2、cted cash and investments.FINANCIALHIGHLIGHTSSTATEMENT OF OPERATIONS DATANet salesGross profitOperating income Net income PER SHARE DATANet income per diluted share Diluted weighted average common shares outstandingBALANCE SHEET DATACash and securities(a)Working capital Current ratioTotal assets Tot
3、al debt,including capital lease obligationsShareholders equityDebt as%of equityDebt as%of capitalCASH RETURNED TO SHAREHOLDERSDividends paidCost of shares repurchasedNumber of shares repurchased2016$794,202$442,236$89,179$56,637$2.00 28,324$60,479$124,8572.01 TO 1$577,409$41,838$391,99810.7%9.6%$16,
4、646$19,346697,7992015$754,600$411,163$65,934$37,142$1.27 29,182$86,390$130,0121.92 TO 1$605,977$76,237$370,25820.6%17.1%$13,348$16,470645,8312014$746,659$406,496$69,636$42,931$1.47 29,276$135,836$169,5492.25 TO 1$654,129$130,607 367,21535.6%26.2%$11,297I am pleased to report strong results for fisca
5、l 2016.It is clear that many of the initiatives we have implemented over the past couple of years are having a meaningful impact on the growth of our business and enhancing shareholder returns.Our net sales for fiscal 2016 of$794.2 million increased 5.2%over the previous fiscal year.Operating income
6、 of$89.2 million increased$23.3 million or 35.3%with an operating margin of 11.2%.Net income of$56.6 million increased 52.5%and earnings per diluted share of$2.00 increased 57.5%.Our strategic focus this past fiscal year,and as we continue to move forward,is centered on CREATING A POSITIVE CUSTOMER
7、EXPERIENCE WITH AN ATTITUDE OF REINVENTION through:Strong Customer Service Diversity of Style Consistent Marketing Messages Combining Technology with Personal Service Vertical IntegrationCUSTOMER EXPERIENCEWith more than 1,500 interior designers in our global network of 143 company-operated and 153
8、independently owned Design Centers,Ethan Allen is uniquely positioned to provide interior design service.As we often tell our clients,“We can help as little or as much as youd like.”We have further empowered our interior designers with new technology to use to interact with their clients,and we cont
9、inue to reposition our Design Centers close to where our clients live,work,and shop.During fiscal 2016,we opened ten new Design Centers,most of which were relocations.There are more openings in store for fiscal 2017,including our new flagship Design Center in the Flatiron District of Manhattan,openi
10、ng in August.Our new locations average less than 10,000 sq.ft.and incorporate technology to accelerate the design and selling process,providing a superior service experience for our clients.DIVERSITY OF STYLEWe continued to introduce stylish new products and projections during fiscal 2016,including
11、Capitol Hill,Sonoma,and Buckhead.Fiscal 2017 will see the introduction of Santa Monica in July and Brooklyn in August,followed by the launch of our Ethan Allen|Disney collection in the fall.Having the diverse range of styles our clients want reinforces our position as a design authority.CONSISTENT M
12、ARKETING MESSAGESWe know that consistency builds trust,and trust creates a positive customer experience,which is why we have maintained a consistent message of design service,style,quality,and value.We call them our core messages,and they are used across our marketing mediums,including digital,direc
13、t mail,shelter magazines,print,and television.These messages reinforce the fact that our clients have a world of design possibilities at their fingertips.COMBINING TECHNOLOGY WITH PERSONAL SERVICECombining technology with personal service is one of the major differentiators of great customer service
14、.We are in the process of creating and refining a dynamic omnichannel experience for our clients.We have empowered our designers with tablets for ready access to information.We continually add technology to our new Design Centers in the form of design stations and large touchscreens where clients ca
15、n work on their projects easily,side by side with one of our talented design professionals.During fiscal 2016,we made major enhancements to .Fiscal 2017 will see even more functionality improvements and the launch of our new Ethan Allen|Disney website to coincide with the product launch in the fall.
16、VERTICAL INTEGRATIONOur vertical integration gives us control over every aspect of our business,from determining the need for new product to designing and sourcing that product,to manufacturing,retailing,and delivering it.This also makes it possible for us to establish and deliver on our commitments
17、 to environmental stewardship,sustainability,health and safety,and social responsibility.New manufacturing technology,combined with the talents and depth of knowledge of our craftspeople,has made our manufacturing division even strongerthe division that is also the strong base of our stewardship and
18、 responsibility platform.About 70%of our furniture products are manufactured in our North American workshops.Eighty percent of these are custom made and shipped within four to six weeks;20%of our furniture products and more than 60%of our non-furniture products are available for immediate delivery.O
19、ur Premier In-Home Delivery,a white-glove delivery service that we provide at one national price,is a major competitive advantage.Over the past two years,we have opened or relocated twelve retail home delivery service centers to facilitate this aspect of our business.The strong results for fiscal 20
20、16 reflect the focused efforts and accomplishments of all our talented associates in North America and elsewhere.I would like to thank all of them,as well as our clients and shareholders,for their continued support.We look forward to an exciting fiscal 2017.FAROOQ KATHWARIChairman of the Board,Presi
21、dent and CEO Ethan Allen Interiors Inc.DEAR FELLOW SHAREHOLDERSIN A WORLD WHERE FURNITURE IS GENERALLY MARKETED AS A COMMODITY,OUTSTANDING PERSONAL SERVICE IS THE NEW LUXURY.We are as well known for our interior design service as we are for our top-tier products,and our more than 1,500 interior desi
22、gners and a retail network of nearly 300 Design Centers give us a unique strategic advantage.The experiences that people see and admire on home decorating shows are experiences they can have with us.We make the full designer experience accessible in a way no one else can.Clients seek us out for our
23、knowledge as much as for our quality,and they trust us to back up our promises,because for decades,theyve seen us do just that.To build on this bond,drive growth,and further set us apart,weve put new technology in the hands of our designers,helping them to interact with their clients in seamless and
24、 more productive ways,and we continue to reposition our Design Centers close to where our clients live,work,and shop.Our new locations,including an exciting flagship in Manhattans Flatiron District,also incorporate technology to streamline the design and selling process,providing an experience for o
25、ur clients that no one else can match.CUSTOMEREXPERIENCE143 COMPANY OPERATED153 INDEPENDENTLY OPERATED296DESIGN CENTERS63%UNITED STATES2%CANADA35%INTERNATIONALNew FlagshipDesign Center in the Flatiron District of ManhattanWe kicked off a four-phase product and projection repositioning beginning in f
26、iscal 2015.As of the projects completion in August 2016,approximately 70%of our products are new over the last two yearsand these fresh,new looks are driving traffic and sales.Our diverse range of styles gives us a broad consumer base,from millennials to boomers,and reinforces our position as an int
27、erior design authority.And with the exciting new products and interior design projections in our eagerly anticipated new collaboration with Disney Consumer Products ready for launch this fall,we expect to expand that base substantially in fiscal 2017.DIVERSITYOF STYLERETAIL SALES BY PRODUCT LINE48%3
28、0%22%CASE GOODSUPHOLSTERED PRODUCTSHOME ACCENTS&OTHERCONSISTENTMARKETINGMESSAGESCONSISTENCY BUILDS TRUST.TRUST CREATES A POSITIVE EXPERIENCE.Our message isnt just focused on pricing and salesthats a commodity tactic.Our message is consistent nationwide,and will continue to be:Ethan Allen equals desi
29、gn service,style,quality,and value.We call it our core message,and we broadcast it in every medium,from direct mail to shelter magazines to print,television,and digital,which were more focused on than ever before.A successful,broad-spectrum plan connects with consumers wherever they are,and ours is
30、one of the best.As we continue to reach the right audiences in the right way,we take every opportunity to reinforce our core message and build the trust that only consistency can.TECHNOLOGY PLUSPERSONAL SERVICEOngoing investments in our technology infrastructure created new efficiencies across our m
31、anufacturing,operations,warehousing,retail,e-commerce,finance,and logistics platforms.By connecting with clients how and where they want,and delivering the service and information they need when they need it,weve created a dynamic,omnichannel customer experience with greater engagement and greater r
32、etention.Were leveraging this to provide a rich branding experience that offers them not just a sofa or a lamp but design service on demand.Improvements to our website have measurably boosted e-commerce sales,and soon well be launching our new Ethan Allen|Disney online experience.Targeting new and y
33、ounger,“immediate gratification”-minded demographics,we have enhanced our online store,streamlining custom offerings to make the buying process fast and easy,and adding more in-stock items,creating an opportunity for online sales that augments,rather than segments,our brick-and-mortar sales.VERTICAL
34、 INTEGRATIONThe control we have over every aspect of our business is the very foundation of our success.It lets us maintain control of quality and prices.It means that our commitments to health and safety,sustainability,environmental stewardship,and social responsibility are built into our organizat
35、ion.And,significantly,it gives us the unique opportunity to build a positive customer experience through supply chain efficiency.We design our products in-house and source them ourselves,with 70%of our furniture manufactured in our North American workshops.We own and operate seven manufacturing faci
36、lities in the U.S.,one in Mexico,and one in Honduras,and at all of them,we maintain a uniform focus on standards and on environmental and social responsibility.We do not operate a commodity-driven,high-inventory,offshore import model;in fact,in fiscal year 2016,we exported more products to China tha
37、n our total imports from Chinaa claim our competitors cant make.We create our own advertising,based on a deep,immersive knowledge of our audience.We sell our products in our own stores,which are staffed by skilled interior design professionals.And we provide Premier In-Home Delivery service to our c
38、lients via our three national distribution centers and 27 retail division service centers.One seamless process that starts with an idea and ends with countless satisfied clients around the world:vertical integration is the key.Carbon Footprint-28%9,883,179REDUCEDpounds of CO2eElectricalUsage-8%3,004
39、,880REDUCEDkW hoursWaterUsage-20%7,180,475REDUCEDgallonsLandfill Waste-37%1,034,940REDUCEDpoundsGreenhouseGases-24%9,747,875REDUCEDpounds of CO2eRecycling+4%53,496INCREASEDpoundsETHAN ALLEN METRICS 2015Carbon Footprint(CO2e)in pounds per sales dollar manufacturing.07.06.05.04.03.02.01020102011201220
40、1320142015CONSOLIDATED SALES&OPERATING MARGINMillions0%2%4%6%8%10%12%20162015201420132012TOTAL SPECIAL®ULARDIVIDENDS PAID$680$700$720$740$760$780$800$729.4$729.1$746.7$754.6$794.2Consolidated Net SalesGAAP Operating MarginMillions0%.5%1%1.5%2%2.5%20162015201420132012$0$5$10$15$20$25$8.1$22.2$11.3
41、$13.3$16.6Cash Dividends Paid TotalDividend Yield1.5%1.6%1.9%1.3%1.9%6.8%8.3%9.3%8.7%11.2%UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington,D.C.20549 FORM 10-K (Mark One)X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30,
42、2016 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-11692 Ethan Allen Interiors Inc.(Exact name of registrant as specified in its charter)Delaware 06-1275288 (State or other jurisdiction of incorpo
43、ration or organization)(I.R.S.Employer Identification No.)Ethan Allen Drive,Danbury,CT 06811 (Address of principal executive offices)(Zip Code)Registrants telephone number,including area code (203)743-8000 Securities registered pursuant to Section 12(b)of the Act:Title of Each Class Name of Each Exc
44、hange On Which Registered Common Stock,$.01 par value New York Stock Exchange,Inc.Securities registered pursuant to Section 12(g)of the Act:None(Title of Class)Indicate by check mark if the Registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.X Yes No Indicate by c
45、heck mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d)of the Act.Yes X No 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 month
46、s(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.X Yes No Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site,if any,every Interactiv
47、e Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or such shorter period that the registrant was required to submit and post such files).X Yes No Indicate by check mark if disclosure of delinquent filers purs
48、uant to Item 405 of Regulation S-K is not contained herein,and will not be contained,to the best of Registrants knowledge,in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.X Indicate by check mark whether the regi
49、strant is a large accelerated filer,an accelerated filer,a non-accelerated filer,or a smaller reporting company.See the definitions of“large accelerated filer,”“accelerated filer”and“smaller reporting company”in Rule 12b-2 of the Exchange Act(check one):Indicate by check mark whether the Registrant
50、is a shell company(as defined in Rule 12b-2 of the Act).Yes X No The aggregate market value of the Registrants common stock,par value$.01 per share,held by non-affiliates(based upon the closing sale price on the New York Stock Exchange)on December 31,2015,(the last day of the Registrants most recent
51、ly completed second fiscal quarter)was approximately$703,752,000.As of July 31,2016,there were 27,747,128 shares of the Registrants common stock,par value$.01 per share,outstanding.DOCUMENTS INCORPORATED BY REFERENCE:Certain information contained in the Registrants definitive Proxy Statement for the
52、 2016 Annual Meeting of stockholders,which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A of the Securities Exchange Act of 1934,is incorporated by reference into Part III hereof.Large accelerated filer X Accelerated filer Non-accelerated filer Smaller reporting
53、 company 1 ETHAN ALLEN INTERIORS INC.AND SUBSIDIARIES TABLE OF CONTENTS Item Page PART I 1.1.Business.3 1A.Risk Factors.11 1B.Unresolved Staff Comments.15 2.Properties.15 3.Legal Proceedings.16 4.Mine Safety Disclosures.17 PART II 5.Market for Registrants Common Equity,Related Stockholder Matters an
54、d Issuer Purchases of Equity Securities.17 6.Selected Financial Data.18 7.Managements Discussion and Analysis of Financial Condition and Results of Operation.20 7A.Quantitative and Qualitative Disclosures About Market Risk.31 8.Financial Statements and Supplementary Data.32 9.Changes in and Disagree
55、ments with Accountants on Accounting and Financial Disclosure.57 9A.Controls and Procedures.57 9B.Other Information.58 PART III 10.Directors,Executive Officers and Corporate Governance.58 11.Executive Compensation.59 12.Security Ownership of Certain Beneficial Owners and Management and Related Share
56、holder Matters.59 13.Certain Relationships and Related Transactions,and Director Independence.59 14.Principal Accounting Fees and Services.59 PART IV 15.Exhibits and Financial Statement Schedules.59 SIGNATURES.64 2 ETHAN ALLEN INTERIORS INC.AND SUBSIDIARIES PART I Item 1.Business The Company Incorpo
57、rated in Delaware in 1989,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 leading interior design company and manufacturer and retailer of quality home furnishings
58、.Founded over 80 years ago,today we are a leading international home fashion brand doing business in North America,Europe,Asia and the Middle East.We are vertically integrated from design through delivery,affording our clientele a value equation of style,quality and price that is unique to the indus
59、try.We offer complimentary interior design service to our clients and sell a full range of furniture products and decorative accents through and a network of approximately 300 design centers in the United States and abroad.The design centers represent a mix of independent licensees and our own Compa
60、ny operated retail segment.We own and operate nine manufacturing facilities including six manufacturing plants and one sawmill in the United States and one manufacturing plant each in Mexico and Honduras.Available Information We make available,free of charge via our website,all Annual Reports on For
61、m 10-K,Quarterly Reports on Form 10-Q,Current Reports on Form 8-K and other information filed with,or furnished to,the Securities and Exchange Commission(the SEC or the Commission),including exhibits and amendments to such reports.Information contained on our website is not part of this Annual Repor
62、t.This information is available at as soon as reasonably practicable after it is electronically filed with,or furnished to,the SEC.In addition,our SEC filings,including exhibits filed therewith,are also available on the SECs website at www.sec.gov.You may obtain and copy any document we furnish or f
63、ile with the SEC at the SECs public reference room at 100 F Street,NE,Room 1580,Washington,D.C.20549.You may obtain information on the operation of the SECs public reference facilities by calling the SEC at 1-800-SEC-0330.You may request copies of these documents,upon payment of a duplicating fee,by
64、 writing to the SEC at its principal office at 100 F Street,NE,Room 1580,Washington,D.C.In addition,charters of all committees of our Board of Directors,as well as our Corporate Governance guidelines,are available on our website at or,upon written request,in printed hardcopy form.Written requests sh
65、ould be sent to Office of the Secretary,Ethan Allen Interiors Inc.,Ethan Allen Drive,Danbury,Connecticut 06811.Mission Statement Our primary business objective is to provide our customers with a convenient,full-service,one-stop shopping solution for their home decorating needs by offering complement
66、ary interior design services and stylish,high-quality products at good value.In order to meet our stated objective,we have developed and adhere to a focused and comprehensive business strategy.The elements of this strategy,each of which is integral to our solutions-based philosophy,include(i)our ver
67、tically integrated operating structure,(ii)our stylish products and related marketing initiatives,(iii)our retail design center network,(iv)our people,and(v)our focus on providing interior design solutions.Operating Segments Our products are sold through a dedicated global network of approximately 3
68、00 retail design centers.As of June 30,2016,the Company operated 143 design centers(our retail segment)and our independent retailers operated 153 design centers(as compared to 144 and 155,respectively,at the end of the prior fiscal year).Our wholesale segment net sales include sales to our retail se
69、gment(which are eliminated in consolidation),and sales to our independent retailers.Our retail segment net sales accounted for 79%of our consolidated net sales in fiscal 2016.Our wholesale segment net sales to independent retailers accounted for 21%,including approximately 10.5%of our net sales in f
70、iscal 2016 to the ten largest independent retailers,who operate 102 design centers.Our independent retailer in China operated 83 of these locations at the end of fiscal 2016.Our wholesale and retail operating segments represent strategic business areas of our vertically integrated business that oper
71、ate separately and provide their own distinctive services(further outlined below).This vertical structure enables us to offer our complete line of home furnishings and accents more effectively while controlling quality and cost.For certain 3 ETHAN ALLEN INTERIORS INC.AND SUBSIDIARIES financial infor
72、mation regarding our operating segments,see Note 15 to the Consolidated Financial Statements included under Item 8 of this Annual Report and incorporated herein by reference.Our home furnishings and accents are marketed and sold in a similar manner in our wholesale and retail segments,although the t
73、ype of customer(wholesale versus retail)and the specific services that each operating segment provides are different.Within the wholesale segment,we maintain revenue information according to each respective product line(i.e.case goods,upholstery,or home accents and other).Case goods include items su
74、ch as beds,dressers,armoires,tables,chairs,buffets,entertainment units,home office furniture,and wooden accents.Upholstery items include sleepers,recliners and other motion furniture,chairs,ottomans,custom pillows,sofas,loveseats,cut fabrics and leather.Skilled artisans cut,sew and upholster custom-
75、designed upholstery items which are available in a variety of frame,fabric and trim options.Home accent and other items include window treatments and drapery hardware,wall decor,florals,lighting,clocks,mattresses,bedspreads,throws,pillows,decorative accents,area rugs,wall coverings and home and gard
76、en furnishings.We evaluate performance of the respective segments based upon revenues and operating income.Inter-segment transactions result,primarily,from the wholesale sale of inventory to the retail segment,including the related profit margin.Wholesale Segment Overview:Wholesale net sales for eac
77、h of the last three fiscal years are summarized below(in millions):201620152014Wholesale net sales491.5$469.4$453.6$Fiscal Year Ended June 30,Wholesale net sales for each of the last three fiscal years,allocated by product line,were as follows:201620152014Case Goods32%34%36%Upholstered Products51%48
78、%48%Home Accents and Other17%18%16%100%100%100%Fiscal Year Ended June 30,The wholesale segment,principally involved in the development of the Ethan Allen brand,encompasses all aspects of design,manufacture,sourcing,sale,and distribution of our broad range of home furnishings and accents.Wholesale re
79、venue is generated upon the wholesale sale and shipment of our products to our network of independently operated design centers and Company operated design centers(see Company operated retail comments below)through its national distribution center and one other smaller fulfillment center.During the
80、past year,independent retailers opened 15 new design centers and closed 16,two of which were relocations.We continue to promote the growth and expansion of our independent retailers through ongoing support in the areas of market analysis,site selection,and business development.As in the past,our ind
81、ependent retailers are required to enter into license agreements with us,which(i)authorize the use of certain Ethan Allen trademarks and(ii)require adherence to certain standards of operation,including a requirement to fulfill related warranty service agreements.We are not subject to any territorial
82、 or exclusive retailer agreements in North America.The wholesale segment also develops and implements related marketing and brand awareness programs.Wholesale profitability includes(i)the wholesale gross margin,which represents the difference between the wholesale net sales price and the cost associ
83、ated with manufacturing and/or sourcing the related product,and(ii)other operating costs associated with wholesale segment activities.Approximately 75%of the products sold by the Company are manufactured in its North American plants.During fiscal 2016,the Companys case goods manufacturing footprint
84、increased 59,000 square feet,further increasing throughput in our Honduras facility.In our upholstery plants in Maiden,North Carolina we expanded production capacity and built a new R&D facility.A 300,000 square foot expansion is underway at our upholstery plant in Mexico which we anticipate complet
85、ing 4 ETHAN ALLEN INTERIORS INC.AND SUBSIDIARIES during fiscal 2017.We operate four case good plants(two in Vermont including one sawmill,one in North Carolina,and one in Honduras),four upholstery plants(three at our North Carolina campus,and one in Mexico)and one home accent plant in New Jersey.We
86、also source selected case goods,upholstery,and home accent items from third-party suppliers domestically and abroad.As of June 30,2016,our wholesale backlog was$40.3 million(as compared to$63.7 million as of June 30,2015)which is anticipated to be serviced in the first quarter of fiscal 2017.This ba
87、cklog fluctuates based on the timing of net orders booked,manufacturing schedules and efficiency,the timing of sourced product receipts,the timing and volume of wholesale shipments,and the timing of various promotional events.Because orders may be rescheduled and/or canceled and the sourcing timing
88、may change,the measure of backlog at a point in time is not necessarily indicative of future sales performance.For the twelve months ended June 30,2016,net orders booked at the wholesale level,which includes orders generated by independently operated and Company operated design centers,totaled$470.7
89、 million as compared to$487.4 million for the twelve months ended June 30,2015.In any given period,net orders booked may be impacted by the timing of floor sample orders received in connection with new product introductions.New product offerings may be made available to the retail network at any tim
90、e during the year,including in connection with our periodic retailer conferences.Retail Segment Overview:Retail net sales for each of the last three fiscal years are summarized below(in millions):201620152014Retail net sales626.5$579.7$580.7$Fiscal Year Ended June 30,Retail net sales for each of the
91、 last three fiscal years,allocated by product line,were as follows:201620152014Case Goods30%32%33%Upholstered Products48%45%45%Home Accents and Other22%23%22%100%100%100%Fiscal Year Ended June 30,The retail segment sells home furnishings and accents to consumers through a network of Company operated
92、 design centers.The Company also offers access to its products to qualified independent interior designers through our interior design affiliate(“IDA”)program.Retail revenue is generated upon the retail sale and delivery of our products to our retail customers through our network of service centers.
93、Retail profitability reflects(i)the retail gross margin,which represents the difference between the retail net sales price and the cost of goods,purchased primarily from the wholesale segment,and(ii)other operating costs associated with retail segment activities.We measure the performance of our des
94、ign centers based on net sales and written orders booked on a comparable period basis.Comparable design centers are those which have been operating for at least 15 months.During the first three months of operations of newly opened(including relocated)design centers,written orders are booked but mini
95、mal net sales are achieved through the delivery of products.Design centers we acquire from independent retailers are included in comparable design center sales in their 13th full month of Ethan Allen-owned operations.The frequency of our promotional events as well as the timing of the end of those e
96、vents can also affect the comparability of orders booked during a given period.We pursue further expansion of the Company operated retail business by adding interior design professionals and expanding the IDA program,opening new design centers,relocating existing design centers and,when appropriate,
97、acquiring design centers from independent retailers.During fiscal 2016 our reach was expanded further through our launch of our gift registry,and through establishing licensing arrangements with Disney Consumer Products,an affiliate program with the Army and Air Force Exchange Service and marketing
98、agreements with several leading national real estate brokerages.During fiscal 2016,we opened ten new design centers,six of which were relocations.The geographic distribution of retail design center locations is included under Item 2 of Part I of this Annual Report.5 ETHAN ALLEN INTERIORS INC.AND SUB
99、SIDIARIES Products Our strategy has been to position Ethan Allen as a preferred brand offering complimentary design service together with products of superior style,quality and value to provide consumers with a comprehensive,one-stop shopping solution for their home furnishing and interior design ne
100、eds.In carrying out our strategy,we continue to expand our reach to a broader consumer base through a diverse selection of attractively priced products,designed to complement one another,reflecting current fashion trends in home decorating.During fiscal 2016,the Company continued to strengthen its p
101、roduct offerings by introducing new products to retail consumers in case goods,upholstery,and home accents,by introducing a very large collection of new products and existing products in new finishes under the umbrella of“Romantic Classics”,“Casual Classics”,and the expansion of our custom quick-shi
102、p program.Much of our furniture is built by hand,one piece at a time,in our North American workshops.Most frames are hand-assembled and stitching is guided by hand.We select international partners who are as committed to quality as we are.All case good frames are made with premium lumber and veneers
103、.We use best-in-class construction techniques,including mortise and tenon joinery and four-corner glued dovetail joinery on drawers.We combine technology with personal service and maintain an up-to-date broad range of styles and custom options in keeping with todays home decorating trends.These fact
104、ors continue to define Ethan Allen,positioning us as a leader in home fashion.The interior of our design centers,which were substantially refreshed during the past two fiscal years,are organized to facilitate display of our product offerings,both in room settings that project the category lifestyle
105、and by product grouping to facilitate comparisons of the styles and tastes of our clients.To further enhance the experience,technology is used to expand the range of products viewed by including content from our website in applications used on large touch-screen flat panel displays.We continuously m
106、onitor changes in home fashion trends through attendance at international industry events and fashion shows,internal market research,and regular communication with our retailers and design center design consultants who provide valuable input on consumer trends.We believe that the observations and in
107、put gathered enable us to incorporate appropriate style details into our products to react quickly to changing consumer tastes.Product Development and Sourcing Activities Using a combination of on staff and outsourced product designers,we design the majority of the products we sell;all of which are
108、branded Ethan Allen.This important facet of our vertically integrated business enables us to control the design specifications and establish consistent levels of quality across the products in our own North American plants.To capitalize on this vertical integration,between the fall of 2014 and the s
109、pring of 2016,the Company undertook a significant redesign of products.Much of the product design took advantage of the Companys custom manufacturing capabilities in its North American plants,where we manufacture and/or assemble approximately 75%of the products we sell,making us one of the largest m
110、anufacturers of home furnishings in the United States.Our main manufacturing facilities are located in the Northeast and Southeast regions of the United States supported by an upholstery plant in Mexico and a case goods plant in Honduras.Our plants are located near sources of raw materials and skill
111、ed artisans.We source approximately 25%of the products we sell from third-party suppliers,most of which are located outside the United States,primarily in Asia.We carefully select our sourcing partners and require them to provide products according to our specifications and quality standards.We beli
112、eve that strategic investments in our manufacturing facilities balanced with outsourcing from foreign and domestic suppliers will accommodate significant future sales growth and allow us to maintain an appropriate degree of control over cost,quality and service to our customers.We are focused on env
113、ironmental and social responsibility and incorporating uniform environment,health and safety programs into our manufacturing standards.Our“green”initiatives include but are not limited to the use of responsibly harvested Appalachian woods,water based finishes and measuring our carbon footprint,green
114、house gases and recycled materials from our operations.We have implemented the Enhancing Furnitures Environmental Culture(EFEC)environmental management system sponsored by the American Home Furnishing Alliance(AHFA)at all of our domestic manufacturing,distribution and service center facilities,and h
115、ave begun to expand these effort to our retail design centers.Our domestic manufacturing,distribution and service centers have also achieved Sustainable by Design(SBD)registration under the EFEC program.Our Silao Mexico facility has also been audited and registered under the AHFAs EFEC program.SBD p
116、rovides a framework for home furnishings companies to create and maintain a corporate culture of conservation and environmental stewardship by integrating socio-economic policies and sustainable business practices into their manufacturing operations and sourcing strategies.6 ETHAN ALLEN INTERIORS IN
117、C.AND SUBSIDIARIES Raw Materials and Other Suppliers The most important raw materials we use in furniture manufacturing are lumber,veneers,plywood,hardware,glue,finishing materials,glass,laminates,fabrics,foam,and filling material.The various types of wood used in our products include cherry,ash,oak
118、,maple,prima vera,African mahogany,birch,rubber wood and poplar.Fabrics and other raw materials are purchased both domestically and outside the United States.We have no significant long-term supply contracts,and have sufficient alternate sources of supply to prevent disruption in supplying our opera
119、tions.We maintain a number of sources for our raw materials,which we believe contribute to our ability to obtain competitive pricing.Lumber prices and availability fluctuate over time based on factors such as weather and demand.The cost of some of our raw materials such as foam and shipping costs ar
120、e dependent on petroleum cost.Higher material prices,cost of petroleum,and costs of sourced products could have an adverse effect on margins.Appropriate amounts of lumber and fabric inventory are typically stocked to maintain adequate production levels.We believe that our sources of supply for these
121、 materials are sufficient and that we are not dependent on any one supplier.We enter into standard purchase agreements with certain foreign and domestic suppliers to source selected case goods,upholstery,and home accent items.The terms of these arrangements are customary for the industry and do not
122、contain any long-term contractual obligations on our behalf.We believe we maintain good relationships with our suppliers.Distribution and Logistics We distribute our products through three distribution centers,owned by the Company,strategically located in New Jersey,Oklahoma,and Virginia.These distr
123、ibution centers provide efficient cross-dock operations to receive and ship product from our manufacturing facilities and third-party suppliers to our network of Company and independently operated retail service centers.Retail service centers prepare products for delivery into clients homes.At June
124、30,2016,the Company operated retail design centers were supported by 13 Company operated retail service centers and 14 service centers operated by third parties.While we manufacture to custom order the majority of our products,we also stock selected case goods,upholstery and home accents to provide
125、for quick delivery of in-stock items and to allow for more efficient production runs.Wholesale shipments utilize our own fleet of trucks and trailers or are subcontracted with independent carriers.Our fleet of trucks are financed under capital lease agreements with remaining terms ranging from less
126、than two to over three years,and all of our trailers are owned.Our practice has been to sell our products at the same delivered cost to all Company and independently operated design centers in North America,regardless of their shipping point.This policy creates pricing credibility with our wholesale
127、 customers while providing our retail network the opportunity to achieve more consistent margins by removing fluctuations attributable to the cost of shipping.Further,this policy eliminates the need for our independent retailers to carry significant amounts of inventory in their own warehouses.As a
128、result,we obtain more accurate consumer product demand information.Marketing Programs Our marketing and advertising strategies are developed to drive traffic into our network of design centers and to .We believe these strategies give Ethan Allen a strong competitive advantage in the home furnishings
129、 industry.We create and coordinate print,digital and television campaigns nationally,as well as assist in international and local marketing and promotional efforts.The Companys network of approximately 300 retail design centers,along with the over 6,000 independent members of the Interior Design Aff
130、iliate program,benefit from these marketing efforts,and we believe these efforts position us to consistently fulfill our brand promise as Americas Classic Design Brand.Our team of advertising specialists creates consistent,clear messages that Ethan Allen is a leader in home fashion,designer services
131、 and classic style,with everything for the well designed home.We use several forms of media to communicate our message,including social media,digital advertising,television(national and local),direct mail,newspapers and national shelter magazines.These messages are also conveyed on our website at .A
132、 strong email marketing program delivers promotional messages,inspiration,design ideas and product brochures to a growing database of clients.Our national television,social media,online and print advertising campaigns are designed to leverage our strong brand equity,finding creative and compelling w
133、ays to remind consumers of our tremendous range of products,services,special 7 ETHAN ALLEN INTERIORS INC.AND SUBSIDIARIES programs,and custom options.Coordinated local digital,television and print advertising also serve to support our national programs.The Ethan Allen direct mail magazine,which emph
134、asizes the eclectic mix of our wide breadth of products and services,is a key marketing tool.We publish these magazines and sell them to Company and independently operated design centers that use demographic information collected internally and through independent market research to target potential
135、 clients.Given the importance of this advertising medium,direct mail marketing lists are continually refined to target those consumers who are most likely to purchase,and improve the return on direct mail expenditures.Approximately 23 million copies of our direct mail magazine were distributed to co
136、nsumers during fiscal 2016.At we provide our clients and our associates with the tools they need to shop,design and buy.The website features inspiring photography,engaging video content,and all our latest news and promotional information.This year we launched an enhanced user experience and streamli
137、ned the path to purchase by updating the designs to our category pages,product types,and checkout.Ethan Allen also has local websites in various international regions to support our international licensees.These websites,some in local languages,provide a regionalized presentation of the brand while
138、also linking to our main website.We launched an online specialty store in partnership with the Army and Air Force Exchange Service.The specialty online store accessible through is an Exchange members-only website.The Army and Air Force Exchange Service is dedicated to ensuring active and retired sol
139、diers,airmen,and their families have access to U.S.goods and services,wherever they serve or live.To enhance the Ethan Allen client experience,our design centers have interactive touchscreens,where users can browse our full product catalog,check out hundreds of fully designed rooms,print product des
140、criptions,learn about promotions,and much more.Our design consultants utilize customized tablets so they can be more productive in our design centers and in our clients homes.Our social media platforms offer fans and followers inspirational images,trend information,and design ideas,as well as tips f
141、or how to bring distinctive Ethan Allen style to their homes.We have a robust and loyal following on Facebook,Pinterest,Instagram,Twitter,Google+,YouTube,LinkedIn and Houzz.Our products are available to buy on Pinterest where we were one of the first brands to launch with Pinterests buyable pins pro
142、gram.Our new mover and marketing program with major realtors brings Ethan Allen into targeted homes at the moment homeowners are most likely in the market for new furnishings.This program educates qualified consumers about our services and product offerings and is an extension of our designers grass
143、roots marketing efforts.We also have a robust and informative extranet available to our retailers and design professionals.It is the primary source of communication in and among members of our retail network.It provides information about every aspect of the retail business at Ethan Allen,including a
144、dvertising materials,prototype floor plan displays,and extensive product details.Retail Design Center Network Ethan Allen design centers are typically located in busy retail settings as freestanding destinations or as part of suburban strip malls or shopping malls,depending upon the real estate oppo
145、rtunities in a particular market.Our design centers average approximately 16,000 square feet in size with 75%between 15,000 and 25,000 square feet and 20%less than 15,000 square feet and 5%greater than 25,000 square feet.Combining technology with personal service in our design centers has allowed us
146、 to reduce the size of our design centers.At June 30,2016 we operated 19 design centers that have opened in the past three years,and these average 8,700 square feet.These smaller footprint design centers reflect our direction as we move forward in repositioning our retail design center network.These
147、 new and relocated design centers also reflect our shift from destination and shopping mall locations to lifestyle centers that better project our brand and offer increased traffic opportunities.We maintain consistency of presentation throughout the retail design center network through a comprehensi
148、ve set of standards and display planning assistance.These interior display design standards assist each design center in presenting a high quality image by using focused lifestyle settings and select product category groupings to display our products and information to facilitate design solutions an
149、d to educate consumers.We also create a consistent brand projection through our 8 ETHAN ALLEN INTERIORS INC.AND SUBSIDIARIES exterior facades and signage.The establishment of these standards has helped position Ethan Allen as a leader in home furnishings retailing.We continue to strengthen the retai
150、l network with many initiatives,including the opening of new and relocating design centers in desirable locations,updating presentations and floor plans,strengthening of the professionalism of our designers through training and certification,and the consolidation of certain design centers and servic
151、e centers.People At June 30,2016,the Company,through its subsidiaries,had approximately 5,200 employees(“associates”),none of whom are represented by unions.We believe we maintain good relationships with our employees.The retail network,which includes both Company subsidiaries and independently oper
152、ated design centers,is staffed with a sales force of interior design consultants and service professionals who provide customers with complimentary home decorating and interior design solutions.Our interior design associates receive specialty training with respect to the distinctive design and quali
153、ty features inherent in each of our products and programs.This enables them to more effectively communicate the elements of style and value that serve to differentiate us from our competition.As such,we believe our design consultants,and the complimentary service they provide,create a distinct compe
154、titive advantage over other home furnishing retailers.We continue to strengthen the level of service,professionalism,interior design competence,efficiency,and effectiveness of retail design center associates.The Companys interior design affiliate program adds further strength and breadth to our inte
155、rior design reach.We believe that this program augments the design center design staff to reach more clients and improve market penetration.We recognize the importance of our retail design center network to our long-term success.Accordingly,we believe we(i)have established a strong management team w
156、ithin Company operated design centers and(ii)continue to work closely with our independent retailers in order to assist them.With this in mind,we make our services available to every design center,whether independently operated or Company operated,in support of their marketing efforts,including coor
157、dinated advertising,merchandising and display programs,and by providing extensive training seminars and educational materials.We believe that the development of design consultants,service and delivery personnel,and independent retailers is important for the growth of our business.As a result,we have
158、 committed to make available comprehensive retail training programs intended to increase the customer service capabilities of each individual.Customer Service Offerings We offer numerous customer service programs,each of which has been developed and introduced to consumers in an effort to make their
159、 shopping experience easier and more enjoyable.Gift Card This program allows customers to purchase and redeem gift cards through our website or at any participating retail design center,which can be used for any of our products or services.Ethan Allen Consumer Credit Programs The Ethan Allen Platinu
160、m program offers consumers(clients)a menu of custom financing options.Financing offered through this program is administered by a third-party financial institution and is granted to our customers on a non-recourse basis to the Company.Clients may apply for an Ethan Allen Platinum card at any partici
161、pating design center or on-line at .Competition The domestic and global home furnishings industry faces numerous challenges,which include an influx of low-priced products from overseas.As a result,there is a high degree of competition in our markets.We differentiate ourselves as a preferred brand by
162、 adhering to a business strategy focused on providing(i)high-quality,well designed and often custom,handmade products at good value,(ii)a comprehensive complement of home furnishing design solutions,including our complimentary design service,and(iii)excellence in customer service.We consider our ver
163、tical integration a significant competitive advantage in the current environment as it allows us to design,manufacture and source,distribute,market,and sell our products through one of the industrys largest single-source retail networks.The internet also provides a highly competitive medium for the
164、sale of a significant amount of home furnishings each year,and we believe it is becoming increasingly important.Although much of that product is sold through commodity oriented,9 ETHAN ALLEN INTERIORS INC.AND SUBSIDIARIES low priced and low service retailers,we believe consumers are spending more ti
165、me window shopping on the internet and are thus better informed when they do visit our brick and mortar facilities.At Ethan Allen,the ultimate goal of our internet strategy is to drive traffic into our network of design centers by combining technology with excellent personal service.At ,customers ha
166、ve the opportunity to buy our products online but we take the process further.With so much of our product offering being custom,we encourage our website customers to get help from our network of interior design professionals.This complimentary interior design support creates a competitive advantage
167、through our excellent personal service.This enhances the online experience and regularly leads to internet customers becoming clients of our network of interior design centers.Industry globalization has provided us an opportunity to adhere to a blended sourcing strategy,establishing relationships wi
168、th certain manufacturers,both domestically and outside the United States,to source selected case goods,upholstery,and home accent items.We intend to continue to balance our own North American production with opportunities to source from foreign and domestic manufacturers,as appropriate,in order to m
169、aintain our competitive advantage.We believe the home furnishings industry competes primarily on the basis of product styling and quality,personal service,prompt delivery,product availability and price.We further believe that we effectively compete on the basis of each of these factors and that,more
170、 specifically,our direct manufacturing,product presentations,website,and complimentary design service create a distinct competitive advantage,further supporting our mission of providing consumers with a complete home decorating and design solution.We also believe that we differentiate ourselves furt
171、her with the quality of our design service through our intensive training.Our objective is to continue to develop and strengthen our retail network by(i)expanding the Company operated retail business through the repositioning of and opening of new design centers,and(ii)obtaining and retaining indepe
172、ndent retailers,encouraging such retailers to expand their business through the opening or relocation of new design centers with the objective of increasing the volume of their sales(iii)further expanding our sales network through our IDA and realtor referral programs and(iv)further expanding our ec
173、ommerce.Trademarks We currently hold,or have registration applications pending for,numerous trademarks,service marks and copyrights for the Ethan Allen name,logos and designs in a broad range of classes for both products and services in the United States and in many foreign countries.In addition,we
174、have registered,or have applications pending for certain of our slogans utilized in connection with promoting brand awareness,retail sales and other services and certain collection names.We view such trademarks and service marks as valuable assets and have an ongoing program to diligently monitor an
175、d defend,through appropriate action,against their unauthorized use.Executive Officers of the Registrant Set forth in the table below is a list of our executive officers,together with certain biographical information,including their ages as of the date of this Report:M.Farooq Kathwari,age 71 Chairman
176、 of the Board,President and Chief Executive Officer since 1988 Daniel M.Grow,age 70 Senior Vice President,Business Development since February 2015 Vice-President,Business Development from 2009 to 2015 Eric D.Koster,age 69 Vice-President,General Counsel and Secretary since April 2013 Private practice
177、 prior to joining the Company in April 2013 Tracy Paccione,age 50 Vice-President,Merchandising since June 2009 Clifford Thorn,age 64 Vice-President,Upholstery Manufacturing since May 2001 Corey Whitely,age 56 Executive Vice-President,Administration,Chief Financial Officer and Treasurer since July 20
178、14 10 ETHAN ALLEN INTERIORS INC.AND SUBSIDIARIES Executive Vice-President,Operations from October 2007 through July 2014 Item 1A.Risk Factors The following information describes certain significant risks and uncertainties inherent in our business that should be carefully considered,along with other
179、information contained elsewhere in this Annual Report and in other filings,when making an investment decision with respect to us.If one or more of these risks actually occurs,the impact on our business,including our financial condition,results of operations,and cash flows could be adverse.An economi
180、c downturn may materially adversely affect our business.Our business and results of operations are affected by international,national and regional economic conditions.Regional economic conditions in the United States and in other regions of the world where we have a concentration of design centers s
181、uch as Canada or China may impact the Company greater compared to economic conditions in other parts of the world where we have lesser concentration of design centers.The United States and many other international economies experienced a major recession,which reduced the available market size for ou
182、r industry from historic peak levels.While we have recalibrated the footprint of our vertically integrated enterprise to be profitable with lower revenues than achieved at our historic peak,an economic downturn of significance or extended duration could adversely affect consumer demand and discretio
183、nary spending habits and,as a result,our business performance,profitability,and cash flows.Access to consumer credit could be interrupted and reduce sales and profitability.Our ability to continue to access consumer credit for our clients could be negatively affected by conditions outside our contro
184、l.If capital market conditions were to worsen meaningfully,there is a risk that our business partner that issues our private label credit card program may not be able to fulfill its obligations under that agreement.In addition,further tightening of credit markets may restrict the ability and willing
185、ness of customers to make purchases.We may be unable to obtain sufficient external funding to finance our operations and growth.Historically,we have relied upon our cash from operations to fund our debt service,operations and growth.As we operate and expand our business,we may rely on external fundi
186、ng sources,including the proceeds from the issuance of additional debt or use of the$115 million revolving bank line of credit under our existing$150 million credit facility.The credit facility bears interest at a floating rate and there is a risk that the rate will increase and as we are not hedgin
187、g our interest rate for the credit facility,our debt service costs could increase.Any unexpected reduction in cash flow from operations could increase our external funding requirements to levels above those currently available.There can be no assurance that we will not experience unexpected cash flo
188、w shortfalls in the future or that any increase in external funding required by such shortfalls will be available on acceptable terms or at all.Operating losses could reduce our liquidity and impact our dividend policy.Historically,we have relied on our cash from operations or debt issuances to fund
189、 our operations and the payment of cash dividends.If the Companys financial performance were to deteriorate resulting in financial losses we may not be able to fund a shortfall from operations and would require external funding.Some financing instruments used by the Company historically may not be a
190、vailable to the Company in the future.We cannot assure that additional sources of financing would be available to the Company on commercially favorable terms should the Companys capital requirements exceed cash available from operations and existing cash and cash equivalents.In such circumstances,th
191、e Company may reduce its quarterly dividends.Additional impairment charges could reduce our profitability.We have significant long-lived tangible and intangible assets recorded on our balance sheets.If our operating results decline,we may incur impairment charges in the future,which could have a mat
192、erial impact on our financial results.We evaluate the recoverability of the carrying amount of our long-lived tangible and intangible assets on an ongoing basis.There can be no assurance that the outcome of such future reviews will not result in substantial impairment charges.Impairment assessment i
193、nherently involves judgments as to assumptions about expected future cash flows and the impact of market conditions on those assumptions.Future events and changing market conditions may impact our assumptions as to prices,costs or other factors that may result in changes in our estimates of future c
194、ash flows.Although we believe the assumptions we use in testing for impairment are reasonable,significant changes in any of our assumptions could produce a significantly different result.11 ETHAN ALLEN INTERIORS INC.AND SUBSIDIARIES We face changes in global and local economic conditions that may ad
195、versely affect consumer demand and spending,our manufacturing operations or sources of merchandise and international operations.Historically,the home furnishings industry has been subject to cyclical variations in the general economy and to uncertainty regarding future economic prospects.Such uncert
196、ainty,as well as other variations in global economic conditions such as rising fuel costs,wage and benefit inflation,currency fluctuations,and increasing interest rates,may continue to cause inconsistent and unpredictable consumer spending habits,while increasing our own input costs.These risks,as w
197、ell as industrial accidents or work stoppages,could also severely disrupt our manufacturing operations,which could have a material adverse effect on our financial performance.We import a portion of our merchandise from foreign countries and operate manufacturing plants in Mexico and Honduras and ope
198、rate retail design centers in Canada.As a result,our ability to obtain adequate supplies or to control our costs may be adversely affected by events affecting international commerce and businesses located outside the United States,including natural disasters,changes in international trade,central ba
199、nk actions,changes in the relationship of the U.S.dollar versus other currencies,labor availability and cost,and other governmental policies of the U.S.and the countries from which we import our merchandise or in which we operate facilities.The inability to import products from certain foreign count
200、ries or the imposition of significant tariffs could have a material adverse effect on our results of operations.Competition from overseas manufacturers and domestic retailers may adversely affect our business,operating results or financial condition.Our wholesale business segment is involved in the
201、development of our brand,which encompasses the design,manufacture,sourcing,sales and distribution of our home furnishings products,and competes with other U.S.and foreign manufacturers.Our retail network sells home furnishings to consumers through a network of Company operated design centers,and com
202、petes against a diverse group of retailers ranging from specialty stores to traditional furniture and department stores,any of which may operate locally,regionally and nationally,as well as over the internet.We also compete with these and other retailers for appropriate retail locations as well as f
203、or qualified design consultants and management personnel.Such competition could adversely affect our future financial performance.Industry globalization has led to increased competitive pressures brought about by the increasing volume of imported finished goods and components,particularly for case g
204、ood products,and the development of manufacturing capabilities in other countries,specifically within Asia.The increase in overseas production capacity has created over-capacity for many manufacturers,including us,which has led to industry-wide plant consolidation.In addition,because many foreign ma
205、nufacturers are able to maintain substantially lower production costs,including the cost of labor and overhead,imported product may be capable of being sold at a lower price to consumers,which,in turn,could lead to some measure of further industry-wide price deflation.We cannot provide assurance tha
206、t we will be able to establish or maintain relationships with sufficient or appropriate manufacturers,whether foreign or domestic,to supply us with selected case goods,upholstery and home accent items to enable us to maintain our competitive advantage.In addition,the emergence of foreign manufacture
207、rs has served to broaden the competitive landscape.Some of these competitors produce furniture types not manufactured by us and may have greater financial resources available to them or lower costs of operating.This competition could adversely affect our future financial performance.Failure to succe
208、ssfully anticipate or respond to changes in consumer tastes and trends in a timely manner could adversely impact our business,operating results and financial condition.Sales of our products are dependent upon consumer acceptance of our product designs,styles,quality and price.We continuously monitor
209、 changes in home design trends through attendance at international industry events and fashion shows,internal marketing research,and regular communication with our retailers and design consultants who provide valuable input on consumer tendencies.However,as with all retailers,our business is suscept
210、ible to changes in consumer tastes and trends.Such tastes and trends can change rapidly and any delay or failure to anticipate or respond to changing consumer tastes and trends in a timely manner could adversely impact our business,operating results and financial condition.Our number of manufacturin
211、g and logistics sites may increase our exposure to business disruptions and could result in higher transportation costs.12 ETHAN ALLEN INTERIORS INC.AND SUBSIDIARIES We have a limited number of manufacturing sites in our case good and upholstery operations,consolidated our distribution network into
212、fewer centers for both wholesale and retail segments,and operate a single home accents plant.Our upholstery operations consist of three upholstery plants at our North Carolina campus and one plant in Mexico.The Company operates three manufacturing plants(North Carolina,Vermont,and Honduras)and one s
213、awmill in support of our case goods operations.Our plants require various raw materials and commodities such as logs and lumber for our case good plants and foam,springs and engineered hardwood board for our upholstery plants.As a result of the consolidation of our manufacturing operations into fewe
214、r facilities,if any of our manufacturing or logistics sites experience significant business interruption,our ability to manufacture products or deliver timely would likely be impacted.While we have long-standing relationships with multiple outside suppliers of our raw materials and commodities,there
215、 can be no assurance of their ability to fulfill our supply needs on a timely basis.The consolidation to fewer locations has resulted in longer distances for delivery and could result in higher costs to transport products if fuel costs increase significantly.Our current and former manufacturing and
216、retail operations and products are subject to increasingly stringent environmental,health and safety requirements.We use and generate hazardous substances in our manufacturing and retail operations.In addition,both the manufacturing properties on which we currently operate and those on which we have
217、 ceased operations are and have been used for industrial purposes.Our manufacturing operations and,to a lesser extent,our retail operations involve risk of personal injury or death.We are subject to increasingly stringent environmental,health and safety laws and regulations relating to our products,
218、current and former properties and our current operations.These laws and regulations provide for substantial fines and criminal sanctions for violations and sometimes require product recalls and/or redesign,the installation of costly pollution control or safety equipment,or costly changes in operatio
219、ns to limit pollution or decrease the likelihood of injuries.In addition,we may become subject to potentially material liabilities for the investigation and cleanup of contaminated properties and to claims alleging personal injury or property damage resulting from exposure to or releases of hazardou
220、s substances or personal injury because of an unsafe workplace.In addition,noncompliance with,or stricter enforcement of,existing laws and regulations,adoption of more stringent new laws and regulations,discovery of previously unknown contamination or imposition of new or increased requirements coul
221、d require us to incur costs or become the basis of new or increased liabilities that could be material.Fluctuations in the price,availability and quality of raw materials could result in increased costs or cause production delays which might result in a decline in sales,either of which could adverse
222、ly impact our earnings.We use various types of wood,foam,fibers,fabrics,leathers,and other raw materials in manufacturing our furniture.Certain of our raw materials,including fabrics,are purchased domestically and outside North America.Fluctuations in the price,availability and quality of raw materi
223、als could result in increased costs or a delay in manufacturing our products,which in turn could result in a delay in delivering products to our customers.For example,lumber prices fluctuate over time based on factors such as weather and demand,which in turn,impact availability.Production delays or
224、upward trends in raw material prices could result in lower sales or margins,thereby adversely impacting our earnings.In addition,certain suppliers may require extensive advance notice of our requirements in order to produce products in the quantities we desire.This long lead time may require us to p
225、lace orders far in advance of the time when certain products will be offered for sale,thereby exposing us to risks relating to shifts in consumer demand and trends,and any significant downturn in the U.S.economy.We depend on key personnel and could be affected by the loss of their services.The succe
226、ss of our business depends upon the services of certain senior executives,and in particular,the services of M.Farooq Kathwari,Chairman of the Board,President and Chief Executive Officer,who is the only one of our senior executives who operates under a written employment agreement.The loss of any suc
227、h person or other key personnel could have a material adverse effect on our business and results of operations.Our business is sensitive to increasing labor costs,competitive labor markets,our continued ability to retain high-quality personnel and risks of work stoppages.The market for qualified emp
228、loyees and personnel in the retail and manufacturing industries is highly competitive.Our success depends upon our ability to attract,retain and motivate qualified artisans,professional and clerical associates and upon the continued contributions of these individuals.We cannot provide assurance that
229、 we will be successful in attracting 13 ETHAN ALLEN INTERIORS INC.AND SUBSIDIARIES and retaining qualified personnel.A shortage of qualified personnel may require us to enhance our wage and benefits package in order to compete effectively in the hiring and retention of qualified employees.Our labor
230、and benefit costs may continue to increase and such increases may not be recovered.This could have a material adverse effect on our business,operating results and financial condition.Our success depends upon our brand,marketing and advertising efforts and pricing strategies.If we are not able to mai
231、ntain and enhance our brand,or if we are not successful in these other efforts,our business and operating results could be adversely affected.Maintaining and enhancing our brand is critical to our ability to expand our base of customers and may require us to make substantial investments.Our advertis
232、ing campaign utilizes television,direct mail,newspapers,magazines and radio to maintain and enhance our existing brand equity.We cannot provide assurance that our marketing,advertising and other efforts to promote and maintain awareness of our brand will not require us to incur substantial costs.If
233、these efforts are unsuccessful or we incur substantial costs in connection with these efforts,our business,operating results and financial condition could be adversely affected.We may not be able to maintain our current design center locations at current costs.We may also fail to successfully select
234、 and secure design center locations.Our design centers are typically located in busy urban settings as freestanding destinations or as part of suburban strip malls or shopping malls,depending upon the real estate opportunities in a particular market.Our business competes with other retailers and as
235、a result,our success may be affected by our ability to renew current design center leases and to select and secure appropriate retail locations for existing and future design centers.Our results of operations for any quarter are not necessarily indicative of our results of operations for a full year
236、.Sales of furniture and other home furnishing products fluctuate from quarter to quarter due to such factors as changes in global and regional economic conditions,changes in competitive conditions,changes in production schedules in response to seasonal changes in energy costs and weather conditions,
237、changes in consumer order patterns,and the timing of various promotional events.From time to time,we have experienced,and may continue to experience,volatility with respect to demand for our home furnishing products.Accordingly,results of operations for any quarter are not necessarily indicative of
238、the results of operations for a full year.Failure to protect our intellectual property could adversely affect us.We believe that our copyrights,trademarks,service marks,trade secrets,and all of our other intellectual property are important to our success.We rely on patent,trademark,copyright and tra
239、de secret laws,and confidentiality and restricted use agreements,to protect our intellectual property and may seek licenses to intellectual property of others.Some of our intellectual property is not covered by any patent,trademark,or copyright or any applications for the same.We cannot provide assu
240、rance that agreements designed to protect our intellectual property will not be breached,that we will have adequate remedies for any such breach,or that the efforts we take to protect our proprietary rights will be sufficient or effective.Any significant impairment of our intellectual property right
241、s or failure to obtain licenses of intellectual property from third parties could harm our business or our ability to compete.Moreover,we cannot provide assurance that the use of our technology or proprietary know-how or information does not infringe the intellectual property rights of others.If we
242、have to litigate to protect or defend any of our rights,such litigation could result in significant expense.The Company relies heavily on information and technology to operate its business,and any disruption to its technology infrastructure(including cyber attacks)or the internet could harm the Comp
243、anys operations.We operate many aspects of our business including financial reporting,and customer relationship management through server and web-based technologies,and store various types of data on such servers or with third-parties who in turn store it on servers and in the“cloud”.Any disruption
244、to the internet or to the Companys or its service providers global technology infrastructure,including malware,insecure coding,“Acts of God,”attempts to penetrate networks,data theft or loss and human error,could have adverse affects on the Companys operations.A cyber attack of our systems or networ
245、ks that impairs our information technology systems could disrupt our business operations and result in loss of service to customers.We have a comprehensive cybersecurity program designed to protect and preserve the integrity of our information technology systems.We have experienced and expect to con
246、tinue to experience actual or attempted cyber attacks of our IT systems or networks;however,none of these actual or attempted cyber attacks has had a material impact 14 ETHAN ALLEN INTERIORS INC.AND SUBSIDIARIES on our operations or financial condition.Additionally,we have access to sensitive custom
247、er information in the ordinary course of business.If a significant data breach occurred,our reputation may be adversely affected,customer confidence may be diminished,or we may be subject to legal claims,any of which may contribute to the loss of customers and have a material adverse impact on our b
248、usiness.While we have invested and continue to invest in information technology risk management,cybersecurity and disaster recovery plans,these measures cannot fully insulate the Company from technology disruptions or data theft or loss and the resulting adverse effect on the Companys operations and
249、 financial results.We could incur substantial costs due to compliance with conflict mineral regulations,which may materially adversely affect our business,operating results,and financial condition.The SEC has adopted rules regarding disclosure of the use of tantalum,tin,tungsten,and gold(commonly re
250、ferred to as conflict minerals),which are mined from the Democratic Republic of the Congo and surrounding countries.This requirement could affect the sourcing of materials used in some of our products as well as the companies we use to manufacture our products.If our products are found to contain co
251、nflict minerals sourced from the Democratic Republic of the Congo or surrounding countries,the Company would take actions such as changing materials or designs to reduce the possibility that the purchase of conflict minerals may fund armed groups in the region.These actions could add engineering and
252、 other costs to the manufacture of our products.We expect to incur costs to continue to upgrade our process to discover the origin of the tantalum,tin,tungsten,and gold used in our products,and to audit our conflict minerals disclosures.Our reputation and consequently our financial condition may als
253、o suffer if we have included conflict minerals originating in the Democratic Republic of the Congo or surrounding countries in our products,and those conflict minerals funded armed groups in the region.Item 1B.Unresolved Staff Comments None.Item 2.Properties Our 144,000 sq.ft.corporate headquarters,
254、located in Danbury,Connecticut,and adjacent Ethan Allen Hotel and Conference Center,containing approximately 200 guestrooms,are owned by the Company.The hotel is used primarily for functions and accommodations for the general public as well as in connection with Ethan Allen functions and training pr
255、ograms.We operate nine manufacturing facilities located in the U.S.,Mexico and Honduras.All of these facilities are owned by the Company and include four case good plants(including one sawmill)totaling 1,789,000 square feet,four upholstery furniture plants totaling 947,000 square feet,and one home a
256、ccent plant of 177,000 square feet.Our wholesale division also owns and operates three national distribution and fulfillment centers,one of which shares a facility with our manufacturing,which are a combined 1,001,000 square feet.Two of our case goods manufacturing facilities are located in Vermont,
257、one is in North Carolina and one is in Honduras.We have three upholstery manufacturing facilities at our North Carolina campus,and one in Mexico.Our home accents plant is located in New Jersey,and our distribution facilities are located in New Jersey,Oklahoma,and Virginia.We own three and lease ten
258、retail service centers,totaling 732,000 square feet.Our retail service centers are located throughout the United States and Canada and serve to support our various retail sales districts.The location activity and geographic distribution of our retail design center network as of June 30,2016 is as fo
259、llows:15 ETHAN ALLEN INTERIORS INC.AND SUBSIDIARIES IndependentCompany-IndependentCompany-retailersoperatedTotalretailersoperatedTotalRetail Design Center location activity:Balance at beginning of period155 144 299 152 143 295 New locations15 10 25 22 4 26 Closures(16)(12)(28)(17)(5)(22)Transfers(1)
260、1 -(2)2 -Balance at end of period153 143 296 155 144 299 Relocations(in new and closures)2 6 8 7 2 9 Retail Design Center geographic locations:United States50 137 187 58 137 195 Canada-6 6 2 6 8 Asia94 -94 87 -87 Europe2 -2 1 1 2 Middle East7 -7 7 -7 Total153 143 296 155 144 299 Year-to-date Fiscal
261、2015Year-to-date Fiscal 2016 Of the 143 Company operated retail design centers,66 of the properties are owned and 77 of the properties are leased from independent third parties.Of the 66 owned design centers,17 are subject to land leases.We own six additional retail properties,two of which are lease
262、d to independent Ethan Allen retailers,and four of which are leased to unaffiliated third parties.See Note 7 to the Consolidated Financial Statements included under Item 8 of this Annual Report for more information with respect to our operating lease obligations.We believe that all of our properties
263、 are well maintained and in good condition.We estimate that our manufacturing plants are currently operating at approximately 66%of capacity based on their current shifts and staffing.We believe we have additional capacity at selected facilities,which we could utilize with minimal additional capital
264、 expenditures.Item 3.Legal Proceedings In the ordinary course of our business,we are party to various legal proceedings and claims which we believe are incidental to the operation of our business.Other than as described under Note 13 to our consolidated financial statements included in Part II,Item
265、8 of this Annual Report on Form 10-K,we believe the ultimate outcome of these proceedings to which we are currently a party will not have a material adverse effect on our business,financial position,results of operations or cash flows.Regulations issued under the Clean Air Act Amendments of 1990 req
266、uired the industry to reformulate certain furniture finishes or institute process changes to reduce emissions of volatile organic compounds.Compliance with many of these requirements has been facilitated through the introduction of high solids coating technology and alternative formulations.In addit
267、ion,we have instituted a variety of technical and procedural controls,including reformulation of finishing materials to reduce toxicity,implementation of high velocity low pressure spray systems,development of storm water protection plans and controls,and further development of related inspection/au
268、dit teams,all of which have served to reduce emissions per unit of production.We remain committed to implementing new waste minimization programs and/or enhancing existing programs with the objective of(i)reducing the total volume of waste,(ii)limiting the liability associated with waste disposal,an
269、d(iii)continuously improving environmental and job safety programs on the factory floor which serve to minimize emissions and safety risks for employees.In order to reduce the use of hazardous materials in the manufacturing process,we will continue to evaluate the most appropriate,cost-effective con
270、trol technologies for finishing operations and production methods.We believe that our facilities are in material compliance with all such applicable laws and regulations.Our currently anticipated capital expenditures for environmental control facility matters are not material.16 ETHAN ALLEN INTERIOR
271、S INC.AND SUBSIDIARIES Item 4.Mine Safety Disclosures Not applicable.PART II Item 5.Market for Registrants Common Equity,Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the New York Stock Exchange(“NYSE”)under ticker symbol ETH.The following table
272、sets forth,for each quarterly period during the past two fiscal years,(i)the intraday high and low sales prices of our common stock as reported on the NYSE and(ii)the dividends per share declared by us:DividendsHighLowPer ShareFiscal 2016First Quarter31.87$25.76$0.14 Second Quarter29.65 25.30 0.14 T
273、hird Quarter32.10 22.46 0.17 Fourth Quarter35.31 29.39 0.17 Fiscal 2015First Quarter26.84$22.06$0.12$Second Quarter31.24 22.58 0.12 Third Quarter32.63 25.31 0.12 Fourth Quarter28.25 23.33 0.14 Market Price Mr.Kathwari,Chief Executive Officer and President,has certified to the NYSE,pursuant to Sectio
274、n 303A.12 of the NYSEs Listing Company Manual,that he is unaware of any violation by the Company of the NYSEs corporate governance listing standards.As of July 31,2016,there were 238 shareholders of record of our common stock.Management estimates there are approximately 10,000 beneficial shareholder
275、s of the Companys common stock.The Companys policy is to issue quarterly dividends,and we expect to continue to declare quarterly dividends for the foreseeable future,business conditions permitting.Equity Compensation Plan Information The Equity Compensation Plan Information required by this Item wi
276、ll appear in the Ethan Allen Interiors Inc.proxy statement for the Annual Meeting of Shareholders scheduled to be held on November 16,2016 and is incorporated herein by reference in the introductory paragraph of Part III of this Annual Report.Issuer Purchases of Equity Securities On November 21,2002
277、,our Board of Directors approved a share repurchase program authorizing us to repurchase up to 2,000,000 shares of our common stock,from time to time,either directly or through agents,in the open market at prices and on terms satisfactory to us.Subsequent to that date,the Board of Directors increase
278、d the aggregate authorization under the repurchase program on several separate occasions,the last of which was on April 13,2015 when the Board of Directors increased the aggregate authorization to approximately 3,000,000 shares.There is no expiration date on the repurchase authorization and the amou
279、nt and timing of future share repurchases,if any,will be determined as market and business conditions warrant.There were no purchases made by or on behalf of us or any affiliated purchaser(as defined in Rule 10b-18(a)(3)under the Exchange Act)of our common stock during the three months ended June 30
280、,2016.Comparative Company Performance The following line graph compares the cumulative total stockholder return for the Company with the S&P 500 Index,and the S&P Retail Select Industry Index(SPSIRE),assuming$100 was invested on June 30,2011.17 ETHAN ALLEN INTERIORS INC.AND SUBSIDIARIES Item 6.Selec
281、ted Financial Data The following table presents selected financial data for the fiscal years ended June 30,2016,2015,2014,2013 and 2012 that has been derived from our consolidated financial statements(dollar amounts in thousands except per share data).The information set forth below should be read i
282、n conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations included under Item 7 of this Annual Report and our Consolidated Financial Statements(including the notes thereto)included under Item 8 of this Annual Report.$0$50$100$150$200$2506/166/156/146/136
283、/126/11COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*Among Ethan Allen Interiors Inc.,the S&P 500 Index,S&P Retail Select Industry Index(SPSIRE)Ethan Allen Interiors Inc.S&P 500S&P Retail Select Industry Index(SPSIRE)*$100 invested on June 30,2011 in stock or index,including reinvestment of dividends
284、.Fiscal years ending June 30.Source:S&P Dow Jones Indices18 ETHAN ALLEN INTERIORS INC.AND SUBSIDIARIES 20162015201420132012Consolidated Operations Data Net Sales794,202$754,600$746,659$729,083$729,373$Cost of Sales351,966 343,437 340,163 330,734 339,085 Selling,general andadministrative expenses353,
285、057 345,229 336,860 337,912 340,591 Operating income 89,179 65,934 69,636 60,437 49,697 Interest and other expense,net1,223 9,251 7,234 10,263 8,458 Income before incometax expense87,956 56,683 62,402 50,174 41,239 Income tax expense(benefit)31,319 19,541 19,471 17,696 (8,455)Net income56,637$37,142
286、$42,931$32,478$49,694$Per Share DataNet income per basicshare2.02$1.29$1.48$1.13$1.72$Basic weighted average sharesoutstanding28,072 28,874 28,918 28,864 28,824 Net income per dilutedshare2.00$1.27$1.47$1.11$1.71$Diluted weighted averageshares outstanding28,324 29,182 29,276 29,239 29,109 Cash divid
287、ends per share0.62$0.50$0.40$0.77$0.30$Other InformationDepreciation and amortization19,353$19,142$17,930$18,008$18,581$Capital expenditures andacquisitions23,132$21,778$19,305$19,775$23,404$Working capital124,857$130,012$169,582$127,631$131,715$Current ratio2.01 to 11.92 to 12.25 to 11.96 to 11.87
288、to 1Effective tax rate35.6%34.5%31.2%35.3%-20.5%Balance Sheet Data(at end of period)Total assets577,409$605,977$654,434$617,285$644,788$Total debt,including capitallease obligations 41,838 76,237 130,912 131,289 154,500 Shareholders equity392,202$370,535$367,467$334,357$321,868$Debt as a percentage
289、of equity10.7%20.6%35.6%39.3%48.0%Debt as a percentage of capital9.6%17.1%26.3%28.2%32.4%Fiscal Year Ended June 30,19 ETHAN ALLEN INTERIORS INC.AND SUBSIDIARIES Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operation The following discussion of financial condition
290、and results of operations is based upon,and should be read in conjunction with,our Consolidated Financial Statements(including the notes thereto)included under Item 8 of this Annual Report.Forward-Looking Statements Managements discussion and analysis of financial condition and results of operations
291、 and other sections of this Annual Report on Form 10-K contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995,Section 27A of the Securities Act of 1933,as amended,and Section 21E of the Securities Exchange Act of 1934,as amended(the“Exchange Act
292、”),which represent managements beliefs and assumptions concerning future events based on information currently available to us relating to our future results.Such forward-looking statements are identified in this Annual Report on Form 10-K and in documents incorporated herein by reference by use of
293、forward-looking words such as anticipate,believe,plan,estimate,expect,intend,“will”,“may”,“continue”,“project”,”target”,“outlook”,“forecast”,“guidance”,and similar expressions and the negatives of such forward-looking words.These forward-looking statements are subject to management decisions and var
294、ious assumptions about future events,and are not guarantees of future performance.A number of risks and uncertainties could cause actual results to differ materially from those anticipated in the forward-looking statements,including,but not limited to:changes in global or regional political or econo
295、mic conditions,including changes in governmental and central bank policies;our ability to secure debt or other forms of financing;the effect of operating losses on our ability to pay cash dividends;changes in business conditions in the furniture industry,including changes in consumer spending patter
296、ns,tastes and demand for home furnishings;competition from overseas manufacturers and domestic retailers and competitive factors such as changes in products or marketing efforts of others;effects of our brand awareness and marketing programs,including changes in demand for our existing and new produ
297、cts;our ability to locate new design center sites and/or negotiate favorable lease terms for additional design centers or for the expansion of existing design centers;fluctuations in interest rates and the cost,availability and quality of raw materials;pricing pressures;the effects of labor strikes;
298、weather conditions that may affect sales;volatility in fuel,utility,transportation and security costs;the potential effects of natural disasters affecting our suppliers or trading partners;the effects of terrorist attacks or conflicts or wars involving the United States or its allies or trading part
299、ners;and those matters discussed in Items 1A and 7A of this Annual Report on Form 10-K and in our other SEC filings.Accordingly,actual circumstances and results could differ materially from those contemplated by the forward-looking statements.Given the risks and uncertainties surrounding forward-loo
300、king statements,you should not place undue reliance on these statements.Many of these factors are beyond our ability to control or predict.Our forward-looking statements speak only as of the date of this Annual Report on Form 10-K.Other than as required by law,we undertake no obligation to update or
301、 revise forward-looking statements,whether as a result of new information,future events,or otherwise.Critical Accounting Policies Our consolidated financial statements have been prepared in conformity with U.S.generally accepted accounting principles that require,in some cases,that certain estimates
302、 and assumptions be made that affect the amounts and disclosures reported in those financial statements and the related accompanying notes.Estimates are based on currently known facts and circumstances,prior experience and other reasonable assumptions.We use our best judgment in valuing these estima
303、tes and may,as warranted,solicit external advice.Actual results could differ from these estimates,assumptions and judgments,and these differences could be material.The following critical accounting policies,some of which are impacted significantly by estimates,assumptions and judgments,affect our co
304、nsolidated financial statements.Inventories Inventories(finished goods,work in process and raw materials)are stated at the lower of cost,determined on a first-in,first-out basis,or market.Cost is determined based solely on those charges incurred in the acquisition and production of the related inven
305、tory(i.e.material,labor and manufacturing overhead costs).We estimate an inventory reserve for excess quantities and obsolete items based on specific identification and historical write-downs,taking into account future demand and market conditions.If actual demand or market conditions in the future
306、are less favorable than those estimated,additional inventory write-downs may be required.Revenue Recognition Revenue is recognized when all of the following have occurred:persuasive evidence of a sales arrangement exists(e.g.a wholesale purchase order or retail sales invoice);the sales arrangement s
307、pecifies a fixed or determinable sales price;title and risk of ownership has passed to the customer;no specific performance obligations remain;product is shipped or services are provided to the customer;collectability is reasonably assured.As such,revenue 20 ETHAN ALLEN INTERIORS INC.AND SUBSIDIARIE
308、S recognition generally occurs upon the shipment of goods to independent retailers or,in the case of Ethan Allen operated retail design centers,upon delivery to the customer.If a shipping charge is billed to customers,this is included in revenue.Recorded sales provide for estimated returns and allow
309、ances.We permit our customers to return defective products and incorrect shipments,and terms we offer are standard for the industry.Allowance for Doubtful Accounts We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payme
310、nts.The allowance for doubtful accounts is based on a review of specifically identified accounts in addition to an overall aging analysis.Judgments are made with respect to the collectability of accounts receivable based on historical experience and current economic trends.Actual losses could differ
311、 from those estimates.Retail Design Center Acquisitions-We account for the acquisition of retail design centers and related assets with the purchase method.Accounting for these transactions as purchase business combinations requires the allocation of purchase price paid to the assets acquired and li
312、abilities assumed based on their fair values as of the date of the acquisition.The amount paid in excess of the fair value of net assets acquired is accounted for as goodwill.Impairment of Long-Lived Assets and Goodwill Goodwill and other indefinite-lived intangible assets are evaluated for impairme
313、nt on an annual basis during the fourth quarter of each fiscal year,and between annual tests whenever events or circumstances indicate that the carrying value of the goodwill or other intangible asset may exceed its fair value.When testing goodwill for impairment,we may assess qualitative factors fo
314、r some or all of our reporting units to determine whether it is more likely than not(that is,a likelihood of more than 50 percent)that the fair value of a reporting unit is less than its carrying amount,including goodwill.Alternatively,we may bypass this qualitative assessment for some or all of our
315、 reporting units and determine whether the carrying value exceeds the fair value using a quantitative assessment as described below.The recoverability of long-lived assets are evaluated for impairment by determining whether the carrying value will be recovered through the expected undiscounted futur
316、e cash flows resulting from the use of the asset.In the event the sum of the expected undiscounted future cash flows is less than the carrying value of the asset,an impairment loss equal to the excess of the assets carrying value over its fair value is recorded.The long-term nature of these assets r
317、equires the estimation of cash inflows and outflows several years into the future and only takes into consideration technological advances known at the time of the impairment test.To evaluate goodwill using a quantitative assessment,the Company determines the current fair value of the reporting unit
318、s using a combination of“Market”and“Income”approaches.In the Market approach,the“Guideline Company”method is used,which focuses on comparing the Companys risk profile and growth prospects to reasonably similar publicly traded companies.Key assumptions used for the Guideline Company method are total
319、invested capital(“TIC”)multiples for revenues and operating cash flows,as well as consideration of control premiums.The TIC multiples are determined based on public furniture companies within our peer group,and if appropriate,recent comparable transactions are considered.Control premiums are determi
320、ned using recent comparable transactions in the open market.Under the Income approach,a discounted cash flow method is used,which includes a terminal value,and is based on external analyst financial projection estimates,as well as internal financial projection estimates prepared by management.The lo
321、ng-term terminal growth rate assumptions reflect our current long-term view of the market in which we compete.Discount rates use the weighted average cost of capital for companies within our peer group,adjusted for specific company risk premium factors.The fair value of our trade name,which is the C
322、ompanys only indefinite-lived intangible asset other than goodwill,is valued using the relief-from-royalty method.Significant factors used in trade name valuation are rates for royalties,future growth,and a discount factor.Royalty rates are determined using an average of recent comparable values.Fut
323、ure growth rates are based on the Companys perception of the long-term values in the market in which we compete,and the discount rate is determined using the weighted average cost of capital for companies within our peer group,adjusted for specific company risk premium factors.In the fourth quarter
324、of fiscal years 2016,2015 and 2014,the Company performed qualitative assessments of the fair value of the wholesale reporting unit and concluded that the fair value of its goodwill exceeded its carrying value.The fair value of the trade name exceeded its carrying value by a substantial margin in fis
325、cal years 2016,2015,and 2014.To calculate fair value of these assets,management relies on estimates and assumptions which by their nature have varying degrees of uncertainty.Wherever possible,management therefore looks for third party transactions to provide the best possible 21 ETHAN ALLEN INTERIOR
326、S INC.AND SUBSIDIARIES support for the assumptions incorporated.Management considers several factors to be significant when estimating fair value including expected financial outlook of the business,changes in the Companys stock price,the impact of changing market conditions on financial performance
327、 and expected future cash flows,and other factors.Deterioration in any of these factors may result in a lower fair value assessment,which could lead to impairment of the long-lived assets and goodwill of the Company.Income Taxes Income taxes are accounted for under the asset and liability method.Def
328、erred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.Deferred tax assets and liabi
329、lities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the
330、 enactment date.Additional factors that we consider when making judgments about the deferred tax valuation include tax law changes,a recent history of cumulative losses,and variances in future projected profitability.The Company evaluates,on a quarterly basis,uncertain tax positions taken or expecte
331、d to be taken on tax returns for recognition,measurement,presentation,and disclosure in its financial statements.If an income tax position exceeds a 50%probability of success upon tax audit,based solely on the technical merits of the position,the Company recognizes an income tax benefit in its finan
332、cial statements.The tax benefits recognized are measured based on the largest benefit that has a greater than 50%likelihood of being realized upon ultimate settlement.The liability associated with an unrecognized tax benefit is classified as a long-term liability except for the amount for which a ca
333、sh payment is expected to be made or tax positions settled within one year.We recognize interest and penalties related to income tax matters as a component of income tax expense.Business Insurance Reserves We have insurance programs in place to cover workers compensation and property/casualty claims.The insurance programs,which are funded through self-insured retention,are subject to various stop-
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