ETHAN ALLEN INTERIORS INC

Previous wording

The MD&A is based upon, and should be read in conjunction with, our Consolidated Financial Statements and related Notes included under Item 8 of this Annual Report on Form 10-K.

Current wording

The MD&A is based upon, and should be read in conjunction with Item 7A.Quantitative and Qualitative Disclosures About Market Risks and our Consolidated Financial Statements and related Notes included under Item 8 of this Annual Report on Form 10-K.

Previous wording

Who We Are***.***Founded in 1932, Ethan Allen is a leading interior design company, manufacturer and retailer in the home furnishings marketplace. We are a global luxury home fashion brand that is vertically integrated from product design through home delivery, which offers clients stylish product offerings, artisanal quality and personalized service. We are known for the quality and craftsmanship of our products as well as for the exceptional personal service from design to delivery. We provide complimentary interior design service to our clients and sell a full range of home furnishings through a retail network of design centers located throughout the United States and internationally as well as online at ethanallen.com.

Current wording

Who We Are***.***Founded in 1932, Ethan Allen is a leading interior design company, manufacturer and retailer in the home furnishings marketplace. We are a global luxury home fashion brand that is vertically integrated from product design through home delivery, which offers clients stylish product offerings, artisanal quality and personalized service. We are known for the quality and craftsmanship of our products as well as for the exceptional personal service from design to delivery. We provide complimentary interior design service to our clients and sell a full range of home furnishings through a retail network of design centers located throughout the U.S. and internationally as well as online at ethanallen.com.

Previous wording

Ethan Allen design centers represent a mix of locations operated by independent licensees and Company-operated locations. At June 30, 2024, the Company operates 142 retail design centers, 138 located in the United States and four in Canada. Our independently operated design centers are located in the United States, Asia, the Middle East and Europe. We also own and operate ten manufacturing facilities, including four manufacturing plants, one sawmill, one rough mill and a kiln dry lumberyard in the United States, two upholstery manufacturing plants in Mexico and one case goods manufacturing plant in Honduras. Approximately 75% of our furniture is manufactured in our North American plants. We also contract with various suppliers located in Europe, Asia and other various countries to import products that support our business.

Current wording

We also own and operate eleven manufacturing facilities, including four manufacturing plants, one sawmill, one rough mill and a kiln dry lumberyard in the U.S., three upholstery manufacturing plants in Mexico and one case goods manufacturing plant in Honduras. Approximately 75% of our furniture is manufactured in our North American plants. In addition, we contract with various suppliers located in Europe, Asia and other various countries to import products that support our business.

Previous wording

We aim to position Ethan Allen as a premier interior design destination and a preferred brand offering products of superior style, quality, and value to customers with a comprehensive, one-stop shopping solution for their home furnishing and interior design needs. We seek to constantly reinvent our projection and product offerings through a broad selection of products, designed to complement one another, reflecting current fashion trends in home furnishing. Our vertical integration is a competitive advantage for us. Our North American manufacturing and logistics operations are an integral part of an overall strategy to maximize production efficiencies and maintain this competitive advantage.

Current wording

*Business Model.*Our vertical integration is a competitive advantage for us. Our North American manufacturing and logistics operations are an integral part of an overall strategy to maximize production efficiencies and maintain this competitive advantage. Our business model is to maintain continued focus on (i) providing relevant product offerings, (ii) capitalizing on the professional and personal service offered to our customers by our interior design professionals, (iii) leveraging the benefits of our vertical integration including a manufacturing presence in North America, (iv) investing in new technologies across key aspects of our vertically integrated business, (v) maintaining a strong logistics network, (vi) communicating our messages with strong marketing campaigns, and (vii) utilizing our website, ethanallen.com, as a key marketing tool to drive traffic to our retail design centers. We aim to position Ethan Allen as a premier interior design destination and a preferred brand offering products of superior style, quality, and value to customers with a comprehensive, one-stop shopping solution for their home furnishing and interior design needs. We seek to constantly reinvent our projection and product offerings through a broad selection of products, designed to complement one another, reflecting current fashion trends in home furnishing.

Previous wording

*Talent.*At June 30, 2024, our employee count totaled 3,404, with 2,376 employees in our wholesale segment and 1,028 in our retail segment. We are pleased with the continued strengthening of our teams and the performance of our employees during fiscal 2024 while at the same time being able to reduce headcount through operational efficiencies. Our employee count decreased 9.2% during fiscal 2024, with 46 fewer employees in retail and 298 fewer employees in wholesale.

Current wording

*Talent.*At June 30, 2025, our employee count totaled 3,211, with 2,239 employees in our wholesale segment and 972 in our retail segment. Our employee count decreased 5.7% or 193 associates during fiscal 2025, with 56 fewer employees in retail and 137 fewer employees in wholesale. We were pleased to strengthen our teams during fiscal 2025 while at the same time reducing headcount through operational efficiencies.

Previous wording

Fiscal 2024 Financial Year in Review* (1). *Our vertically integrated business delivered positive operating results during a period marked by industry-wide softer demand and challenging headwinds. Our financial results were highlighted by double-digit operating margins, disciplined expense management, strong operating cash flow and a robust balance sheet. We ended the fiscal 2024 year with a strong balance sheet, including cash, cash equivalents and investments of $195.8 million, no outstanding debt, and $80.2 million of cash generated from operating activities. Our Board increased our regular quarterly cash dividend by 8.3% to $0.39 per share and declared a special cash dividend of $0.50 per share, bringing the total amount of dividends paid to $50.3 million during the fiscal year. Consolidated net sales of $646.2 million were down 18.3% compared to the prior year due to lower delivered unit volumes, reduced manufacturing from lower backlogs, softening demand and a strong prior year comparable. Our consolidated gross margin of 60.8% was comparable to the prior year as benefits from lower raw material input costs, reduced headcount, and disciplined promotional activity were offset by lower delivered unit volume. Adjusted operating margin of 12.1% remained above pre-pandemic levels primarily due to strong gross margins and lower operating expenses from disciplined cost control initiatives. Adjusted diluted earnings per share was $2.49. We ended the fiscal year with wholesale backlog of $53.5 million, down 27.7% from a year ago. However, backlog is now more reflective of historical norms and near pre-pandemic levels.

Current wording

Fiscal 2025 Financial Year in Review* (1). *Our financial performance during fiscal 2025 was highlighted by strong margins, positive operating cash flow and a robust balance sheet despite operating in a challenging environment. We generated strong operating cash flow of $61.7 million, which helped us grow our cash, cash equivalents and investments total to $196.2 million at June 30, 2025. We continued our history of returning capital to shareholders by paying four regular cash dividends of $0.39 and declared a special cash dividend of $0.40 per share, bringing the total amount of dividends paid to $50.1 million during fiscal 2025. Consolidated net sales of $614.6 million were down 4.9% compared to the prior year due to lower delivered unit volume, reduced available backlog, less design center traffic and fewer contract sales partially offset by higher average ticket prices. We ended the fiscal year with wholesale backlog of $48.9 million, down 8.7% from a year ago due to lower contract volume and improved customer lead times. Our consolidated gross margin of 60.5% was comparable to 60.8% in the prior year as benefits from a change in sales mix, lower input costs, reduced headcount, fewer designer floor sample sales and selective price increases were offset by lower unit volume sales, increased promotional activity and higher financing costs. Our adjusted operating margin was 10.2% compared to 12.1% in the prior year primarily due to deleveraging from lower unit sales partially offset by disciplined cost management and gross margin preservation. Adjusted diluted earnings per share of $2.04 was down from $2.49 in the prior year.

Previous wording

Wholesale net sales in fiscal 2024 decreased $78.5 million or 17.5% compared to the prior year primarily due to decreases in intersegment sales to our Company-operated design centers, sales to our independent dealers and contract sales. Lower sales primarily reflect lower incoming written orders, a decline in delivered unit volume and backlog returning to near pre-pandemic levels. Excluding intersegment sales to our retail segment, wholesale net sales decreased $23.2 million or 18.0% compared to the prior year period. Our contract sales, including shipments to the United States government General Services Administration (“GSA”), decreased due to lower backlog, timing of purchases and a slowdown in government spending. Our international sales, which represent 1.9% of total wholesale net sales, decreased primarily from lower net sales to our international retailers in Southeast Asia and the Middle East partially offset by improving sales to China.

Current wording

Wholesale net sales in fiscal 2025 decreased 3.2% compared to the prior year primarily due to a decline in contract sales partially offset by an increase in intersegment sales to our Company-operated design centers. Excluding intersegment sales to our retail segment, wholesale net sales decreased $14.2 million or 13.4% compared to the prior year period. Our contract sales, including shipments to the GSA, decreased 23.7% due to less incoming orders as a result of the slowdown in government spending, which led to lower available backlog. Our international sales, which represented 1.4% of total wholesale net sales in fiscal 2025, decreased 27.6% from lower net sales to China.

Previous wording

Retail net sales from Company-operated design centers decreased $122.0 million or 18.4% during fiscal 2024 compared to the prior year period. There was an 18.6% decrease in net sales in the United States, while sales from our Canadian design centers decreased 9.1%. The decline in retail net sales was primarily from a decline in delivered unit volume as a result of lower manufacturing levels, combined with lower written orders, reduced backlog and decreased premier home delivery revenue partially offset by higher designer floor sample sales and selective price increases.

Current wording

Retail net sales from Company-operated design centers decreased 3.2% during fiscal 2025 compared to the prior year primarily from reduced delivered unit volumes, lower written orders, less available backlog, lower designer floor sample sales and decreased premier home delivery revenue partially offset by an increase in average ticket price. Sales in the U.S. were down 2.7% while sales from our Canadian design centers decreased 20.8%.

Previous wording

Wholesale gross margin was down 70 basis points over the prior year period due to reduced production volumes which led to increased plant inefficiencies and related manufacturing variances, inflationary pressure on labor and rising fuel costs partially offset by lower raw material input costs, reduced headcount and investments in technology, which helped streamline production workflows. Lower raw material input costs were led by reduced commodity prices and improved sourcing.

Current wording

Consolidated gross margin was 60.5%, a 30-basis point decline over the prior year due to lower unit volume sales and higher financing costs partially offset by a change in sales mix, lower raw material and freight input costs, reduced headcount, fewer designer floor sample sales and selective price increases which contributed to a higher average ticket price. Retail sales, when expressed as a percentage of total consolidated net sales, were 85.1% in fiscal 2025, up from 83.6% in the prior year period, which had a positive impact on our consolidated gross margin. Wholesale gross margin was up 70 basis points over the prior year due to lower raw material and fuel input costs, reduced headcount and investments in technology, which helped streamline production workflows. These benefits were partially offset by reduced production volumes from lower incoming written orders, which led to increased plant inefficiencies and higher manufacturing variances. Our retail gross margin decreased 30 basis points compared to the prior year due to higher financing costs and increased promotional levels partially offset by higher average ticket price and a decline in sales of designer floor samples.

Previous wording

SG&A expenses** **for fiscal 2024 decreased $31.7 million or 9.2% compared to the prior year period due to lower selling expenses from less delivered net sales and a reduction in general and administrative costs. When expressed as a percentage of sales, SG&A expenses were 48.8% compared to 43.8% in the prior year period, an increase of 500 basis points due to fixed cost deleveraging from lower delivered sales partially offset by lower headcount and a disciplined approach to cost savings. SG&A expenses were down 9.2% while consolidated sales decreased 18.3%, which led to a decrease in operating leverage.

Current wording

SG&A expenses** **for fiscal 2025 decreased $5.4 million or 1.7% compared to the prior year. When expressed as a percentage of sales, SG&A expenses were 50.4%, an increase from 48.8% in the prior year primarily due to fixed cost deleveraging from lower delivered sales. SG&A expenses were down 1.7% while consolidated sales decreased 4.9%, which led to a decrease in operating leverage.

Previous wording

Consolidated selling expenses were down 14.4% during fiscal 2024. Wholesale selling expenses, which include our logistics operation, decreased 16.8% primarily from a 17.1% decline in wholesale units shipped, lower freight costs including fuel, and less outgoing distribution costs combined with reduced headcount partially offset by an increase in technology spend. Retail selling expenses were down 13.6% due to lower designer variable compensation and reduced delivery costs from the 18.4% decrease in retail net sales partially offset by increased occupancy expenses and costs associated with our design center refreshes completed during fiscal 2024. Our consolidated advertising expenses were equal to 2.5% of net sales, up from 2.2% in the prior year period as we increased our direct mail campaigns focusing on being the premier interior design destination with new product introductions.

Current wording

Consolidated selling expenses were down 3.6% during fiscal 2025. Wholesale selling expenses, which include our logistics operation, decreased 0.1% from a 9.8% decline in wholesale units shipped, lower freight costs including fuel, and less outgoing distribution costs combined with reduced headcount partially offset by an increase in advertising expenses and digital and web-technology spend. Retail selling expenses were down 4.8% due to reduced delivery costs from lower delivered revenue, less headcount and lower designer variable compensation from lower retail sales. Consolidated advertising expenses were equal to 2.9% of net sales, up from 2.5% in the prior year due to increased digital media spend, including paid social campaigns and a higher volume of digital magazine mailings.

Previous wording

Restructuring and other charges, net of gains for fiscal 2024 was a gain of $0.1 million compared to a gain of $3.7 million in the prior year period. The fiscal 2024 restructuring credit was due to a $2.6 million gain related to the amortization of the deferred liability generated from the August 1, 2022 sale-leaseback transaction partially offset by a $2.2 million net loss incurred from the damage sustained in the July 2023 Vermont flooding and severance costs of $0.4 million. Vermont flood losses incurred from the disposal of damaged inventory, inoperable machinery equipment from water damage, facility cleanup, and restoration, were $2.2 million, net of insurance recoveries and grant proceeds. In the prior year period, we recognized a gain of $4.2 million on the sale-leaseback transaction as well as a gain of $0.3 million on the sale of a property partially offset by severance costs of $0.7 million.

Current wording

Restructuring and other charges, net of gains for fiscal 2025 was a charge of $0.3 million and related primarily to severance and other charges. Included within other charges was $0.1 million from a recent fire within our Vermont sawmill. The temporary disruption caused by the June 2025 fire did not have a material impact on our operations as the facility resumed operations by early July. Losses incurred were from the disposal of damaged inventory, inoperable equipment from fire damage, facility cleanup and restoration and we are working through insurance to recover a portion of our losses incurred. The prior year gain of $0.1 million related to a $2.6 million gain related to the amortization of the deferred liability generated from the sale-leaseback transaction completed on August 1, 2022 partially offset by $2.2 million in net losses from the July 2023 Vermont flood and $0.4 million in severance and other charges.

Previous wording

Consolidated operating income** **for fiscal 2024 decreased $59.2 million or 43.2%. Adjusted operating income, which excludes restructuring and other charges, net of gains, was $77.9 million, or 12.1% of net sales compared with $133.5 million, or 16.9% of net sales in the prior year period. The decrease in operating income was driven by lower consolidated net sales partially offset by lower SG&A expenses. We remain focused on a disciplined approach to cost savings and expense control in a declining net sales environment, which helped mitigate the impact of the reduction in consolidated net sales.

Current wording

Consolidated operating income** **for fiscal 2025 decreased $16.0 million or 20.5%. Adjusted operating income was $62.9 million, or 10.2% of net sales compared with $77.9 million, or 12.1% of net sales in the prior year. The primary driver of reduced operating income was lower consolidated net sales partially offset by lower SG&A expenses. We remain focused on a disciplined approach to cost savings and expense control in a challenging environment, which helped mitigate the impact of reduced consolidated net sales.

Previous wording

Wholesale operating income for fiscal 2024 was $48.7 million or 13.1% of net sales, compared to $68.8 million or 15.3% in the prior year period. Adjusted wholesale operating income, which excludes restructuring and other charges, net of gains, was $51.1 million, or 13.8% of net sales compared with $69.0 million, or 15.3% of net sales in the prior year period. The decrease in adjusted wholesale operating income was driven primarily by the 17.5% decline in wholesale net sales partially offset by the 13.8% reduction in wholesale SG&A expenses.

Current wording

Wholesale operating income for fiscal 2025 was $47.0 million or 13.1% of net sales, compared to $48.7 million or 13.1% in the prior year. The decrease in wholesale operating income was driven by the $12.0 million decline in wholesale net sales partially offset by a 70-basis point increase in gross margin combined with higher restructuring charges in the prior year related to the Vermont flood.

Previous wording

Retail operating income for fiscal 2024 was $24.7 million or 4.6% of retail net sales, compared to $67.3 million or 10.2% in the prior year period. Adjusted retail operating income, which excludes restructuring and other charges, net of gains, was $22.2 million, or 4.1% of net sales compared with $63.4 million, or 9.6% of net sales in the prior year period. The decrease in adjusted retail operating income is driven primarily by the 18.4% decrease in retail net sales partially offset by the 7.6% reduction in retail SG&A expenses.

Current wording

Retail operating income for fiscal 2025 was $19.8 million or 3.8% of retail net sales, compared to $24.7 million or 4.6% in the prior year. The decrease in operating income was driven primarily by the $17.4 million reduction in retail net sales combined with a 30-basis point drop in gross margin partially offset by a decline in SG&A expenses.

Previous wording

Interest and other income, net includes interest income on investments, foreign currency gains or losses and other income or expense incurred outside our normal course of business. Interest and other income, net increased 90.5% to $7.7 million during fiscal 2024 due to incremental interest income driven by higher investment balances.

Current wording

Interest and other income, net includes interest income on investments, foreign currency gains or losses and other income (expense) incurred outside our normal course of business. Interest and other income, net decreased 5.5% to $7.3 million during fiscal 2025 due to foreign currency losses reflecting greater volatility in exchange rates, including a weaker U.S. dollar partially offset by an additional $0.1 million in interest income on our investments.

Previous wording

Income tax expense was $21.6 million compared with $35.2 million in the prior year due to the $55.6 million decrease in income before income taxes as our consolidated effective tax rate was 25.3% compared with 25.0% in the prior year. Our effective tax rate of 25.3% varies from the 21% federal statutory rate primarily due to state taxes.

Current wording

Income tax expense for fiscal 2025 decreased $4.2 million or 19.4% compared with the prior year due to the $16.4 million decrease in income before income taxes. Our effective tax rate was 25.2% compared with 25.3% in the prior year. Our effective tax rate of 25.2% varies from the 21% federal statutory rate primarily due to state taxes.

Previous wording

Net income for fiscal 2024 was $63.8 million compared with $105.8 million in the prior year period. Adjusted net income, which removes the after-tax impact of restructuring and other charges, net of gains, was $63.8 million, a decrease of 38.1% compared to $103.1 million in the prior year period. The decrease in net income and adjusted net income was driven by the $145.2 million reduction in consolidated net sales partially offset by lower operating expenses.

Current wording

Net income for fiscal 2025 was $51.6 million compared with $63.8 million in the prior year period. Adjusted net income was $52.3 million, a decrease of 18.0% compared with $63.8 million in the prior year period. The decrease in net income was driven by the $31.6 million reduction in consolidated net sales partially offset by lower SG&A expenses.

Previous wording

Diluted EPS for fiscal 2024 was $2.49 compared to $4.13 per diluted share in the prior year period. Adjusted diluted EPS was $2.49, down 38.2% compared with the prior year period. The decrease in diluted EPS was primarily due to lower consolidated net sales partially offset by lower operating expenses.

Current wording

Diluted EPS for fiscal 2025 was $2.01 compared to $2.49 per diluted share in the prior year period. Adjusted diluted EPS was $2.04, down 18.1% compared with the prior year period. The decrease in diluted EPS was primarily due to lower consolidated net sales partially offset by lower SG&A expenses.

Previous wording

To supplement the financial measures prepared in accordance with GAAP, we use non-GAAP financial measures, including adjusted operating income and margin, adjusted wholesale operating income and margin, adjusted retail operating income and margin, adjusted net income and adjusted diluted EPS. The reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are shown in the tables below.

Current wording

To supplement the financial measures prepared in accordance with GAAP, we use non-GAAP financial measures, including adjusted operating income and margin, adjusted net income and adjusted diluted EPS. The reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are shown in the tables below.

Previous wording

Our sources of liquidity include cash and cash equivalents, short-term and long-term investments, cash generated from operations and amounts available under our credit facility. We believe these sources remain adequate to meet our short-term and long-term liquidity requirements, finance our long-term growth plans, invest in capital expenditures and fulfill other cash requirements for day-to-day operations and contractual obligations. We are committed to maintaining a strong balance sheet and monitoring our liquidity closely.

Current wording

Our sources of liquidity include cash and cash equivalents, short-term and long-term investments, cash generated from operations and amounts available under our credit facility. We believe these sources remain adequate to meet our short-term requirements and contractual obligations and fulfill other cash requirements for day-to-day operations for at least the next twelve months, as well as to meet long-term liquidity requirements and contractual obligations, finance our long-term growth plans and invest in capital expenditures for the foreseeable future. We are committed to maintaining a strong balance sheet and monitoring our liquidity closely.

Previous wording

At June 30, 2024, we had working capital of $179.0 million compared with $196.4 million at June 30, 2023 and a current ratio of 2.16 at June 30, 2024, comparable to 2.20 a year ago. Our non-U.S. subsidiaries held $4.3 million in cash and cash equivalents at June 30, 2024, which we have determined to be permanently reinvested.

Current wording

At June 30, 2025, we had working capital of $157.1 million compared with $179.0 million at June 30, 2024 and a current ratio of 2.03 at June 30, 2025, comparable to 2.16 a year ago. Our non-U.S. subsidiaries held $3.6 million in cash and cash equivalents at June 30, 2025, which we have determined to be permanently reinvested.

Previous wording

At June 30, 2024, we held cash and cash equivalents of $69.7 million compared with $62.1 million at June 30, 2023. Cash and cash equivalents aggregated to 9.4% of our total assets at June 30, 2024, compared with 8.3% a year ago. In addition to cash and cash equivalents of $69.7 million, we had aggregated investments of $126.1 million at June 30, 2024 compared with $110.6 million at June 30, 2023. Our investments at June 30, 2024 are within U.S. Treasury bills and notes, which we expect will further enhance our returns on excess cash. Our U.S. Treasury bills totaled $91.3 million with maturities of less than one year while our U.S. Treasury notes totaled $34.8 million with maturities ranging between one and two years. We believe our cash, cash equivalents and investments are available to meet short-term liquidity needs.

Current wording

At June 30, 2025, we held cash and cash equivalents of $76.2 million compared with $69.7 million at June 30, 2024. Cash and cash equivalents aggregated to 10.3% of our total assets at June 30, 2025, compared with 9.4% a year ago. In addition to cash and cash equivalents of $76.2 million, we had aggregated investments of $120.0 million at June 30, 2025 compared with $126.1 million at June 30, 2024. Our investments at June 30, 2025 are within U.S. Treasury bills and notes, which we expect will further enhance our returns on excess cash. Our U.S. Treasury bills with maturities of less than one year totaled $60.0 million while our U.S. Treasury notes with maturities ranging between one and two years totaled $60.0 million. We believe our cash, cash equivalents and investments are available to meet short-term liquidity needs.

Previous wording

The following table illustrates the main components of our cash flows for each of the last three fiscal years.

Current wording

The following table illustrates the main components of our cash flows during each of the last three fiscal years.

Previous wording

Our cash and cash equivalents increased $7.6 million or 12.2% during fiscal 2024 due to net cash provided by operating activities of $80.2 million partially offset by $50.3 million in cash dividends paid, capital expenditures of $9.6 million, $10.4 million in net purchases of investments and $2.1 million in taxes paid related to net share settlement of vested RSUs and PSUs.

Current wording

Our cash, cash equivalents and restricted cash increased $6.7 million or 9.6% during fiscal 2025 due to $61.7 million in net cash provided by operating activities and $8.9 million of proceeds from sales of investments, net of purchases, partially offset by $50.1 million in cash dividends paid, capital expenditures of $11.3 million and $2.2 million in taxes paid related to net share settlement of vested equity awards.

Previous wording

Cash used in investing activities was $20.0 million during fiscal 2024, compared with cash used of $101.5 million in the prior year period. During fiscal 2024, we had $10.4 million of net purchases of investments, which represent $124.5 million of U.S. Treasuries that matured during the year and were subsequently reinvested at a higher amount totaling $134.9 million. The prior year period included $97.5 million of net purchases of investments to further enhance our returns on our cash as well as to fund future obligations. In addition, the prior year included $8.1 million in proceeds received from the sale-leaseback transaction completed in August 2022 as well as the sale of a property for $1.8 million in April 2023. Capital expenditures during fiscal 2024 were $9.6 million compared with $13.9 million in the prior year period. Fiscal 2024 capital expenditures primarily related to design center openings, relocations and improvements, replacement of machinery and equipment used within our manufacturing and distribution facilities, and investments in technology. Capital expenditures a year ago were higher as we made significant safety and efficiency upgrades within our manufacturing plants.

Current wording

Cash used in investing activities was $2.4 million during fiscal 2025, compared with $20.0 million in the prior year. During fiscal 2025, we had $8.9 million of proceeds from sales of investments, net of purchases, which represented $94.1 million of U.S. Treasuries that matured during the fiscal year of which $85.2 million was reinvested. The prior year included an outgoing $10.4 million of net purchases of investments, which related to $124.5 million of U.S. treasuries that matured during the year and were subsequently reinvested at a higher amount of $134.9 million. Capital expenditures during fiscal 2025 were $11.3 million compared with $9.6 million in the prior year as we further expanded our manufacturing facilities in Mexico, remodeled our hotel, built-out new retail design centers and continued to invest in new manufacturing equipment and technology.

Previous wording

Cash used in financing activities was $52.3 million during fiscal 2024, an increase from $47.6 million in the prior year period primarily due to the $3.9 million increase in dividends paid. Effective May 2024, the regular quarterly dividend increased 8.3%, from $0.36 to $0.39 per share. A special cash dividend of $0.50 per share was also paid in both the current and prior year periods. In addition, during fiscal 2024 a total of 67,824 shares valued at $2.1 million were repurchased from employees to satisfy their withholding tax obligations upon vesting of RSUs and PSUs. This compared to $0.8 million repurchased for tax obligations upon vesting of RSUs and PSUs in the prior year period. There were no share repurchases under our existing multi-year share repurchase program during fiscal 2024 or 2023.

Current wording

Cash used in financing activities was $52.6 million during fiscal 2025 compared with $52.3 million in the prior year. Total dividends paid were $50.1 million, a decrease of 0.4% from a year ago due to a reduction in the special cash dividend paid, which went from $0.50 per share last year to $0.40 in the current year. The decrease in our special cash dividend was offset by an 8.3% increase in our regular quarterly dividend, which rose from $0.36 to $0.39 per share, effective May 2024. In addition, during fiscal 2025, a total of 70,495 shares valued at $2.2 million were repurchased from employees to satisfy their withholding tax obligations upon vesting of equity awards. This compared to $2.1 million repurchased for similar withholding tax obligations in the prior year period.

Previous wording

We present restricted cash as a component of total cash and cash equivalents on our consolidated statements of cash flows and withinOther assets on our consolidated balance sheets. At both June 30, 2024 and 2023, we held $0.5 million of restricted cash related to the Ethan Allen insurance captive.

Current wording

We present restricted cash as a component of total cash and cash equivalents on our consolidated statements of cash flows and withinOther assets on our consolidated balance sheets. At June 30, 2025 we held $0.8 million of restricted cash related to the Ethan Allen insurance captive compared to $0.5 million in the prior year.

Previous wording

Due to changes in exchange rates, our cash and cash equivalents were negatively impacted by $0.3 million during fiscal 2024 compared with a $0.2 million positive impact in the prior year period. These changes had an immaterial impact on our cash balances held in Canada, Mexico and Honduras.

Current wording

Due to changes in exchange rates, our cash and cash equivalents were impacted by less than $0.1 million during fiscal 2025 compared with $0.3 million in the prior year period. These changes had an immaterial impact on our cash balances held in Canada, Mexico and Honduras.

Previous wording

Capital Needs. On January 26, 2022, we entered into a Third Amended and Restated Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A. as administrative agent and syndication agent and Capital One, National Association, as documentation agent. The Credit Agreement amended and restated the Second Amended and Restated Credit Agreement, dated as of December 21, 2018, as amended. The Credit Agreement provides for a $125 million revolving credit facility (the “Facility”), subject to borrowing base availability, with a maturity date of January 26, 2027. The Credit Agreement also provides us with an option to increase the size of the Facility up to an additional amount of $60 million. Availability under the Facility fluctuates according to a borrowing base calculated on eligible accounts receivable and inventory, net of customer deposits and reserves. The Facility includes covenants that apply under certain circumstances, including a fixed-charge coverage ratio requirement that applies when excess availability under the credit line is less than certain thresholds. As of June 30, 2024, we were not subject to the fixed-charge coverage ratio requirement, had no borrowings outstanding under the Facility, were in compliance with all other covenants, and had borrowing availability of $121.0 million of the $125.0 million credit commitment. We incurred financing costs of $0.5 million during fiscal 2022, which are being amortized as interest expense over the remaining life of the Facility using the effective interest method. See Note 12,Credit Agreement, to the consolidated financial statements included under Item 8 of this Annual Report on Form 10-K, for a further description of the Credit Agreement.

Current wording

Capital Needs. On January 26, 2022, we entered into a Third Amended and Restated Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A. as administrative agent and syndication agent and Capital One, National Association, as documentation agent. The Credit Agreement amended and restated the Second Amended and Restated Credit Agreement, dated as of December 21, 2018, as amended. The Credit Agreement provides for a $125 million revolving credit facility (the “Facility”), subject to borrowing base availability, with a maturity date of January 26, 2027. The Credit Agreement also provides us with an option to increase the size of the Facility up to an additional amount of $60 million. Availability under the Facility fluctuates according to a borrowing base calculated on eligible accounts receivable and inventory, net of customer deposits and reserves. The Facility includes covenants that apply under certain circumstances, including a fixed-charge coverage ratio requirement that applies when excess availability under the credit line is less than certain thresholds. As of June 30, 2025, we were not subject to the fixed-charge coverage ratio requirement, had no borrowings outstanding under the Facility, were in compliance with all other covenants, and had borrowing availability of $121.0 million of the $125.0 million credit commitment. See Note 12,Credit Agreement, to the consolidated financial statements included under Item 8 of this Annual Report on Form 10-K, for a further description of the Credit Agreement.

Previous wording

We have no material contractual commitments outstanding for future capital expenditures and anticipate that cash from operations will be sufficient to fund future capital expenditures.

Current wording

We have no material contractual commitments outstanding for future capital expenditures and anticipate that cash from operations will be sufficient to fund future capital expenditures at least for the next twelve months and foreseeable future.

Previous wording

During fiscal 2024 we paid a total of $1.97 per share in cash dividends for an aggregate total of $50.3 million. This included the special dividend paid in August 2023 totaling $12.7 million. In the prior year period, total dividends paid were $46.4 million. With our dividends, we have returned $671.2 million to shareholders since our initial public offering in 1993.

Current wording

During fiscal 2025 we paid a total of $1.96 per share in cash dividends for an aggregate total of $50.1 million. This included the special dividend paid on August 29, 2024 totaling $10.2 million. In the prior year period, total dividends paid were $50.3 million. With our dividends, we have returned $721.3 million to shareholders since our initial public offering in 1993.

Previous wording

We have paid a special cash dividend each of the past four years and paid an annual cash dividend every year since 1996. Although we expect to continue to declare and pay quarterly cash dividends for the foreseeable future, the payment of future cash dividends is within the discretion of our Board of Directors and will depend on our earnings, operations, financial condition, capital requirements and general business outlook, among other factors. Our credit agreement also includes covenants that include limitations on our ability to pay dividends.

Current wording

We have paid a special cash dividend each of the past five years and paid an annual cash dividend every year since 1996. Although we expect to continue to declare and pay quarterly cash dividends for the foreseeable future, the payment of future cash dividends is within the discretion of our Board and will depend on our earnings, operations, financial condition, capital requirements and general business outlook, among other factors. Our credit agreement also includes covenants with certain limitations on our ability to pay dividends.

Previous wording

Fluctuations in our operating results, levels of inventory on hand, operating lease commitments, the degree of success of our accounts receivable collection efforts, the timing of tax and other material payments, the rate of written orders and net sales, levels of customer deposits on hand, as well as capital expenditures will impact our liquidity and cash flows in future periods. The effect of our contractual obligations on our liquidity and capital resources in future periods should be considered in conjunction with the factors mentioned here. At June 30, 2024, we had total contractual obligations of $197.9 million, comparable to $199.1 million a year ago as there were no material changes during fiscal 2024.

Current wording

Fluctuations in our operating results, levels of inventory on hand, operating lease commitments, the degree of success of our accounts receivable collection efforts, the timing of tax and other material payments, the rate of written orders and net sales, levels of customer deposits on hand, as well as capital expenditures will impact our liquidity and cash flows in future periods. The effect of our contractual obligations on our liquidity and capital resources in future periods should be considered in conjunction with the factors mentioned here. At June 30, 2025, we had total contractual obligations of $182.8 million, down from $197.9 million a year ago primarily due to lower retail design center lease obligations and timing of purchase orders for the procurement of finished goods and raw materials.

Previous wording

Product Warranties***.***At June 30, 2024 and 2023, our product warranty liability totaled $1.0 million and $1.3 million, respectively. Our products, including our case goods, upholstery and home accents, generally carry explicit product warranties and are provided based on terms that are generally accepted in the industry. All our domestic independent retailers are required to enter into and perform in accordance with the terms and conditions of a warranty service agreement. We record provisions for estimated warranty and other related costs at time of sale based on historical warranty loss experience and make periodic adjustments to those provisions to reflect actual experience.

Current wording

Product Warranties***.***At both June 30, 2025 and 2024, our product warranty liability totaled $1.0 million. Our products, including case goods, upholstery and home accents, generally carry explicit product warranties and are provided based on terms that are generally accepted in the industry. All our domestic independent retailers are required to enter into and perform in accordance with the terms and conditions of a warranty service agreement. We record provisions for estimated warranty and other related costs at time of sale based on historical warranty loss experience and make periodic adjustments to those provisions to reflect actual experience.

Previous wording

The recoverability of long-lived assets, including those held by our retail design centers, is evaluated for impairment whenever events or changes in circumstances indicate that we may not be able to recover the carrying amount of an asset or asset group. Conditions that may indicate impairment include, but are not limited to, a significant adverse change in customer demand or business climate that could affect the value of an asset, change in the intended use of an asset, a product recall or an adverse action or assessment by a regulator. If the sum of the estimated undiscounted future cash flows over the remaining life of the primary asset is less than the carrying value, we recognize a loss equal to the difference between the carrying value and the fair value, usually determined by the estimated discounted cash flow analysis or independent third-party appraisal of the asset or asset group. While determining fair value requires a variety of input assumptions and judgment, we believe our estimates of fair value are reasonable. The asset group is defined as the lowest level for which identifiable cash flows are available and largely independent of the cash flows of other groups of assets, which for our retail segment is the individual design center. For retail design center level long-lived assets, expected cash flows are determined based on our estimate of future net sales, margin rates and expenses over the remaining expected terms of the leases.

Current wording

The recoverability of long-lived assets, including those held by our retail design centers, is evaluated for impairment whenever events or changes in circumstances indicate that we may not be able to recover the carrying amount of an asset or asset group. Conditions that may indicate impairment include, but are not limited to, a significant adverse change in customer demand or business climate that could affect the value of an asset, change in the intended use of an asset, a product recall or an adverse action or assessment by a regulator. If the sum of the estimated undiscounted future cash flows over the remaining life of the primary asset is less than the carrying value, we recognize a loss equal to the difference between the carrying value and the fair value, usually determined by the estimated discounted cash flow analysis or independent third-party appraisal of the asset or asset group. While determining fair value requires a variety of input assumptions and judgment, we believe our estimates of fair value are reasonable. The asset group is defined as the lowest level for which identifiable cash flows are available and largely independent of the cash flows of other groups of assets, which for our retail segment is the individual design center. For retail design center long-lived assets, expected cash flows are determined based on our estimate of future net sales, margin rates and expenses over the remaining expected terms of the leases.

Previous wording

We review the carrying value of our goodwill and intangible assets with indefinite lives at least annually, during the fourth quarter, or more frequently if an event occurs or circumstances change, for possible impairment. Both goodwill and indefinite-lived intangible assets are assigned to our wholesale reporting unit which is principally involved in the development of the Ethan Allen brand and encompasses all aspects of design, manufacturing, sourcing, marketing, sale and distribution of the Company’s broad range of home furnishings and accents.

Current wording

We review the carrying value of our goodwill and intangible assets with indefinite lives at least annually, during the fourth quarter, or more frequently if an event occurs or circumstances change, for possible impairment. Both goodwill and indefinite-lived intangible assets are assigned to our wholesale reporting unit which is principally involved in the development of the Ethan Allen brand and encompasses all aspects of design, manufacturing, sourcing, marketing, sale and distribution of our home furnishings and accents.

Previous wording

We performed our annual indefinite-lived intangible asset impairment test during the fourth quarter of fiscal 2024 utilizing a qualitative analysis and concluded it was more likely than not the fair value of our trade name was greater than its carrying value and no impairment charge was required. Qualitative factors reviewed included a review for significant adverse changes in customer demand or business climate that could affect the value of the asset, a product recall or an adverse action or assessment by a regulator.

Current wording

We performed our annual indefinite-lived intangible asset impairment test during the fourth quarter of fiscal 2025 utilizing a qualitative analysis and concluded it was more likely than not the fair value of our trade name was greater than its carrying value and no impairment charge was required. Qualitative factors reviewed included a review for significant adverse changes in client demand or business climate that could affect the value of the asset, a product recall or an adverse action or assessment by a regulator.

Previous wording

Inventories (finished goods, work in process and raw materials) are stated at the lower of cost, determined on a first-in, first-out basis, and net realizable value. Cost is determined based solely on those charges incurred in the acquisition and production of the related inventory (i.e. material, labor and manufacturing overhead costs). At June 30, 2024 our inventory reserves totaled $1.8 million, which we estimate for excess quantities and obsolete items based on specific identification and historical write-downs, taking into account future demand and market conditions. Our inventory reserves contain uncertainties that require management to make assumptions and to apply judgment regarding a number of factors, including market conditions, the selling environment, historical results and current inventory trends. We adjust our inventory reserves for net realizable value and obsolescence based on trends, aging reports, specific identification and estimates of future retail sales prices. If actual demand or market conditions change from our prior estimates, we adjust our inventory reserves accordingly throughout the period. We have not made any material changes to our assumptions included in the calculations of the lower of cost or net realizable value reserves during the periods presented.

Current wording

Inventories (finished goods, work in process and raw materials) are stated at the lower of cost, determined on a first-in, first-out basis, and net realizable value. Cost is determined based solely on those charges incurred in the acquisition and production of the related inventory (i.e. material, labor and manufacturing overhead costs). At June 30, 2025 our inventory reserves totaled $1.5 million, which we estimate for excess quantities and obsolete items based on specific identification and historical write-downs, taking into account future demand and market conditions. Our inventory reserves contain uncertainties that require management to make assumptions and to apply judgment regarding a number of factors, including market conditions, the selling environment, historical results and current inventory trends. We adjust our inventory reserves for net realizable value and obsolescence based on trends, aging reports, specific identification and estimates of future retail sales prices. If actual demand or market conditions change from our prior estimates, we adjust our inventory reserves accordingly throughout the period. We have not made any material changes to our assumptions included in the calculations of the lower of cost or net realizable value reserves during the periods presented. Our inventory reserves of $1.5 million at June 30, 2025 were down from $1.8 million a year ago primarily due to a decline in our inventory carrying levels combined with fewer returns and obsolete items.

Previous wording

We are subject to income taxes in the United States and other foreign jurisdictions. Our tax provision is an estimate based on our understanding of laws in Federal, state and foreign tax jurisdictions. These laws can be complicated and are difficult to apply to any business, including ours. The tax laws also require us to allocate our taxable income to many jurisdictions based on subjective allocation methodologies and information collection processes.

Current wording

We are subject to income taxes in the U.S. and other foreign jurisdictions. Our effective tax rate for fiscal 2025 was 25.2% compared with 25.3% in the prior year. Our tax provision is an estimate based on our understanding of laws in Federal, state and foreign tax jurisdictions. These laws can be complicated and are difficult to apply to any business, including ours. The tax laws also require us to allocate our taxable income to many jurisdictions based on subjective allocation methodologies and information collection processes. Our effective tax rate varies from the 21% federal statutory rate primarily due to state taxes.