Financial Analysis

(18) Commitments and Contingencies Commitments represent obligations, such as those for future purchases of goods or services that are not yet recorded on the consolidated balance sheets as liabilities. We record liabilities for commitments when incurred (specifically when the goods or services are received). Fluctuations in our operating results, levels of inventory on hand, the degree of success of our accounts receivable collection efforts, the timing of tax and other payments, as well as capital expenditures will impact our liquidity and cash flows in future periods. Material Cash Requirements from Contractual Obligations. As disclosed in our 2025 Annual Report on Form 10-K, we had total contractual obligations of $182.8 million, including $146.3 million related to our operating and finance lease commitments and $21.0 million of open purchase orders at June 30, 2025. Except for $26.1 million in operating lease payments made to our landlords and $19.0 million of operating lease assets obtained in exchange for $19.0 million of operating lease liabilities during the first nine months of fiscal 2026, there were no other material changes, outside of the ordinary course of business, in our contractual obligations as previously disclosed in our 2025 Annual Report on Form 10-K. Legal Matters. We are routinely party to various legal proceedings in the ordinary course of business, including investigations or as a defendant in litigation. On a quarterly basis, we review our litigati …

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(12) Credit Agreement On January 26, 2022, the Company and most of its domestic subsidiaries (the Loan Parties) 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 amends and restates 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 the Company with an option to increase the size of the facility up to an additional amount of $60 million. We incurred financing costs of $0.5 million during fiscal 2022, which are being amortized as interest expense within Interest and other financing costs in the consolidated statements of comprehensive income over the remaining life of the Credit Agreement using the effective interest method. Availability. The availability of credit at any given time under the Facility will be constrained by the terms and conditions of the Credit Agreement, including the amount of collateral available, a borrowing base formula based upon numerous factors including the value of eligible inventory and eligible accounts receivable, and other restrictions contained in the Facility. All obligations under the Facility are secured by …

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Three months ended March 31, 2026 Three months ended March 31, 2025 Wholesale Retail Eliminations (1) Total Wholesale Retail Eliminations (1) Total Upholstery (2) $ 44,300 $ 55,194 $ (33,314 ) $ 66,180 $ 49,207 $ 54,116 $ (35,676 ) $ 67,647 Case goods (3) 26,950 31,247 (17,636 ) 40,561 32,962 32,097 (21,979 ) 43,080 Accents (4) 15,146 24,210 (14,371 ) 24,985 18,814 25,232 (16,262 ) 27,784 Other (5) (1,477 ) 5,586 - 4,109 (1,993 ) 6,177 - 4,184 Total $ 84,919 $ 116,237 $ (65,321 ) $ 135,835 $ 98,990 $ 117,622 $ (73,917 ) $ 142,695 Nine months ended March 31, 2026 Nine months ended March 31, 2025 Wholesale Retail Eliminations (1) Total Wholesale Retail Eliminations (1) Total Upholstery (2) $ 133,551 $ 182,533 $ (100,656 ) $ 215,428 $ 138,850 $ 183,037 $ (101,110 ) $ 220,777 Case goods (3) 74,710 98,322 (53,288 ) 119,744 86,812 100,775 (56,621 ) 130,966 Accents (4) 45,915 79,571 (43,420 ) 82,066 50,185 81,077 (44,488 ) 86,774 Other (5) (3,225 ) 18,722 - 15,497 (3,990 ) 19,765 - 15,775 Total $ 250,951 $ 379,148 $ (197,364 ) $ 432,735 $ 271,857 $ 384,654 $ (202,219 ) $ 454,292

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(16) Share-Based Compensation We recognized total share-based compensation expense of $0.9 million and $1.1 million during the nine months ended March 31, 2026 and 2025, respectively. These amounts have been included in the consolidated statements of comprehensive income within SG&A expenses . At March 31, 2026 , $1.6 million of total unrecognized compensation expense related to non-vested stock-based awards is expected to be recognized over a weighted average period of 1.8 years. There was no share-based compensation capitalized during the nine months ended March 31, 2026 and 2025. At March 31, 2026, there were 1,082,013 shares of common stock available for future issuance pursuant to The Ethan Allen Interiors Inc. Stock Incentive Plan (the Plan), which provides for the grant of stock-based awards including stock options, restricted stock and stock units. All stock-based awards are approved by the Compensation Committee of the Board of Directors after consideration of recommendations proposed by the Chief Executive Officer. Company policy requires an additional one-year holding period beyond the service vest date for executive officers and members of the Board of Directors. Stock Option Activity Employee Stock Option Grants. There were no stock option awards granted to employees during the nine months ended March 31, 2026 and 2025. Non-Employee Stock Option Grants. The Plan also provides for the grant of stock-based awards to non-employee directors of the Company. During …

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(10) Goodwill and Intangible Assets Our goodwill and intangible assets are comprised of goodwill, which represents the excess of cost over the fair value of net assets acquired, and our Ethan Allen trade name and related trademarks. Both goodwill and indefinite-lived intangible assets are not amortized as they are estimated to have an indefinite life. At March 31, 2026 and June 30, 2025, we had $25.4 million of goodwill and $19.7 million of indefinite-lived intangible assets, all of which is assigned to our wholesale reporting unit. Our wholesale reporting unit 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 Companys broad range of home furnishings and accents. We test our wholesale goodwill and indefinite-lived intangibles for impairment on an annual basis in the fourth quarter of each fiscal year, and more frequently if events or changes in circumstances indicate that it might be impaired. Consistent with the timing of prior years, we performed our annual goodwill and indefinite-lived intangible asset impairment tests 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. …

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(13) Income Taxes The Company's process for determining the provision for income taxes involves using an estimated annual effective tax rate which is based on forecasted annual income and statutory tax rates across the various jurisdictions in which we operate. We recorded a provision for income tax expense of $1.9 million and $9.4 million, respectively, for the three and nine months ended March 31, 2026 compared with $2.9 million and $13.0 in the prior year comparable period. Our consolidated effective tax rate was 24.2% and 25.1%, respectively, for the three and nine months ended March 31, 2026 compared with 23.4% and 24.9%, respectively, for the three and nine months ended March 31, 2025. Our effective tax rate varies from the 21% federal statutory rate primarily due to state taxes. We recognize interest and penalties related to income tax matters as a component of income tax expense. At March 31, 2026, we had $4.2 million of unrecognized tax benefits compared with $3.9 million at June 30, 2025. It is reasonably possible that various matters relating to $0.9 million of the total gross unrecognized tax benefits at March 31, 2026 will be resolved within the next 12 months as exams are completed or statutes expire. If recognized, $0.8 million of unrecognized tax benefits would reduce our income tax expense in the period realized.

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Recently Adopted Accounting Standards or Updates Segment Reporting. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which requires all public entities to provide enhanced disclosures about significant segment expenses. The Company adopted ASU 2023-07 for the fiscal year ended June 30, 2025. We adopted this guidance on a retrospective basis, which modified our annual disclosures beginning in fiscal 2025 and our interim disclosures beginning in fiscal 2026 but did not have a material effect on our financial position, results of operations, or cash flows. Refer to Note 17, Segment Information , in the accompanying notes to the consolidated statements for further detail. Recent Accounting Standards or Updates Not Yet Adopted Income Taxes. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which enhances transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid and to improve the effectiveness of income tax disclosures. This ASU will be effective for our annual financial statements starting in fiscal 2026 and interim periods beginning in the first quarter of fiscal 2027, with early adoption permitted. We are currently evaluating the impact of this accounting standard, but do not expect it to have a material impact on our income tax disclosures. …

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(4) Revenue Recognition Our reported revenue (net sales) consists substantially of product sales. We report product sales net of discounts and recognize them at the point in time when control transfers to the customer. For sales to our customers in our wholesale segment, control typically transfers when the product is shipped. The majority of our shipping agreements are freight-on-board shipping point and risk of loss transfers to our wholesale customer once the product is out of our control. Accordingly, revenue is recognized for product shipments on third-party carriers at the point in time that our product is loaded onto the third-party container or truck. For sales in our retail segment, control generally transfers upon delivery to the customer. We recognize the promised amount of consideration without adjusting for the effects of a significant financing component if the contract has a duration of one year or less. As our contracts typically are less than one year in length and do not have significant financing components, we have not adjusted consideration. Shipping and Handling. Our practice has been to sell our products at the same delivered cost to all retailers and customers nationwide, regardless of shipping point. Costs incurred by the Company to deliver finished goods are expensed and recorded in selling, general and administrative (SG&A) expenses. We recognize shipping and handling expense as fulfillment activities (rather than as a promised good or service) …

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(17) Segment Information Ethan Allen conducts business globally and has strategically aligned its business into two reportable segments: Wholesale and Retail. These two segments represent strategic business areas of our vertically integrated enterprise that operate separately and provide their own distinctive services. Our operating segments are aligned with how the Company and our chief operating decision maker (CODM) who is the Chairman of our Board of Directors, and our President and Chief Executive Officer, evaluates the operating results and performance of the business. We evaluate the performance of our two segments based upon net sales and operating income in order to allocate resources. Segment operating income is based on operating income before interest and other financing costs, interest and other income, net and income tax expense. The CODM assesses performance by regularly reviewing each segments significant expense categories which include selling expenses and cost of sales, general and administrative expenses, and advertising expenses. Wholesale Segment. The wholesale segment 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 broad range of home furnishings and accents. Wholesale revenue is recorded upon the shipment of our products to our retail network of independently operated design centers, Company-operated design centers, and other thir …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing