UNITEDUNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

(Mark One)

 

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended June 30, 20202021

 

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 incorporation or organization)		06-1275288
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

 

25 Lake Avenue Ext., Danbury, Connecticut		06811-5286
(Address of principal executive offices)		06811-5286
(Address of principal executive offices)		(Zip Code)

 

(203) 743-8000

(Registrant's telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

	Common stock $0.01parvalue		ETHETD		New York Stock Exchange
	(Title of each class)		(Trading symbol)		(Name of exchange on which registered)

 

Securities registered pursuant to Section 12(g) of the Act: None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.          ☐ Yes      ☒ No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.         ☐ Yes       ☒ 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 months (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. ☒ Yes     ☐ No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   ☒ Yes      ☐ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

	Large accelerated filer	☐	Accelerated filer	☒
	Non-accelerated filer	☐	Smaller reporting company	☐
	Emerging growth company	☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐

 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

 

 

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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No

 

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant on December 31, 2019,2020, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $443,379,667.$451,118,344. The number of shares outstanding of the registrant’s common stock, $0.01 par value, as of August 20, 202011, 2021 was 25,053,082.25,237,415.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

Portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A for its 20202021 Annual Meeting of Stockholders to be held as of November 12, 202010, 2021 are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended June 30, 2020.2021.

 

 

2

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ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS (SAFE-HARBOR)

This Annual Report on Form 10-K contains certain statements which may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.1934, as amended (the “Exchange Act”). Generally, forward-looking statements giveinclude information concerning current expectations, and projections or trends relating to financial condition, results of operations, financial results, financial condition, strategic objectives and plans, objectives,expenses, dividends, share repurchases, liquidity, use of cash and cash requirements, investments, future economic performance, business and business. A readerindustry and the effect of the novel coronavirus (“COVID-19”) pandemic on the business operations and financial results. Forward-looking statements can identify forward-looking statementsbe identified by the fact that they do not relate strictly to historical or current facts. These forward-looking statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “continue,” “may,” “will,” “short-term,” “target,” “outlook,” “forecast,” “future,” “strategy,” “opportunity,” “would,” “guidance,” “non-recurring,” “one-time,” “unusual,” “should,” “likely,” “COVID-19 impact,” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events.

Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that are expected. Ethan Allen Interiors Inc. and its subsidiaries (the “Company”) derive many of its forward-looking statements from operating budgets and forecasts, which are based upon many detailed assumptions. While the Company believes that its assumptions are reasonable, it cautions that it is very difficult to predict the impact of known factors and it is impossible for the Company to anticipate all factors that could affect actual results and matters that are identified as “short term,” “non-recurring,” “unusual,” “one-time,” or other words and terms of similar meaning may in fact recur in one or more future financial reporting periods. Important factors that could cause actual results to differ materially from the Company’s expectations, or cautionary statements, are disclosed in Item 1A, Risk Factors, Item 7, Management’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in this Annual Report Form 10-K. All forward-looking statements attributable to the Company, or persons acting on its behalf, are expressly qualified in their entirety by these cautionary statements, as well as other cautionary statements. A reader should evaluate all forward-looking statements made in this Annual Report on Form 10-K in the context of these risks and uncertainties. Given the risks and uncertainties surrounding forward-looking statements, you should not place undue reliance on these statements. Many of these factors are beyond our ability to control or predict.

The forward-looking statements included in this Annual Report on Form 10-K are made only as of the date hereof. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as otherwise required by law.

PART I

ITEM 1.      BUSINESS

Overview

Founded in 1932 and incorporated 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, manufacturer and retailer in the home furnishings marketplace. Today weWe are a global luxury international home fashion brand that is vertically integrated from product design through home delivery, which affordsoffers our clientele a value proposition of style,customers stylish product offerings, artisanal quality, and price.personalized service. We provide complimentary interior design service to our clients and sell a full range of furniture products and decorative accentshome furnishings through a retail network of approximately 300 design centers in the United States and abroad as well as online at ethanallen.com. The

Ethan Allen design centers represent a mix of locations operated by independent licensees and Company-owned and operatedCompany-operated locations. OurAs of June 30, 2021, the Company operates 141 retail design centerscenters; 136 located in the United States and five in Canada. TheOur 161 independently operated design centers are located in the United States, Asia, the Middle East and Europe. We also own and operate nine manufacturing facilities including six manufacturing plantslocated in the United States, two manufacturing plants in Mexico, and Honduras, including one manufacturing plant in Honduras.sawmill, one rough mill and a lumberyard. Approximately 75% of our products are manufactured or assembled in these North American facilities. We also contract with various suppliers located in Europe, Asia, and various other countries that produce products that support our business.

Business Strategy

We strive to deliver value to our shareholders over the long term through executing on our strategic initiatives. Ethan Allen has a distinct vision of American style, rooted in the kind of substance that we believe differentiates us from our competitors. Our business model is to maintain continued focus on (i) capitalizing on the professional service offered to our customers by our interior design professionals in our retail design centers, (ii) investing in new technologies across key aspects of our vertically integrated business, (iii) using our website, ethanallen.com, as a key marketing tool to drive traffic to our retail design centers, (iv) communicating our messages with strong advertising and marketing campaigns, and (v) leveraging the benefits of our vertical integration by maintaining a strong manufacturing capacity in North America.

Our strategy has beenemphasizes the aim to position Ethan Allen as a preferred brand offering complimentary design service together with products of superior style, quality and value to provide customers with a comprehensive, one-stop shopping solution for their home furnishing and interior design needs. 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. We continuously monitor 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 consultantsprofessionals who provide valuable input on consumer trends. We believe that the observations and input gathered enable us to incorporate appropriate style details into our products to react quickly to changing customer tastes. We are receiving strong customer interest in our recently introduced products including Lucy, a mid-century modern inspired upholstery collection and Farmhouse, a country cottage inspired furniture collection. 

Our strong network of North American interior design consultantsprofessionals continues to create design solutions that best satisfy our customers’ needs. We believe changes in consumer spending and new habits being formed as a result of social distancing and sheltering in place brought about by the COVID-19 pandemic will createhas created opportunities for our brand. Now more than ever, home is a haven, and we are here to help the customer reimagine their homes. We continue to generate business through our retail design center network and by interacting virtually with our customers through ethanallen.com.

Our design consultants engage with customers working safely in our design centersunique combination of personal service and remotely utilizing technology includingenhances the customers’ Ethan Allen inHomeexperience. By investing in digital design technologies, we have expanded our virtual design appointment capabilities. EA inHome®, an augmented reality mobile app, empowers clients to preview Ethan Allen products in their homes, at scale, in a variety of fabrics and finishes. With the 3D room planner tool, Live Chat on ethanallen.com, SkypeRoom Planner, our designers generate both 2D floor plans and FaceTime.

At Ethan Allen,immersive, realistic 3D walk-throughs of the interior designs they create. These technologies have been pivotal to our internet strategy isability to generate business by combining technology with excellent personal service. Thoughserve clients remotely during the COVID-19 pandemic and increase our customers have the opportunity to buy our products online, we take the process further.e-commerce business. With so much of our product customizable, we encourage our website customers to get personal help from our interior design professionals either in person or by chatting online with one of our qualified design consultants.professionals. This complimentary direct contact with one of our knowledgeable interior design consultants,professionals, whether remotely or in-person, creates a competitive advantage through our excellent personal service. Thisas well as enhances the online experience and regularly leads to internet customers becoming customers of our network of interior design centers. In the past three months,year we have seen our internet business doublee-commerce net sales grow 88% over the prior year as we have increased our use of technology and the related customer experience.

We planthat better allows clients to further invest in our digital footprint, including our website, in order to enhance our customer experience. We are also continually improving our customers’ journey from the time they land on our website to the delivery of their purchase through our white glove home delivery service. We view the combination of online traffic and design center traffic in a holistic fashion whereby our customer generally experiences our brand on our website before visiting a design center in person. Our online traffic continues to increase each year and our marketing teams remain focused on enhancing our digital outreach strategies to further drive more traffic and keep our brand relevant in today’s social media oriented world. shop with confidence.

Developments Regarding, and Actions Taken in Response to,Impact of COVID-19 on our Business

On March 11, 2020, the World Health Organization declared the COVID-19 outbreak to be a global pandemic. In response to this declaration and the rapid ongoing spread of COVID-19 within the United States and around the world, federal, state and local governments have imposed varying degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the virus. Such measures included quarantines, shelter-in-place orders and directives, restrictions on travel, and closures of non-essential businesses, which included many sectors within retail commerce.

Timeline. In response to these requirementsthe COVID-19 pandemic and for the protection of our employees and customers, we implemented, and continue to monitor, certain business continuity plans to ensure the ongoing availability of our products and services, while prioritizing health and safety measures, including temporarily closing of our design centers and most of our manufacturing plants, implementing enhanced cleaning and hygiene protocols as recommended by the Centers for Disease Control and Prevention (“CDC”(the “CDC”),. Beginning in our third quarter of fiscal 2020, we took the following actions in response to the COVID-19 pandemic:

Fiscal 2020

Fiscal 2021

Impact on Health and Safety. The start of our fiscal 2021 year was during the COVID-19 pandemic and our foremost focus was and has continued to be operating safely for our employees and clients. In response to COVID-19, we implemented certain business continuity plans and health and safety measures to ensure the ongoing availability of our services, while also protecting our employees and customers. Such measures included temporarily closing of our design centers and most of our manufacturing plants during our fourth quarter of fiscal 2020, implementing enhanced cleaning and hygiene protocols as recommended by the CDC, and implementing remote work policies wherefor our employees, wherever possible.

The Company began As we worked to experience the initial impact of COVID-19 on customer demand in the second half of February 2020 and the decreased demand continued to persist into our fiscal 2020 fourth quarter. As a result, the Company implemented a number of mitigating safety and cost-saving measures.

On March 19, 2020, we announced that our Company-owned retail design centers in North America were temporarily closed or remained open by appointment only, in response to the COVID-19 health crisis. We continued to serve our clients by appointment in our physical locations or virtually. For the well-being of our associates, we also provided them the ability to work from home during this national health crisis, where possible. 

On March 23, 2020, we borrowed an aggregate principal amount of $80 million under our existing revolving credit facility. Prior to such borrowing, there were no borrowings outstanding under the credit facility. On March 30, 2020, we borrowed an additional $20 million under the credit facility. We subsequently repaid $50 million of our borrowings in June 2020. The outstanding borrowings bear interest at a rate equal to the one-month LIBOR rate plus a spread using a debt leverage pricing grid. We may repay amounts borrowed at any time without penalty. The Company, while currently having available cash on its balance sheet and no outstanding debt, elected to draw on the credit facility to increase its cash position as a precautionary measure and to maximize financial flexibility in light of the uncertainty surrounding the ongoing impact of COVID-19.

On April 1, 2020, we announced our comprehensive action plan in response to the COVID-19 health crisis, which combined both health and safety as well as cost-saving initiatives. Measures taken included, among other things, the temporary closure of design centers and manufacturing facilities, the furlough of 70% of our global workforce, the decision by our CEO to temporarily forego his salary through June 30, 2020, a temporary reduction in salaries of up to 40% for all senior management and up to 20% for other salaried employees through June 30, 2020, a temporary reduction of 50% in the cash compensation of the Company’s directors through June 30, 2020, the elimination of all non-essential operating expenses, a delay of capital expenditures, the temporary suspension of the regular quarterly dividend and temporarily halted the share repurchase program.

On April 22, 2020, we issued a press release providing business updates, including an update to our COVID-19 action plan which emphasized our continued focus on the health, safety and well-being of our associates, our customers, and the communities in which we operate. Our update emphasized the continued evaluation of plans and timing as it related to the planned reopening ofsafely reopen our design centers and other facilities, we put COVID-19 prevention protocols in place to restarting productionminimize the spread of COVID-19 in our North American manufacturing plants.

On May 11, 2020,workplaces. These protocols, which remain in place, meet or exceed the CDC guidelines and where applicable, state mandates. Our employees were trained on these protocols prior to or upon returning to work. We established logistics for the supply of hand sanitizer and related dispensers, disinfectant cleaning supplies and masks and nitrile gloves, increased ventilation and air filtration, instituted physical distance requirements, where applicable, and increased the cleaning frequency. We also work closely with our associates to identify team members who were in close contact with an ill colleague in the workplace and instituted procedures to help contain the spread of COVID-19. As of June 30, 2021, we reported our fiscal 2020 third quarter results and provided an update on our COVID-19 action plan. In additionhave been fortunate to the financial results disclosed in our press release, we also announced that we began reopening design centers inexperience a limited number of U.S. states since May 1, 2020 and began resuming productioncases of COVID-19 throughout our enterprise, each of which resulted in some of its North American manufacturing plants in a limited capacityno significant disruptions to work through existing backlog and to be in a position to service expected demand as the economy begins to reopen for business. We further announced that our distribution and home delivery centers were open and making home deliveries.

On August 4, 2020, we announced that all of our Company-operated retail design centers reopened, including 14% open by appointment only. We also resumed production in our North American manufacturing plants during the second half of our fiscal 2020 fourth quarter, some in a limited capacity, and expect to work through existing order backlog and ramp up to full production by the end of August 2020. The temporary salary reductions were lifted, effective June 30, 2020, as planned. The Board of Directors also reinstated the regular quarterly dividend. Lastly, we have brought back approximately 56% of our associates previously furloughed in April 2020.operations.

The COVID-19 crisis challengedImpact on the Supply Chain. We have seen a significant improvement in business conditions, which has contributed to our operationsincreased profitability and strong positive cash flow during fiscal 2020, but2021. Tempering these improvements are the continuing logistical challenges that we, as well as the entire home furnishings industry, have faced resulting from COVID-19-related labor shortages and supply chain disruptions creating significant delays in order fulfillment and increasing order backlogs. We continue to focus on our associates did well in persevering through these challenges. Our primary focus was operating in a safe manner, for our associatesinventory and clients. As our design centers begansupply chain management as we balance the need to reopen, we implemented various mitigatingmaintain supply chain flexibility to help ensure competitive lead times with the risk of inventory shortage and safety protocols recommended by the CDC guidelines for operating businesses safely.obsolescence. We established logistics for the supply of hand sanitizer and related dispensers, disinfectant cleaning supplies, masks and nitrile gloves, and we increased the cleaning frequencycontinue to produce about 75% of our design centers and other facilities. As a result of these additional supplies and cleaning regimes based on the CDC’s safe business protocols, we incurred incremental costs during fiscal 2020. These costs, which were less than $1.0 million, are reflected within our selling, general and administrative expenses. We expect to incur a similar level of expenses associated with safety and additional hygiene measures on an ongoing basis for the foreseeable future. For the safety of our associatesproducts in our design centers we require all associatesNorth American manufacturing facilities with the remaining 25% being sourced primarily from Southeast Asia and clientsChina. The receipt of inventory and raw materials imported from these areas has been slowed or disrupted. In addition, ocean freight capacity issues continue to wear masks. So far, we have been fortunate with very few cases of COVID-19 throughout our enterprise,persist worldwide, which has resulted in no disruptions to our operations.

price increases per shipping container. We continue to manage and evaluate our logistics providers, but believe that ocean freight container rates will not return to pre-COVID-19 levels in the near-term.

Impact on Raw Material Prices. During fiscal 2021, the prices of materials we use in our upholstery manufacturing process, such as foam and springs, and in our case goods manufacturing process, such as logs and lumber, increased due to COVID-19 related supply chain challenges that limited supply during a time of higher demand for raw materials in various manufacturing sectors, including the home building and home furnishings industries due to increased consumer purchasing and inflationary cost pressure. COVID-19 and weather-related disruptions led to temporary shortages of foam and springs in fiscal 2021. The short-term dynamics of supply and demand due to the COVID-19 pandemic and a surge in new homes and renovations, also resulted in lumber prices significantly increasing across North America during fiscal 2021. While we have recently begun to see foam, springs, lumber and other raw material prices come down from historic highs, we expect raw material prices to remain at high levels in many categories due to price inflation and global supply chain complexities. COVID-19 related issues will continue to introduce uncertainty into many markets. To the extent that we experience incremental raw material price increases, we may increase our selling prices or assess material surcharges to offset the impact. However, increases in selling prices, or surcharges, may not fully mitigate the impact of raw material cost increases which would adversely impact operating profits.

Impact on Backlog. During fiscal 2021, we have experienced unprecedented demand driving a 31.7% increase in wholesale written orders, which has outpaced our production. The strong product demand, coupled with COVID-19 related production challenges, including manufacturing shutdowns, plant absenteeism, material shortages and shipping delays resulted in extended lead times between order and delivery. Our wholesale backlog growth was due to wholesale orders booked of $471.1 million compared with net sales of $413.1 million. As a result, our wholesale backlog was at a record level of $120.0 million as of June 30, 2021, up 88.1% from a year ago. We will continue to work through this existing order backlog during fiscal 2022, but are unable to reasonably predict the timing and size of reductions to our backlog.

Impact on Seasonality. During the last two fiscal years our sales volume and production schedules did not follow typical trends due to the impact of COVID-19. Beginning in the fourth quarter of fiscal 2020, COVID-19 led us to temporarily closing our retail design centers and manufacturing facilities, which resulted in a significant decline in net sales that continued in the first quarter of fiscal 2021. After reopening all of our retail design centers and manufacturing facilities by the end of the first quarter of fiscal 2021, we have continued to see an increase in demand for our products and services. However, this increased demand has been partially offset by supply chain disruptions and shipping container availability, which limited our ability to fully ramp up production throughout fiscal 2021. We experienced our largest sales volume during the third quarter in our wholesale business and fourth quarter in our retail business. We believe this fiscal 2021 experience was not an indicator that our seasonal trends are changing and was primarily due to disruptions in the market caused by the COVID-19 crisispandemic in the second half of fiscal 2021. Additionally, in fiscal 2022 we do not anticipate a return to typical trends due to our record order backlog as of June 30, 2021.

Continued Monitoring. We continue to frequently monitor and re-evaluate our COVID-19 action plan based on guidance from the CDC, regulators and other health and safety organizations. We believe that we have a daily basis. Asstrong balance sheet with $104.6 million of cash and no bank debt as of June 30, 2021, which we believe will provide sufficient liquidity to continue business operations in the datelong-term. Although we continue to actively manage the impact of this filing,COVID-19 and the prospect of continuing or future outbreaks, we are unable to predict the ultimate impact that the COVID-19 pandemic will have on our financial operations in the nearnear- and long term remains unknown. The timing of any future actions in responselong-term. We also continue to COVID-19 is largely dependentactively manage our global supply chain and manufacturing operations, which may continue to be adversely impacted with respect to availability and pricing based on the mitigation of the spread of the virus, status of government orders, directives and guidelines, recovery of the business environment, economic conditions, and consumer demand for our products.uncontrollable factors.

Product

The majority of the products we sell are built by artisans in our North American plants. Most upholstery frames are hand-assembled and stitching is guided by hand. We select international partners who are as committed to quality and social responsibility as we are. All case goods frames are made with premium lumber and veneers. 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 today’s home decorating trends. These factors continue to define Ethan Allen, positioning us as a quality and fashion leader in the home furnishing industry.

The interior of our design centers are organized to facilitate display of our product offerings, both in room settings that project the category lifestyle, and by product grouping to facilitate comparisons of the styles and tastes of our customers. To further enhance the experience, we use technology is used to expand the range of products viewed by including content from our website and 3D digital images in applications used on large touch-screen flat panel displays.

Product Development

Using a combination of employees and designers, we design and build the majority of the products we sell. All of our products are Ethan Allen branded. This important facet of our vertically integrated business enables us to control the design specifications and establish consistent levels of quality across all our product programs. In addition to our six United States manufacturing facilities, we have two upholstery manufacturing plants in Mexico and a case goods manufacturing facility in Honduras. We selectively outsource the remaining 25% of our products, primarily from Asia. We carefully select our sourcing partners and require strict compliance with our specifications, quality and social responsibility standards. We believe that our strategic investments in our manufacturing facilities balanced with outsourcing from foreign and domestic suppliers will enable us to accommodate any significant future sales growth and allow us to maintain an appropriate degree of control over cost, quality and service to our customers.

Raw Materials and Other SuppliersSupply Chain

The most important raw materials we use in furniture manufacturing are lumber, veneers, plywood, hardware, glue, finishing materials, glass, laminates, steel, fabrics, foam, and filling material. The various types of wood used in our products include cherry, ash, oak, maple, prima vera, African mahogany, birch, rubber wood and poplar.

Fabrics and other raw materials are purchased both domestically and outside the United States .States. We have no significant long-term supply contracts and believe we have sufficient alternate sources of supply to prevent significant long-term disruption in supplying our operations. We maintain a numberoperations, despite the availability pressures of sources for our raw materials which we believe contributedue to our ability to obtain competitive pricing. Lumber prices and availability fluctuate over time based on factors suchCOVID-19, as weather and demand. The cost of some of our raw materials such as foam and shipping costs are dependent on petroleum cost. Higher material prices, cost of petroleum, and costs of sourced products could have an adverse effect on margins.

described further below. Appropriate amounts of lumber and fabric inventory are typically stocked to maintain adequate production levels. We believe that our sources of supply for these materials are sufficient and that we are not dependent on any one supplier. We have been able to reduce our exposure to any one particular country or manufacturing hub through our unique vertical integration, which allows us to make approximately 75% of our products within our own North American manufacturing plants. This manufacturing structure leaves us with limited exposure to any one particular country on the other 25% that we import. We enter into standard purchase agreements with foreign and domestic suppliers to source selected products. The terms of these arrangements are customary for the industry and do not contain any long-term contractual obligations on our behalf. We select international partners who are as committed to quality and social responsibility as we are. We believe we maintain good relationships with our suppliers.

While we strive to maintain a number of sources for our raw materials, the impact of COVID-19 on raw materials and increased demand on our supply chain has created additional pricing and availability pressures. During fiscal 2021, the prices of materials we use in our upholstery manufacturing process, such as foam and springs, and in our case goods manufacturing process, such as logs and lumber, increased due to COVID-19 related supply chain challenges, higher demand for raw materials in manufacturing sectors, including the home furnishings industry, and inflationary cost pressure. Lumber prices and availability can also fluctuate over time based on various factors, including supply and demand and new home construction. The cost of some of our raw materials such as foam and shipping costs are also dependent on petroleum cost. Higher material prices, cost of petroleum, and costs of sourced products could have an adverse effect on margins.

We expect raw material prices to remain at historically high levels in many categories during fiscal 2022 due to price inflation in certain raw materials and global supply chain complexities. COVID-19 related issues will continue to introduce uncertainty into many markets, especially with respect to freight and labor availability. To the extent that we experience incremental costs in any of these areas, we may increase our selling prices or assess material surcharges to offset the impact. However, increases in selling prices, or surcharges, may not fully mitigate the impact of raw material cost increases which would adversely impact operating income. Further, given our current backlog, described further below, we anticipate delays in the realization of pricing actions due to the timing difference between written orders and the recognition of sales upon delivery.

Marketing

Ethan Allen’s marketing mission statement, “We Make the American Home^TM,” capitalizes on our core brand values of quality and craftsmanship, combining personal service with technology, and a commitment to social responsibility. We amplify those values through our dynamic brand story, The Journey of American Style. Told across our three predominant lifestyles of Classic, Country & Coastal, and Modern, this brand story honors our history as a quintessential American brand while empowering us to promote a broad yet curated range of products, which results in a superlative combination of product value and personal service.

By adopting a fresh, ever-evolving creative approach, increasingly driven by digital strategies, we have continually reinvigorated our brand, enhancing its desirability and visibility. Our vertically integrated approach to business is one of our key competitive advantages. Because we make 75% of our products in our own North American workshops, we believe we have greater control over quality and serviceability, and we make products to order, supporting an exceptional breadth of styles and custom options.  

Our combination of creative and analytics-driven strategies enables us to drive both new and repeat client traffic, both to over 300 design centers worldwide and to our website, ethanallen.com. Using our fully integrated customer relationship management system, we create personalized customer journeys, targeted communications, and retargeting campaigns. We develop persuasive, aspirational, and relevant messaging, and we convey it through a variety of media, including direct mail, national and local TV and radio, digital and social channels, and email marketing. We also launched an aggressive and targeted digital communications strategy in 2021 that significantly increases our prospecting contacts annually. Taken together, these strategies ensure that we are constantly adding to and refreshing our client base while retaining existing relationships.

Once clients reach any point of purchase, we offer enticing financing options through the Ethan Allen Platinum Card, a third party-administered consumer credit program. Designed to make Ethan Allen accessible to everyone, the card continues to attract both new and recurring clients, driven by our strong financing programs, which has helped increase both conversion rates and average transaction.

E-Commerce

At Ethan Allen, our e-commerce strategy is to generate business by combining technology with excellent personal service. We consider our website an extension of our retail design centers and not a separate segment of our business. Most clients will use the internet for inspiration and as a start to their shopping process to view products and prices. Though our customers have the opportunity to buy our products online, we take the process further. With so much of our product customizable, we encourage our website customers to get personal help from our interior design professionals either in person or by chatting online with one of our qualified design professionals. This complimentary direct contact with one of our knowledgeable interior design professionals, whether remotely or in-person, creates a competitive advantage through our excellent personal service. This enhances the online experience and regularly leads to internet customers becoming customers of our network of interior design centers.

Particularly as a result of the increased focus on online shopping and virtual merchandise platforms during the COVID-19 pandemic, we continue to strategically focus on e-commerce, through our ongoing implementation of conversion rate optimization updates. We also invest in targeted search engine optimization and paid search marketing, for both national and local markets, driving both referral traffic to our website and physical traffic to our design centers. In addition, improved on-site search capabilities, expanded Live Chat services, online appointment booking capability, and product listing and display page enhancements continue to elevate the user experience. We continue to promote brand visibility on various social media platforms, placing a greater emphasis on visual and video-driven content. Both paid social media campaigns and an ​organic social media presence have helped us grow our social following and take a more prominent place in the cultural conversation. 

Our website traffic, as expected, increased dramatically due to the COVID-19 pandemic as people spent more time in their homes. E-commerce retail written orders during fiscal 2021 increased 57.9%. However, as the fiscal year progressed, we saw a shift in traffic, from our website to in-person at the design center as more people felt comfortable outside of the home. Our total e-commerce net sales for fiscal 2021 were up 87.5% over the year ago period, but remained less than 5% of our total consolidated net sales.

We plan to further invest in our digital footprint, including our website, in order to enhance our customer experience. We are also continually improving our customers’ journey from the time they land on our website to the delivery of their purchase through our white glove home delivery service. We view the combination of online traffic and design center traffic in a holistic fashion whereby our customer generally experiences our brand on our website before visiting a design center in person. Our online traffic continues to increase each year and our marketing teams remain focused on enhancing our digital outreach strategies to further drive more traffic and keep our brand relevant in today’s social media oriented world. 

The Client Experience

We have greatly enhanced the client experience both in our design centers, as well as online by investing in digital design technologies over the past several years. EA inHome®, our augmented reality mobile app, empowers clients to preview Ethan Allen products in their homes, at scale, in a variety of fabrics and finishes. With the 3D Room Planner, our clients and designers generate both 2D floor plans and immersive, incredibly realistic 3D walk-throughs of the designs they create.  Both technologies have been pivotal to our ability to offer clients a variety of touchpoints for design conversations; clients can easily work with designers in our design centers, at their homes, or online. We have also developed a virtual design center experience, which enables clients to shop within a virtual Ethan Allen showroom, receive detailed product information, and collaborate with an Ethan Allen designer within the virtual showroom. 

Segments

We have strategically aligned our business into two reportable segments: Wholesalewholesale and Retail.retail. Our operating segments are aligned with how the Company, including our chief operating decision maker, manages the business. These two segments represent strategic business areas of our vertically integrated enterprise that operate separately and provide their own distinctive services. This vertical structure enables us to offer our complete line of home furnishings and accents while better controlling quality and cost. We evaluate performance of the respective segments based upon net sales and operating income. Inter-segmentIntersegment transactions result, primarily, from the sale of wholesale inventory to the retail segment, including the related profit margin. Financial information, including sales, operating income and long-lived assets related to our segments are disclosed in Note 19, SegmentSegment Information, of the notes to our consolidated financial statements included under Item 8 of this Annual Report on Form 10-K.

As of June 30, 2020,2021, the Company operated 144141 design centers (our retail segment) and our independent retailers operated 160161 design centers. Our wholesale segment’s net sales include sales to our retail segment, which are eliminated in consolidation, and sales to ourexternal customers (our independent retailers and other unaffiliated third parties.parties). Our retail segment net sales accounted for 78.5%81.0% of our consolidated net sales in fiscal 2020.2021. Our wholesale segment net sales accounted for the remaining 21.5%19.0%.

The following charts depict net sales related to our two reportable segments.

We believe that the demand for furniture generally reflects sensitivity to overall economic conditions, including consumer confidence, discretionary spending, housing starts, sales of new and existing homes, housing values, the level of mortgage refinancing, debt levels, retail trends and unemployment rates. For both our segments, the second and fourth quarters are historically the seasonally highest-volume sales quarters. However, during fiscal 2020, we experienced our largest sales volume quarter for our wholesale business during the first quarter while our retail segment had its highest sales volume during the second quarter. We believe this fiscal 2020 experience was not an indicator that our seasonal trends are changing and was primarily due to disruptions in the market caused by the COVID-19 pandemic in the second half of fiscal 2020.

Retail Segment

The retail segment, which accounted for 78.5%81% of net sales during fiscal 2020,2021, sells home furnishings and accents to clients through a network of 141 Company-operated design centers. Ethan Allen design centers are typically located in busy retail settings as freestanding destinations or as part of town centers, lifestyle centers, and suburban shopping malls, and average approximately 14,700 square feet in size with 59% of them ranging between 10,000 and 20,000 square feet, 26% being less than 10,000 square feet and the remaining 15% being greater than 20,000 square feet. Over the past 10 years, 50% of our design centers are new or have been relocated as we continually evaluate our retail footprint. Other initiatives include regularly updating presentations and floor plans, strengthening the qualifications of our designers through training and certifications and combining technology with personal service in our design centers, which has also allowed us to reduce the size of our design centers. In the past five years, we have either opened or relocated a total of 22 new design centers with an average size of 9,900 square feet. These smaller footprint design centers reflect our shift from destination and shopping mall locations to lifestyle centers that better project our brand and offer increased traffic opportunities.

Retail segment revenue is generated upon the retail sale and delivery of our products to our retail customers through our network of retail home delivery centers. Retail profitability reflects (i) the retail gross margin, which represents the difference between the retail net sales price and the cost of goods, purchased from the wholesale segment, and (ii) other operating costs associated with retail segment activities.

We measure the performance of our design centers primarily based on net sales and profitabilityoperating income on a comparable period basis. The frequency of our promotional events as well as the timing of the end of those events can affect the comparability of net sales during a given period. Due to the nature of the business in which the retail segment operates, there are no customer concentration risks.

The retail segment’s product line revenue, expressed as a percentage of net sales, is comprised of approximately 48%51% in upholstered products, 29%28% case goods and the remaining 23%21% in home accents and other.

During fiscal 2020,2021, we acquired oneopened three new design center in the United States from an independent retailer, openedcenters, including two which were relocations, and closed three locations, which is net of seven relocations.six. The geographic distribution of our retail design center locations is disclosed under Item 2, Properties, contained in Part I of this Annual Report on Form 10-K.

Wholesale Segment

The wholesale segment, which accounted for 21.5%19% of net sales during fiscal 2020,2021, 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 generated upon the sale and shipment of our products to our retail network of independently operated design centers, Company-operated design centers, and other third-party contract business customers. Sales toOur ten of our largest customers were all within our wholesale segment and accounted for 27%22% of revenuessales within our wholesale segment during fiscal 2020.2021. These customers were the United States government General Services Administration (“GSA”) and nine independent retailers.

Within the wholesale segment, we maintainrecord revenue information according to each respective product line (i.e. case goods, upholstery and home accents). Case goods include items such 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-designed upholstery items which are available in a variety of frame, fabric and trim options. Home accent items include window treatments and drapery hardware, wall décor, florals, lighting, clocks, mattresses, bedspreads, throws, pillows, decorative accents, area rugs, wall coverings and home and garden furnishings.

Wholesale profitability includes (i) the wholesale gross margin, which represents the difference between the wholesale net sales price and the cost associated with manufacturing and/or sourcing the related product, and (ii) other operating costs associated with wholesale segment activities.

The wholesale segment’s product line revenue, expressed as a percentage of net sales, is comprised of approximately 48%52% in upholstered products, 34%30% case goods and the remaining 18% in home accents and other.

As of June 30, 2020, our wholesale backlog was $63.8 million, up 37.6% compared with $46.4 million a year ago. Our backlog increased due to a 17.5% increase in wholesale orders booked in June 2020 combined with our inability to quickly return our manufacturing plants to desired staffing levels due to COVID-19 related restrictions, including safe workplace environment requirements and social distancing. These restrictions have kept production and net shipments below the prior year rate. The strong product demand, coupled with ramping up manufacturing, has also resulted in extended lead times between order and delivery and slower-than-normal delivered sales. We resumed production in our North American manufacturing plants during the second half of the fourth quarter of fiscal 2020, some in a limited capacity, and expect to work through this existing order backlog during the first half of fiscal 2021. Our wholesale backlog 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.

Our independent 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 or exclusive retailer agreements in North America.

The geographic distribution of manufacturing and distribution locations is disclosed under Item 2, Properties, contained in Part I of this Annual Report on Form 10-K.

TalentSeasonality

Since our founding, we have built a collaborative cultureWe believe that recognizes and rewards innovation and offers employees a variety of opportunities and experiences. After almost nine decades in business, the name Ethan Allen is well known and highly regarded in thedemand for home furnishings marketplace. Our employees are vitalgenerally reflects sensitivity to overall economic conditions, including consumer confidence, discretionary spending, housing starts, sales of new and existing homes, housing values, the level of mortgage refinancing, debt levels, retail trends and unemployment rates. In a typical year, we schedule production to maintain consistent manufacturing activity throughout the year whenever possible. We typically shut down our success and aredomestic plants for one week at the beginning of the main reasons we continueeach fiscal year to execute at a high level. We believeperform routine maintenance. For both our employees have an entrepreneurial spirit, a passion for style, a drive for excellence, outstanding communication skills and create a culture that embraces creativity, integrity, diversity, innovation and inclusionsegments, historically no one particular fiscal quarter contributes more than 27% of people from all backgrounds. Our continued focus on making employee engagement a top priority will help us provide high quality products and servicesannual sales volume, thus limiting our exposure to our customers.seasonality.

At June 30, 2020During the last two fiscal years, our employee count totaled 3,369, a decrease from 4,736 a year ago. We are gratified withsales volume and production schedules did not follow the work and focusaforementioned typical trends due to the impact of COVID-19. For further discussion on these changes, refer to the Impact of COVID-19 on our teams during the unprecedented crisis caused by the ongoing COVID-19 pandemic. We have had to make many hard decisions including the furlough of approximately 70% of our global workforce in April 2020. Fortunately, we have been able to bring many associates back with 56% of them having returned to work by June 30, 2020. The majority of our employees are employed on a full-time basis and we believe we maintain good relationships with our employees. None of our employees are represented by unions or collective bargaining agreements.Business section further above.

Customer Service OfferingsBacklog

We offer numerous customer service programs, eachdefine backlog as any written order received that has not yet been delivered. Our wholesale backlog consists of which has been developed and introduced to customers in an effort to make their 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. The Ethan Allen Platinum Card consumer credit program offers customers 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. Customers may apply for an Ethan Allen Platinum card at any participating design center or online at ethanallen.com.

Marketing

“We Make the American Home^TM,” Ethan Allen’s marketing mission statement, drives home our core brand values: Quality and Craftsmanship, Complimentary Design Service and Premier In-Home Delivery. We amplify those values through a dynamic brand story told across three predominant lifestyles—Classic, Country/Coastal and Modern—thus promoting a broad, yet curated range of products, resulting in a superlative combination of product value and personal service.

By adopting a fresh, ever-evolving creative approach, we have reinvigorated our brand, enhancing its desirability and visibility while driving both new and repeat client traffic to our approximately 300 design centers network-wide and to our primary website, ethanallen.com. We consider the breadth and depth of our product offerings, enhanced by the countless custom options we offer, to be a key competitive advantage.

Using our fully integrated customer relationship management system, we create personalized customer journeys, targeted communications, and retargeting campaigns. We develop persuasive, aspirational, and relevant messaging, and we convey it through a variety of media including direct mail, national and local TV and radio, digital and social channels and email marketing, which has positively impacted both traffic and conversion nationwide.

As our e-commerce sales continue increasing at double-digit rates, we have implemented conversion rate optimization updates on both ethanallen.com and ethanallen.ca. We also invest in targeted search engine optimization and paid search marketing, for both national and local markets, driving both referral traffic to our website and physical traffic to our design centers. In addition, improved on-site search capabilities, expanded Live Chat services, online appointment booking capability, and product listing and display page enhancements have elevated the user experience.

We have increased brand visibility on Facebook, Instagram, and Pinterest, with a greater emphasis on visual and video-driven content. Both paid social media campaigns and organic social media presence have helped us grow our social following by 20%, drive revenue, and take a more prominent place in the cultural conversation.

By investing in digital design technologies, we have expanded our virtual design appointment capabilities. EA inHome®, an augmented reality mobile app, empowers clients to preview Ethan Allen products in their homes, at scale, in a variety of fabrics and finishes. With the 3D Room Planner, our designers generate both 2D floor plans and immersive, incredibly realistic 3D walk-throughs of the designs they create. These technologies have been pivotal to our ability to serve clients remotely during the ongoing COVID-19 pandemic. Clients can shop with confidence, knowing that they’re investing in beautiful, cohesive room designs and pieces that suit their space.

Once clients reach the point of purchase, we offer enticing financing options through the Ethan Allen Platinum Card, a third party-administered consumer credit program. Designed to make Ethan Allen accessible to everyone, the card launched successfully nationwide and continues to attract both new and recurring clients, driven by a recent offer of 0% APR for 48-months, which aided conversion and order size.

Competition

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 specifically under our vertical structure, our complimentary interior design service, direct manufacturing, white glove delivery service, product presentations, and website create a competitive advantage, further supporting our mission of providing customers with a complete home decorating and design solution. We also believe that we differentiate ourselves further with the quality of our interior design service through our intensive training and the caliber of our design consultants. Our objective is to continue to develop and strengthenwritten orders received from our retail network by (i) expanding the Company-operated retail business through the repositioning and opening of newindependently operated design centers, (ii) obtaining and retaining independent 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 independent design associates and realtor referral programs, and (iv) further expanding our ecommerce.

Retail Design Centers

We continue to strengthen the Ethen Allen brand with many initiatives, including the opening of newCompany-operated design centers, and relocating or consolidating certain existing designother contract business customers that have not yet been delivered. Our retail backlog is undelivered written orders associated with end retail customers. Stock replenishment orders not associated with a specific end customer are excluded from backlog. Our backlog fluctuates based on the timing of net orders booked, manufacturing schedules and home delivery centers, regularly updating presentationsefficiency, the timing of sourced product receipts, the timing and floor plans,volume of shipments, and strengtheningthe timing of the qualifications of our designers through training and certification. Combining technology with personal service in our design centers has allowed us to reducevarious promotional events. Historically, the size of our design centers. In the past five years,backlog at a given time varies and may not be indicative of our future sales, and therefore, we have either opened or relocated a total of 29 new design centers that have an average size of approximately 9,300 square feet. These smaller footprint design centers reflect our direction as we move forward in repositioning our retail design centers. These new and relocated design centers also reflect our shift from destination and shopping mall locationsdo not rely entirely on backlogs to lifestyle centers that better project our brand and offer increased traffic opportunities.predict future sales.

Ethan Allen design centers are typically locatedDuring fiscal 2021 our orders significantly outpaced our production, which led to a record level of backlog as of June 30, 2021. For further discussion on the material increase in busy retail settings as freestanding destinations or as partbacklog, refer to the Impact of town centers, lifestyle centers, suburban strip malls or shopping malls, depending upon the real estate opportunities in a particular market. Our 144 Company-operated retail design centers average approximately 15,000 square feet in size with 59% of them ranging between 10,000 and 20,000 square feet, while 25% being less than 10,000 square feet and the remaining 16% being greater than 20,000 square feet. During the past 10 years, 52% ofCOVID-19 on our design centers are new or have been relocated.

We strive to maintain consistency of presentation throughout our retail design centers through a comprehensive set of standards and display planning assistance. These interior display design standards enable each design center to present a high-quality image by using focused lifestyle settings and select product category groupings to display our products and information to facilitate design solutions and to educate consumers. We also create a consistent brand projection through our exterior facades and signage.Business section further above.

Distribution and Logistics

We distribute our products through fourthree national distribution centers, owned by the Company, strategically located in North Carolina Oklahoma, and Virginia. These distribution centers provide efficient cross-dock operations to receive and ship product from our manufacturing facilities and third-party suppliers to our retail network of Company and independently operated retail home delivery centers. Retail home delivery centers prepare products for delivery into customers’ homes. At June 30, 2020,2021, our Company-operated retail design centers were supported by 16 Company-operated retail home delivery centers and 1011 home delivery centers operated by third parties.

While we manufacture to custom order theThe majority of our products weare manufactured on a custom made-to-order basis. We also stock certain case goods, upholstery and home accents to provide for quick delivery of in-stock items and to allow for more efficient production runs. We utilize independent carriers to ship our products.

Our practice has been to sell our products at the same delivered cost to all Company and independently operated design centers throughout the United States, regardless of their shipping point. This policy creates pricing credibility with our wholesale customers while providing our retail segment 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 result, we obtain more accurate consumer product demand information.

Human Capital Management

At June 30, 2021, our employee count totaled 4,188, with 3,036 employees in our wholesale segment and 1,152 in our retail segment. Our employee count represents an increase from 3,369 a year ago, which can be attributed to the increase in production at our manufacturing facilities combined with 37.8% growth in retail headcount to support the heightened demand. The prior year headcount of 3,369 was significantly lower than historical levels due to actions taken in the fourth quarter of fiscal 2020 to reduce our workforce in response to COVID-19. The majority of our employees are employed on a full-time basis and we believe we maintain good relationships with our employees. None of our employees are represented by unions or collective bargaining agreements and we have not experienced any work stoppages. In managing our business, we focus on a number of key human capital measures and objectives, which are rooted in our core values and include the following items:

Culture and Values

Since our founding, we have aimed to build a collaborative culture that emphasizes treating people with dignity and respect while offering employees a variety of opportunities and experiences. After almost nine decades in business, we believe the name “Ethan Allen” is well-known and highly regarded in the home furnishings marketplace. Our employees are vital to our success and are one of the main reasons we continue to execute at a high level. We believe our employees have an entrepreneurial spirit, a passion for style, a drive for excellence, outstanding communication skills and create a culture that embraces creativity, integrity, diversity, innovation and inclusion of people from all backgrounds. Our continued focus on making employee engagement a top priority will help us provide high quality products and services to our customers.

Diversity and Inclusion

Diversity and inclusion are two of our core values, as we recognize that our employees’ unique backgrounds, experiences and perspectives enable us to create and deliver the best-quality product and provide outstanding service to meet the needs of our customer base. We believe in creating and fostering a workplace in which all our employees feel valued, included and empowered to do their best work and contribute their ideas and perspectives. We are committed to recruiting and retaining diverse talent so that our workforce better reflects the communities in which we live and work. Our diversity and inclusion initiatives include developing impactful practices to advance our Company’s diversity and inclusion, supporting diversity awareness across our organization, maintaining an inclusive environment free from discrimination of any kind, including sexual or other discriminatory harassment, and continuing to offer our employees multiple avenues through which to report inappropriate behavior, including our confidential whistleblower hotline.

Health and Safety

Ethan Allen is committed to protecting the health and safety of our employees. We care about our employee, customers, and the communities we serve. We have a strong safety program that focuses on implementing policies and training programs to ensure our employees can leave their job and return home safely, every day. This commitment and focus have enabled us to restart our business operations without sacrificing the safety of our employees and customers. In addition to our COVID-19 protections, which are discussed within the Impact of COVID-19 on our Business section further above, we have partnered with local communities in some of our North American manufacturing workshops to provide free transportation to and from work and offer daily low-cost meals. In coordination with national healthcare systems for our manufacturing facilities outside of the United States, we provide on-site medical clinics staffed by a doctor and a team of experienced nurses, who also provide a pharmacy to prescribe over-the-counter medications. In addition to offering onsite medical care, we partner with local physicians to provide medical care for every associate’s family members.

Community Giving

Throughout our history, philanthropy has been a core value to Ethan Allen. We strive to develop exceptional programs based on partnerships where employees feel a sense of connection and pride in their communities and our mission is to enhance the quality of life in the communities in which we work and live. Our philanthropic efforts include donations to local universities, arts organizations and more, while also supporting education initiatives and disaster relief for our employees. Responding to the COVID-19 pandemic, Ethan Allen helped produce more than 200,000 units of personal protective equipment. Our skilled craftspeople also turned  antimicrobial fabrics into washable medical-grade masks, as well as disposable fabric gowns. We further helped distribute masks to local schools, and both masks and gowns were given to nearby hospitals and other locations where essential workers needed them. In addition, when devastating hurricanes impacted our Honduras manufacturing operation during fiscal 2021, we acted quickly and through a strong coordinated effort with the local authorities, we worked to help our employees find safety, if needed. For those associates who lost personal belongings, we provided them necessary food, clothing, bedding and medications.

Compensation and Other Benefits

Our compensation programs are designed to attract, retain, and motivate team members to achieve strong results. We benchmark our compensation practices and benefits programs against those of comparable industries and in the geographic areas where our facilities are located. We believe that our compensation and employee benefits are competitive and allow us to attract and retain skilled labor throughout our enterprise. Certain of the benefits we offer include access to healthcare plans, financial and physical wellness programs, paid time off, parental leave and retirement benefits, including a 401(k) plan with Company matching contributions.

Customer Service Offerings

We offer numerous customer service programs, each of which has been developed and introduced to customers in an effort to make their 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. The Ethan Allen Platinum Card consumer credit program offers customers 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. Customers may apply for an Ethan Allen Platinum card at any participating design center or online at ethanallen.com.

Competition

The home furnishings industry is a highly fragmented and competitive business. There has been growth in the e‑commerce channel both from internet only retailers and those with a brick-and-mortar presence. 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 compete with numerous individual retail home furnishing stores as well as national and regional chains. We further believe that we are uniquely positioned to compete on the basis of each of these factors and that, more specifically under our vertical integration structure, our complimentary interior design service, direct manufacturing, white glove delivery service, product presentations, and website create a competitive advantage, further supporting our mission of providing customers with a complete home decorating and design solution. We also believe that we differentiate ourselves further with the quality of our interior design service through our intensive training and the caliber of our interior design professionals. Our objective is to continue to develop and strengthen our retail network by (i) expanding the Company-operated retail business through the repositioning and opening of new design centers, (ii) obtaining new and retaining independent 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 independent design associates and realtor referral programs, and (iv) further expanding our e-commerce.

Environmental Sustainability and Social Responsibility

We continue to be focused on environmental and social responsibility while incorporating uniform social, environmental, health and safety programs into our global manufacturing standards.

Our environmental (green) initiatives include, but are not limited to the use of responsibly harvested Appalachian woods, and water-based finishes and measuring our carbon footprint, greenhouse gases and recycled materials from our operations. We have eliminated the use of heavy metals and hydrochlorofluorocarbons in all packaging. Our mattresses and custom upholstery use foam made without harmful chemicals and substances. We have implemented the Enhancing Furniture’s Environmental Culture (“EFEC”) environmental management system sponsored by the American Home Furnishing Alliance (“AHFA”) at all our domestic manufacturing, distribution and home delivery center facilities, and have expanded these efforts to our retail design centers, which have now been registered in EFEC. Our Mexico and Honduras facilities are also registered under the AHFA's EFEC program. Our United States manufacturing, distribution and home delivery centers have also achieved Sustainable by Design (“SBD”) registration status under the EFEC program. SBD provides 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.

Our manufacturing operations involve the use and disposal of certain substances regulated under environmental protection laws and, from time to time, we may be involved in a small number of remediation actions and site investigations concerning these substances. Based on a review of all currently known facts and our experience with previous environmental matters, we currently do not believe it is probable that we will have any additional loss for environmental matters that would be material to our consolidated financial statements.

The Company requires its sourcing facilities that manufacture Ethan Allen branded products to implement a labor compliance program and meet or exceed the standards established for preventing child labor, involuntary labor, coercion and harassment, discrimination, and restrictions to freedom of association. These facilities are also required to provide a safe and healthy environment in all workspaces, compliance with all local wage and hour laws and regulations, compliance with all applicable environmental laws and regulations, and are required to authorize Ethan Allen or its designated agents (including third-party auditing companies) to engage in monitoring activities to confirm compliance.

We work to ensure our products are safe in our customers’ homes through responsible use of chemicals and manufacturing substances.

Intellectual Property

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 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. In addition, we have registered and maintain the internet domain name of ethanallen.com. We view such trademarks, logos, service marks and domain names as valuable assets and have an ongoing program to diligently monitor and defend, through appropriate action, against their unauthorized use.

Government Regulation

The Company is subject to reporting requirements, disclosure obligations and other recordkeeping requirements of the Securities and Exchange Commission (“SEC”(the “SEC”) and the various local authorities that regulate each location in which we operate. 

CorporateCorporate Contact Information

Ethan Allen’s principal executive office is in Danbury, Connecticut.

Available Information

Information contained in our Investor Relations section of our website at https://ir.ethanallen.com is not part of this Annual Report on Form 10-K. Information that we furnish or file with the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K or exhibits included in these reports are available for download, free of charge, on our Investor Relations website soon after such reports are filed with or furnished to the SEC. Our SEC filings, including exhibits filed therewith, are also available onfree of charge through the SEC’s website at sec.gov.www.sec.gov.

Additionally, we broadcast live our quarterly earnings calls via the News & Events section of our Investor Relations website. We also provide notifications of news or announcements regarding our financial performance, including SEC filings, press and earnings releases, and investor events as part of our Investor Relations website. The contents of this website section are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or document the Company files with the SEC and any reference to this section of our website is intended to be inactive textual references only.

Information about our Executive Officers

Listed below are the name, age,names, ages and current position for eachpositions of our executive officers and, if they had not held those position for the past five years, their former positions during that period with Ethan Allen or other companies. This information is presented as of August 19, 2021, the date of this Annual Report on Form 10-K.

M. Farooq Kathwari*, age 7576

 Daniel M. Grow,Brynne Duncan, age 7463

 Rodney A. Hutton, age 52

Daniel Edinger, age 59

Amy Franks, age 47

Rodney A. Hutton, age 53

Eric D. Koster, age 7374

Christopher H. Robertson, age 52

 Christopher Robertson, age 51

 Clifford Thorn, age 68

Corey Whitely, age 6061

 Michael Worth, age 53

* Mr. KathwariKathwari is the only one of our executive officers who operatesoperates under a written employment agreement.

Additional Information

Additional information with respect to the Company’s business is included in the following pages and is incorporated herein by reference:

ITEM 1A.   RISK FACTORS

The following risks could materially and adversely affect our business, financial condition, cash flows, results of operations and the trading price of our common stock could decline. These risk factors do not identify all risks that we face; our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. Investors should also refer to the other information set forth in this Annual Report on Form 10-K, including Management’sManagement’s Discussion and AnalysisAnalysis of Financial Condition and Results of Operations and our financial statements including the related notes. Investors should carefully consider all risks, including those disclosed, before making an investment decision.

Risks Related to COVID-19 and its Impacts

The ongoing globalCOVID-19 pandemic has, and maycould continue to materially adversely affecthave, a material adverse effect on our business ourand results of operations and our overall financial performance.operations.

The ongoing global COVID-19 pandemic has negatively impacted the world economy, disruptedincreased volatility within the financial markets, anddisrupted international trade, resulted in increased unemployment levels and significantly impacted global supply chains, all of which have negatively affected and continue to materially negatively affect the retailhome furnishings industry and the Company’s business.

In our action plan in response to COVID-19 that we announced on April 1, 2020, we took immediate action and made a number of adjustments to our business operations, but not limited to, temporarily closing our design centers and manufacturing plants, reducing our employee headcount, and curtailing certain operating expenses. Our approach to the COVID-19 pandemic continues to spread bothevolve as business trends substantially improved during fiscal 2021 as consumers have continued to allocate more discretionary spending to home furnishings. We reopened all of our retail design centers and resumed our North American manufacturing. Temporary salary reductions were lifted, headcount increased and our Board of Directors reinstated the regular quarterly cash dividend. 

Although some state and local governments have eased restrictions, it is possible that a resurgence in COVID-19 cases, particularly due to the U.S.rise in cases associated with variants of COVID-19, could prompt a return to tighter restrictions in certain areas. Furthermore, while the home furnishings industry has fared better during the pandemic than certain other sectors of the economy, continued economic weakness could continue to have an adverse impact upon our business. While we continue to serve our customers and globally,operate our business while managing the ongoing COVID-19 pandemic, there can be no assurance that future COVID-19 related developments will not have an impact on our business, results of operations or financial condition since the extent and duration of the pandemic remains highly uncertain. We will continue to make decisions regarding the sources and uses of capital in our business to reflect and adapt to changes in market conditions, including any lasting effects of COVID-19. 

Despite our efforts to manage various impacts, including on those associated with our supply chain, the availability and pricing of raw materials, the ability to service our record backlog and the health and safety of our employees and customers, future adverse developments related governmentto the ongoing COVID-19 pandemic, including additional waves of COVID-19 outbreaks, evolving international, federal, state and private sector mitigation efforts, including travel restrictions, border closings, restrictions on public gatherings, especially when congregating in heavily populated areas, such as malls and shopping centers, shelter-in-placelocal restrictions and limitations on business, including requiring reductionsafety regulations, changes in consumer behavior, health concerns, the pace of operating hours and forced temporary closures of non-essential retailers andeconomic activity, or other businesses, have adversely affected and are expected to continue tosimilar issues could adversely affect our business, results of operations or financial condition in the future, or including our financial results and liquidity. In particular,business performance. Therefore, we currently cannot estimate with any degree of certainty the continued spreadpotential impact to our financial position, results of COVID-19operations and efforts to contain the virus:cash flows.

We have instituted measures to ensure our supply chain remains open to us; however, there has been some recent raw material supply chain challenges related to suppliers negatively impacted by COVID-19 shutdowns and shipping delays. These global supply chain challenges could continue and in turn materially adversely impact our manufacturing production and fulfillment of backlog. Furthermore, anyAny significant reduction in consumer willingness to visit our design centers, levels of consumer spending, employee willingness to work in our design centers, or additional closures of our design centers or distribution centers, relatingdue to COVID-19 or its related impact on the economy, consumer sentiment or health concerns, already resulted and could result in a further loss of revenues, profits, cash flows, and other materially impactful effects on our business and operations. Our customers may have been, and may continue to be negatively affected by layoffs or work reductions as a result of the global economic downturn caused by COVID-19, which may have negatively impacted, and could continue to negatively impact demand for our products as customers delay or reduce discretionary purchases. Any significant reduction in customer traffic and spending at our design center, caused directly or indirectly by COVID-19, would continue to result in a loss of revenue and profits and could result in other material adverse effects.

In addition, we implemented work-from-home policies for certain employees. These working arrangements as well as other related restrictions including severe limitations on travel mayA resurgence of COVID-19 and resulting containment measures could negatively impact our ability to fulfill existing order backlog or cause changes in consumer demand, which could have an impacta material adverse effect on our operationsfinancial performance.

Although unable to predict with certainty, we expect gradual decreases in wholesale and management effectiveness. Although we have technology and other resources to support these new work requirements, there can be no assurance that we will not suffer material risks toretail backlogs over the course of our business, operations, productivity and results of operationsfiscal 2022 year as a result of these restrictions.an anticipated lower rate of future incoming orders coupled with increased manufacturing and shipping activity. If a significant percentagewe are unable to reduce the backlogs and increase the speed of order fulfillment it is possible that some of our workforce is unablecustomers may begin to work, including becausecancel existing orders and require refunds of illness or travel or government restrictionsdeposits, which could have an adverse impact upon our liquidity and results of operations. While the home furnishings industry has fared much better during the pandemic than other sectors of the economy, continued economic weakness, the recent surge in connection with COVID-19 cases and any containment measures to stop further spread may have an adverse impact upon our retail, distribution and manufacturing operationsbusiness. Furthermore, the economic recession brought on by the pandemic may be negatively impacted, potentially materially adversely affectingeventually have an adverse impact on consumer demand for our business, liquidity,products. Should these conditions persist for a prolonged period, this may have a continuing material adverse impact on our ultimate financial condition or results of operations.and liquidity.

A resurgence of COVID-19 could lead to temporary closures, including our distribution centers, which could have a material adverse effect on our business.

Although our distribution centers were fully operational as of the date of filing of this Annual Report on Form 10-K, governmental mandates from a resurgence in COVID-19 or illness or absence of a substantial number of distribution center employees could require that we temporarily close one or more of our distribution centers, or maycenters. A resurgence could also prohibit or significantly limit us, or our third party logistics providers, from delivering to our customers and our design centers, which would complicate or prevent our fulfilling orders and, once our design centers reopen, would complicate or prevent our ability to supply merchandise to these design centers. Further, although we continue to implement strong physical and cyber-security measures to ensure that our business operations remain functional and to ensure uninterrupted service to our customers, our systems and our operations remain vulnerable to cyber-attacks and other disruptions due to the fact that a significant portion of our employees work remotely as a result of the ongoing COVID-19 crisis,pandemic, and we cannot be certain that our mitigation efforts will be effective.

The extent of the impact of COVID-19 on our operational and financial performance will depend on future developments, including the duration and spread of the virus and related restrictions. At this time, given the uncertainty of the lasting effect of COVID-19, the financial impact on the world economy, and in particular, our business, cannot be determined. Further, despite our efforts to manage various impacts, the situation surrounding COVID-19 remains fluid and the potential for a material impact on our results of operations, financial condition and liquidity increases the longer the virus impacts activity levels in the U.S. and globally. The ultimate impact of the COVID-19 pandemic depends on factors beyond our knowledge or control, including the duration and severity of the COVID-19 outbreak as well as third-party actions taken to contain its spread and mitigate its public health effects. Therefore, we currently cannot estimate with any degree of certainty the potential impact to our financial position, results of operations and cash flows.

We may require funding from external sources, which may not be available at the levels we require, or may cost more than we expect, and, as a consequence, our expenses and operating results could be negatively affected.

Our liquidity could be further negatively impacted if the COVID-19 pandemic continues to persist for a significant period of time and we may be required to pursue additional sources of financing to obtain working capital, maintain appropriate inventory levels and meet our financial obligations. Depending on the continued impact of the crisis,pandemic, further actions may be required to improve our cash position and capital structure. Concerns over the economic impact of the COVID-19 pandemic have caused extreme volatility in financial and capital markets, which has adversely impacted our stock price and may materially adversely affect our ability to access capital markets.

We regularly review and evaluate our liquidity and capital needs. We believe that our available cash, cash equivalents and cash flow from operations will be sufficient to finance our operations and expected capital requirements for at least the next 12 months. However, we might experience periods during which we encounter additional cash needs, and we might need additional external funding to support our operations.

In the event we require additional liquidity from our lenders, such funds may not be available to us on acceptable terms, or at all. In addition, in the event we were to breach any of our financial covenants, our banks would not be required to provide us with additional funding, or they may require us to renegotiate our existing credit facility on less favorable terms. In addition, we may not be able to renew our letters of credit that we use to help pay our suppliers, on terms that are acceptable to us, or at all, as the availability of credit facilities may become limited. Further, the providers of such credit may reallocate the available credit to other borrowers. If we are unable to access additional credit at the levels we require, or the cost of credit is greater than expected, it could adversely affect our operating results.

Home Furnishings Industry Risks

Declines in certain economic conditions, which impact consumer confidence and consumer spending, could negatively impact our sales, results of operations and liquidity.

The furniturehome furnishings industry and our business is particularly sensitive to declines in general economic conditions and to uncertainty regarding future economic prospects, including the current and evolving negative economic impact of the COVID-19 pandemic. Our principal products are consumer goods that may be considered postponable purchases. Economic downturns and prolonged negative conditions in the economy could affect consumer spending habits by decreasing the overall demand for discretionary items, including home furnishings. Consumer purchases of discretionary items, including our products, generally decline during periods when disposable income is limited, unemployment rates increase or there is uncertainty about future economic prospects. In addition, changes in interest rates, consumer confidence, new housing starts, existing home sales, the availability of consumer credit and broader national or geopolitical factors also impact our business. We have seen negative effects on certain of these measures due to the COVID-19 pandemic. Consumer spending could remain depressed for an extended time and improvement in our sales could lag behind a general economic recovery as consumers may postpone the purchase of relatively higher-cost discretionary items.

Other financial or operational difficulties due to competition may result in a decrease in our sales, earnings, and liquidity.

The residential home furnishings industry is highly competitive and fragmented. We currently compete with many other manufacturers and retailers, including online retailers, some of which offer widely advertised products, and others, several of which are large retail dealers offering their own store-branded products. Competition in the residential home furnishings industry is based on quality, style of products, perceived value, price, service to the customer, promotional activities, and advertising. The highly competitive nature of the industry means we are constantly subject to the risk of losing market share, which would likely decrease our future sales, earnings and liquidity.

Consumer Demand Risks

A significant shift in consumer preference toward purchasing products online could have a materially adverse impact on our sales and operating margin.

A majority of our business relies on physical design centers that merchandise and sell our products and a significant shift in consumer preference towards exclusively purchasing products online could have a materially adverse impact on our sales and operating margin. During fiscal 2021, we experienced lower traffic to our company-operated design centers, similar to other home furnishing retailers, as consumers shifted to purchasing more product online. The COVID-19 pandemic has accelerated the shift to online purchases by changing customer shopping patterns and behaviors, including decreased consumer willingness to visit physical retail locations. We are attempting to meet consumers where they prefer to shop by expanding our online capabilities and improving the user experience at ethanallen.com to drive more traffic to both our online site and our physical design centers.

Rapidly evolving technologies are altering the manner in which the Company and its competitors communicate and transact with customers. Customers adoption of new technology and related changes in customer behavior, presents a specific risk in the event we are unable to successfully execute our technology plans or adjust them over time if needed. Further, unanticipated changes in pricing and other practices of competitors, including promotional activity, such as thresholds for free shipping and rapid price fluctuation enabled by technology, may adversely affect our performance.

An overall decline in the health of the economy and consumer spending may affect consumer purchases of discretionary items, which could reduce demand for our products and materially harm our sales, profitability and financial condition.

Our business depends on consumer demand for our products and, consequently, is sensitive to a number of factors that influence general consumer spending on discretionary items in particular. Factors influencing consumer spending include general economic conditions, consumer disposable income, fuel prices, recession and fears of recession, unemployment, war and fears of war, inclement weather, availability of consumer credit, consumer debt levels, conditions in the housing market, interest rates, sales tax rates and rate increases, inflation, civil disturbances and terrorist activities, foreign currency exchange rate fluctuations, consumer confidence in future economic and political conditions, natural disasters, and consumer perceptions of personal well-beingwell‑being and security, including health epidemics or pandemics, such as the COVID-19 pandemic. For example, demand for certain of our products decreased during the fourth quarter of fiscal 2020 as a result of the economic impact of the COVID-19 pandemic and weakened consumer confidence in the economy and financial markets. Prolonged or pervasive economic downturns could slow the pace of new design center openings or cause current design centers to temporarily or permanently close. Adverse changes in factors affecting discretionary consumer spending have reduced and may continue to further reduce consumer demand for our products, thus reducing our sales and harming our business and operating results.

Historically, because customers consider home furnishings to be postponable purchases, the home furnishings industry has been subject to cyclical variations in the general economy and to uncertainty regarding future economic prospects. Should the current economic recovery falter or the current recovery in housing starts to stall, consumer confidence and demand for home furnishings could deteriorate, which could adversely affect our business through its impact on the performance of our Company-ownedCompany-operated design centers, as well as on our independent licensees and the ability of a number of them to meet their obligations to us.

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 such as Canada or China, may have a greater impact on the Company compared to economic conditions in other parts of the world where we have lesser concentration of design centers. An economic downturn of significance or extended duration could adversely affect consumer demand and discretionary spending habits and, as a result, our business performance, profitability, and cash flows.

Other financial or operational difficulties due to competition may result in a decrease in our sales, earnings, and liquidity.

The residential furniture industry is highly competitive and fragmented. We currently compete with many other manufacturers and retailers, including online retailers, some of which offer widely advertised products, and others, several of which are large retail furniture dealers offering their own store-branded products. Competition in the residential furniture industry is based on quality, style of products, perceived value, price, service to the customer, promotional activities, and advertising. The highly competitive nature of the industry means we are constantly subject to the risk of losing market share, which would likely decrease our future sales, earnings, and liquidity.

A significant shift in consumer preference toward purchasing products online could have a materially adverse impact on our sales and operating margin.

A majority of our business relies on physical design centers that merchandise and sell our products and a significant shift in consumer preference toward purchasing products online could have a materially adverse impact on our sales and operating margin. In the past year we have experienced lower trafficRisks Related to our company-owned design centers, similar to other furniture retailers, as consumers have shifted to purchasing more furniture product online. The COVID-19 pandemic has accelerated the shift to online furniture purchases by changing customer shopping patternsBrand and behaviors, including decreased consumer willingness to visit physical retail locations. We are attempting to meet consumers where they prefer to shop by expanding our online capabilities and improving the user experience at ethanallen.com to drive more traffic to both our online site and our physical design centers.Product Offerings

Rapidly evolving technologies are altering the manner in which the Company and its competitors communicate and transact with customers. Our strategy designed to adapt to these changes, in the context of competitors’ actions, customers adoption of new technology, and related changes in customer behavior, presents a specific risk in the event we are unable to successfully execute our plans or adjust them over time if needed. Further, unanticipated changes in pricing and other practices of competitors, including promotional activity, such as thresholds for free shipping and rapid price fluctuation enabled by technology, may adversely affect our performance.

Inability to maintainandenhanceourbrand our brand may materially adversely impactourbusiness. our business.

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 advertising campaign utilizes television, direct mail, digital, 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 these efforts are unsuccessful or we incur substantial costs in connection with these efforts, our business, operating results and financial condition could be materially adversely affected.

Failureto successfullyanticipatesuccessfully anticipate orrespond respond tochangesinconsumertastes in consumer tastes andtrends trends ina timelymannertimely manner could materially adverselyadversely impact our business,operating resultsour business, operating results andfinancial condition.condition.

Sales of our products are dependent upon consumer acceptance of our product designs, styles, quality and price. We continuously monitor 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 consultantsprofessionals who provide valuable input on consumer tendencies. However, as with all retailers, our business is susceptible 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 materially adversely impact our business, operating results and financial condition.

Global andlocal economic uncertaintymaymaterially adverselyaffectWe may not be able to maintain our manufacturing operations or sourcesof merchandise and international operations.current design center locations at current costs. We may also fail to successfully select and secure design center locations.

TheOur 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 a result, our success may be affected by our ability to renew current economic challenges in China, including global economic ramificationsdesign center leases and to select and secure appropriate retail locations for existing and future design centers.

Supply Chain Risks

Disruptions of the softening of the Chinese economy and trade agreement negotiations, may continue to put pressure on global economic conditions. This economic uncertainty, as well as other variations in global economic conditions such as fuel costs, wage and benefit inflation, and currency fluctuations, may cause inconsistent and unpredictable consumer spending habits, while increasing our own input costs. These risks resulting from global and local economic uncertainty could also severely disrupt our manufacturing operations, whichsupply chain could have a material adverse effect on our operating and financial performance. We import a portionresults.

Disruption of our merchandise from foreign countries and operate manufacturing plants in Mexico and Honduras and retail design centers in Canada. As a result, our abilitythe Company’s supply chain capabilities due 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, includingtrade restrictions, political instability, severe weather, natural disasters, public health crises such as the ongoing COVID-19 pandemic, changesterrorism, product recalls, labor supply or stoppages, the financial and/or operational instability of key suppliers and carriers, or other reasons could impair the Company’s ability to distribute its products. To the extent we are unable to mitigate the likelihood or potential impact of such events, there could be a material adverse effect on our operating and financial results.

Supply chain management disruption has had, and could continue to have, a material adverse effect on our results of operations.

Supply chain challenges have been faced by the entire home furnishings industry, including the Company, as a result of COVID-19 related labor shortages and supply chain disruptions. These supply chain disruptions have created significant delays in international trade including tariffs, central bank actions, changesour ability to fulfill customer orders and increased backlogs. We continue to produce about 75% of our products in our North American manufacturing facilities. The other 25% is sourced primarily from Southeast Asia and China. The receipt of inventory sourced from impacted areas has been slowed or disrupted and our merchandise suppliers are expected to face similar challenges in receiving materials and fulfilling our orders. In addition, ocean freight capacity issues continue to persist worldwide due to the ongoing global COVID-19 pandemic as there is much greater demand for shipping and reduced capacity and equipment, which has resulted in recent price increases per shipping container. Streamline ships are charging priority booking fees to allocate space as they have less ships and workers operating. While we continue to manage and evaluate our freight carriers, there is no indication that shipping container rates will return to historical levels in the relationship of the United States dollar versus other currencies, labor availabilitynear-term and cost, and other governmental policies of the United States and the countries from which we import our merchandise or in which we operate facilities.

The United States, Mexico and Canada recently entered intothese increases could have a signed trade agreement called The United States - Mexico - Canada Agreement (“USMCA”) that has been ratified by all three countries. The USMCA will govern trade in North America and replaces the North American Free Trade Agreement (“NAFTA”). Compared to the previous NAFTA trade agreement, USMCA will increase environmental and labor regulations and will create incentives for more U.S. production of cars and trucks and impose a quota for Canadian and Mexico automotive production. Although we have determined that there have been no immediate effectsmaterial adverse affect on our operations with respect to USMCA, we cannot predict future developmentsconsolidated results of operations. Furthermore, transportation delays, increases on shipping containers, more extensive travel restrictions, closures or disruptions of businesses and facilities or social, economic, political or labor instability in the political climate involving the United States, Mexico and Canada and thus theseaffected areas, may have an adverse and material impact on our operations and financial growth.or our suppliers’ operations.

CompetitFluctuations in the price, availability and quality of raw materials have resulted in increased costs and caused production delays which, if continued, could result in a decline in sales, either of which could materially adversely impact our earnings.

Although we have instituted measures to ensure our supply chain remains open to us, we experienced raw material supply chain challenges related to suppliers negatively impacted by COVID-19 shutdowns and shipping delays. These global supply chain challenges could continue and in turn materially adversely impact our manufacturing production and fulfillment of backlog. While we strive to maintain a number of sources for our raw materials, the impact of COVID-19 on raw materials and increased demand on our supply chain, has created additional pricing and availability pressures. During fiscal 2021, certain raw material prices, such as foam, springs, logs and lumber, significantly increased and in some instances, limited our production due to sourcing delays. Continued higher raw material prices and costs of sourced products could have an adverse effect on our future margins. We expect raw material prices to remain at historically high levels in many categories during fiscal 2022 due to price inflation in certain raw materials and global supply chain complexities. COVID-19 related issues will continue to introduce uncertainty into many markets, especially with respect to freight and labor availability. To the extent that we experience incremental costs in any of these areas, we may increase our selling prices or assess material surcharges to offset the impact. However, increases in selling prices, or surcharges, may not fully mitigate the impact of raw material cost increases which would adversely impact operating income.

iManufacturing Risks

onCompetition fromoverseas manufacturersmanufacturers and domestic retailersmay materially adverselyaffect affect ourbusiness,operating results business, operating results or financial condition.condition.

Our wholesale business segment is involved in the development of our brand, which encompasses the design, manufacture, sourcing, sales and distribution of our home furnishings products, and competes with other United States and foreign manufacturers. Our retail network sells home furnishings to consumers through a network of independently operated and Company-operated design centers, and competes against a diverse group of retailers ranging from specialty stores to traditional furniturehome furnishings and department stores, any of which may operate locally, regionally, nationally or globally, as well as over the internet. We also compete with these and other retailers for retail locations as well as for qualified design consultantsprofessionals 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 good products, and the development of manufacturing capabilities in other countries, specifically within Asia. The increase in overseas production has created over‐capacity for many manufacturers, including us, which has led to industry‐wide plant consolidation. In addition, because many foreign manufacturers 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 that 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 manufacturers has served to broaden the competitive landscape. Some of these competitors produce furniture typesproducts not manufactured by us and may have greater financial resources available to them or lower costs of operating. This competition could materially adversely affect our future financial performance.

DisruptionsOur number of manufacturing sites may increase our supply chainexposure to business disruptions and could have a material adverse effect on our operating and financial results.

Disruption of the Company’s supply chain capabilities due to trade restrictions, political instability, severe weather, natural disasters, public health crises such as the ongoing COVID-19 pandemic, terrorism, product recalls, labor supply or stoppages, the financial and/or operational instability of key suppliers and carriers, or other reasons could impair the Company’s ability to distribute its products. To the extent we are unable to mitigate the likelihood or potential impact of such events, there could be a material adverse effect on our operating and financial results.

Ournumberofmanufacturingandlogistics sitesmayincrease ourexposure to businessdisruptionsand could resultresult in higher transportationcosts.costs.

We have a limited number of manufacturing sites in our case goods and upholstery operations and consolidated our distribution network into fewer centers for both wholesale and retail segments. Our upholstery operations consist of two upholstery plants at our North Carolina campus and two plants in Mexico. The Company operates two manufacturing plants (Vermont and Honduras) and one sawmill, one rough mill and one lumberyard in support of our case goods operations. As a result of the consolidation of our manufacturing operations into fewer facilities, if any of our manufacturing or logistics sites experience significant business interruption, our ability to manufacture or deliver our products in a timely manner would likely be impacted. While we have long‐standing relationships with multiple outside suppliers of our raw materials and commodities, there 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.

FluctuEnvironmental, Health and Safety Risksationsintheprice,availabilityandqualityofrawmaterialscouldresultinincreasedcostsorcauseproductiondelays which mightresult ina decline in sales, either of which couldmaterially adverselyimpact 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 as well as outside North America. Fluctuations in the price, availability and quality of raw materials 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 upward trends in raw material prices could result in lower sales or margins, thereby materially 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 place 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 United States economy.

Our current andformer manufacturing former manufacturing andretail retail operationsand and productsaresubject are subject to increasinglystringent environmental,increasingly stringent environmental, health and safety requirements.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 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, current and former properties and our current operations. These laws and regulations provide for substantial fines and criminal sanctions for violations and sometimes require the installation of costly pollution control or safety equipment, or costly changes in operations 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 hazardous 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 could require us to incur costs or become the basis of new or increased liabilities that could be material.

Product recalls or product safety concerns could materially adversely affect our sales and operating results.

If the Company's merchandise offerings do not meet applicable safety standards or consumers' expectations regarding safety, the Company could experience decreased sales, increased costs and/or be exposed to legal and reputational risk. Events that give rise to actual, potential or perceived product safety concerns could expose the Company to government enforcement action and/or private litigation. Reputational damage caused by real or perceived product safety concerns or product recalls could negatively affect the Company's business and results of operations.

Technology and Data Security Risks

We rely extensively on information technology systems to process transactions, summarize results, and manage our business and that of certain independent retailers.retailers. Disruptions in both our primary and back-up systems could adversely affect our business and operating results.

Our primary and back-up information technology systems are subject to damage or interruption from power outages, computer and telecommunications failures, viruses, phishing attempts, cyber-attacks, malware and ransomware attacks, security breaches, severe weather, natural disasters, and errors by employees. Though losses arising from some of these issues would be covered by insurance, interruptions of our critical business information technology systems or failure of our back-up systems could result in longer production times or negatively impact customers resulting in damage to our reputation and a reduction in sales. If our critical information technology systems or back-up systems were damaged or ceased to function properly, we might have to make a significant investment to repair or replace them.

SuccessfulSuccessful cyber-attacks and the failure to maintain adequate cyber-security systems and procedures could materially harm our operations.

In the current environment, there are numerous and evolving risks to cybersecurity and privacy, including criminal hackers, hacktivists, state-sponsored intrusions, industrial espionage, employee malfeasance and human or technological error. High-profile security breaches at other companies and in government agencies have increased in recent years, and security industry experts and government officials have warned about the risks of hackers and cyberattacks targeting businesses such as ours. Cyber-attacks are becoming more sophisticated and frequent, and in some cases have caused significant harm. Computer hackers and others routinely attempt to breach the security of technology products, services and systems, and to fraudulently induce employees, customers, or others to disclose information or unwittingly provide access to systems or data. 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.”cloud. Any disruption to the internet or to the Company's 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 effects on the Company's operations. A cyber-attack of our systems or networks that impairs our information technology systems could disrupt our business operations and result in loss of service to customers. The risk of cyberattacks to our Company also includes attempted breaches of contractors, business partners, vendors and other third parties. We have a comprehensive cybersecurity program designed to protect and preserve the integrity of our information technology systems. We have experienced and expect to continue to experience actual or attempted cyber-attacks of our IT systems or networks; however, none of these actual or attempted cyber-attacks had a material impact on our operations or financial condition.

While we devote significant resources to network security, data encryption and other security measures to protect our systems and data, including our own proprietary information and the confidential and personally identifiable information of our customers, employees, and business partners, these measures cannot provide absolute security. The costs to eliminate or alleviate network security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and our efforts to address these problems may not be successful, resulting potentially in the theft, loss, destruction or corruption of information we store electronically, as well as unexpected interruptions, delays or cessation of service, any of which could cause harm to our business operations. Moreover, if a computer security breach or cyber-attack affects our systems or results in the unauthorized release of proprietary or personally identifiable information, our reputation could be materially damaged, our customer confidence could be diminished, and our operations, including technical support for our devices, could be impaired. We would also be exposed to a risk of loss or litigation and potential liability, which could have a material adverse effect on our business, results of operations and financial condition.

Loss, corruption and misappropriation of data and information relating to customers could materially adversely affectaffect our operations.

We have access to sensitive customer 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, or legal proceedings, including regulatory investigations and actions, may have a negative impact on our reputation, may lead to regulatory enforcement actions against us, and may materially adversely affect our business, operating results and financial condition. The loss, disclosure or misappropriation of our business information may materially adversely affect our business, operating results and financial condition. Further, legislative or regulatory action in these areas is evolving, and we may be unable to adapt our IT systems or to manage the IT systems of third parties to accommodate these changes. Finally, if a significant data breach occurred, our reputation could be materially and adversely affected, and confidence among our customers may be diminished.

Legal and Regulatory Risks

Global and local economic uncertainty may materially adversely affect our manufacturing operations or sources of merchandise and international operations.

Economic uncertainty, as well as other variations in global economic conditions such as fuel costs, wage and benefit inflation, and currency fluctuations, may cause inconsistent and unpredictable consumer spending habits, while increasing our own input costs. These risks resulting from global and local economic uncertainty could also severely disrupt our manufacturing operations, which could have a material adverse effect on our financial performance. We import approximately 25% of our merchandise from outside of the United States as well as operate manufacturing plants in Mexico and Honduras and 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, public health crises such as the ongoing COVID-19 pandemic, changes in international trade including tariffs, central bank actions, changes in the relationship of the United States dollar versus other currencies, labor availability and cost, and other governmental policies of the United States and the countries from which we import our merchandise or in which we operate facilities.

Changes in United States trade and tax policy could materially adversely affect our business and results of operations.

Changes in the political environment in the United States may require us to modify our current business practices. Because we manufacture components and finished goods in Mexico and Honduras and purchase components and finished goods manufactured in foreign countries, including China, we are subject to risks relating to increased tariffs on United States imports, changes in the North American Free Trade Agreement, and other changes affecting imports. Recently, the United States administration considered enacting certain tariffs on many items sourced from China, including certain furniture, accessories, furniture parts, and raw materials that are imported into the United States and used in our domestic operations. We may not be able to fully or substantially mitigate the impact of such tariffs, pass price increases on to our customers, or secure adequate alternative sources of products or materials. The tariffs, along with any additional tariffs or retaliatory trade restrictions implemented by other countries, could negatively impact customer sales, including potential delays in product received from our vendors, our cost of goods sold and results of operations.

Approximately 25%Our business may be materially adversely affected by changes to tax policies.

Changes in United States or international income tax laws and regulations may have a material adverse effect on our business in the future or require us to modify our current business practices. In the ordinary course of business, we are subject to tax examinations by various governmental tax authorities. The global and diverse nature of our merchandisebusiness means that there could be additional examinations by governmental tax authorities and the resolution of ongoing and other probable audits, which could impose a future risk to the results of our business.

Interest payments on our future borrowings may be materially adversely affected by the phasing out of LIBOR.

Any future borrowings under our revolving credit facility has an interest rate tied to LIBOR, which is sourced from outsidethe subject of recent national, international and other regulatory guidance and proposals for reform. These reforms and other pressure may cause LIBOR to disappear entirely or to perform differently than in the past. It is expected that certain banks will stop reporting information used to set LIBOR at the end of calendar year 2021 when their reporting obligations cease. This will effectively end the usefulness of LIBOR and end its publication. If LIBOR is no longer available, or otherwise at our option, we will pursue alternative interest rate calculations in our Credit Agreement, including the use of the United States. The United States government has also expressed its intentSecured Overnight Financing Rate (“SOFR”). A number of other alternatives to alter its approach to trade policy, including, in some instances, to revise, renegotiateLIBOR have been proposed or terminate certain multilateral trade agreements. It has also imposed new tariffs on certain foreign goods and raised the possibility of imposing additional increases or new tariffs on other goods. Such actions have, in some cases, already led to retaliatory trade measures by certain foreign governments. Such policies could makeare being developed, but it more difficult or costly for us to do business in or import our products from those countries. In turn, we may need to raise prices or make changes to our operations,is not clear which, could negatively impact our net sales or operating results. At this time, it remains unclear what additional actions, if any, will be taken byadopted. Any of these alternative methods may result in interest payments that are higher than expected or that do not otherwise correlate over time with the United States government or foreign governments with respect to tariff and international trade agreements and policies, and we cannot predict future trade policy orpayments that would have been made on such indebtedness for the terms of any revised trade agreements or any impact on our business.interest periods if the applicable LIBOR rate was available in its current form.

Human Capital Risk

Our business is dependent on certain key personnel; if we lose key personnel or are unable to hire additional qualified personnel, our business may be harmed.

The success of our business depends upon our ability to retain continued service of certain key personnel, particularly our Chairman of the Board, President and Chief Executive Officer, M. Farooq Kathwari, and to attract and retain additional qualified key personnel in the future. We face risks related to loss of any key personnel and we also face risks related to any changes that may occur in key senior leadership executive positions. Any disruption in the services of our key personnel could make it more difficult to successfully operate our business and achieve our business goals and could adversely affect our results of operation and financial condition. These changes could also increase the volatility of our stock price.

The market for qualified employees 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 employees and upon the continued contributions of these individuals. We cannot provide assurance that we will be successful in attracting 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 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.

In addition, COVID-19 increases the risk that certain senior executive officers or a member of the board of directorsour Board could become ill, causing them to be incapacitated or otherwise unable to perform their duties for an extended absence. Furthermore, because of the nature of the disease, multiple people working in close proximity could also become ill simultaneously which could result in the same department having extended absences. This could negatively impact the efficiency and effectiveness of processes and internal controls throughout the Company.

Financial Risks

Our total assets include substantialsubstantial amounts of long-lived assets. assets. Changes to estimates or projections used to assess the fair value of these assets,, financial results that are lower than current estimates at certain design center locations or determinations to close underperforming locations may cause us to incur future impairment charges, negatively affecting its financial results.

We make certain accounting estimates and projections with regard to individual design center operations as well as overall Company performance in connection with our impairment analysis for long-lived assets in accordance with applicable accounting guidance. An impairment charge may be required if the impairment analysis indicates that the carrying value of an asset exceeds the sum of the expected undiscounted cash flows of the asset. The projection of future cash flows used in this analysis requires the use of judgment and a number of estimates and projections of future operating results.results, including sales growth rates. If actual results differ from Company estimates, additional charges for asset impairments may be required in the future. If impairment charges are significant, our financial results could be negatively affected.

Access toconsumer consumer credit couldcould be interrupted interrupted as a result of conditions outside of our control, which could reduce salesreduce sales andprofitability. profitability.

Our ability to continue to access consumer credit for our customers could be negatively affected by conditions outside our control. If capital market conditions have a material negative change, 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, the tightening of credit markets may restrict the ability and willingness of customers to make purchases.

WeGeneral Risk Factorsmaynotbeabletomaintainourcurrentdesigncenterlocationsatcurrentcosts.Wemayalsofailtosuccessfullyselect 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 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 business may be materially adversely affected by changes to tax policies.

Changes in United States or international income tax laws and regulations may have a material adverse effect on our business in the future or require us to modify our current business practices. In the ordinary course of business, we are subject to tax examinations by various governmental tax authorities. The global and diverse nature of our business means that there could be additional examinations by governmental tax authorities and the resolution of ongoing and other probable audits, which could impose a future risk to the results of our business.

Our operations present hazards and risks which may not be fully covered by insurance, if insured.

The scope and nature of our operations present a variety of operational hazards and risks that must be managed through continual oversight and control. As protection against hazards and risks, we maintain insurance against many, but not all, potential losses or liabilities arising from such risks. Uninsured losses and liabilities from operating risks could reduce the funds available to us for capital and investment spending and could have a material adverse impact on the results of operations.

Failure to protect our intellectual property could materially 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 trade 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 assurance 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 rights 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 have to litigate to protect or defend any of our rights, such litigation could result in significant expense.

Our operations present hazards and risks which may not be fully covered by insurance, if insured.

As protection against operational hazards and risks, we maintain business insurance against many, but not all, potential losses or liabilities arising from such risks. Uninsured losses and liabilities from operating risks could reduce the funds available to us for capital and investment spending and could have a material adverse impact on the results of operations.

ITEM 1B.   UNRESOLVED STAFF COMMENTS

None.

ITEM 2.      PROPERTIES

Ethan Allen’s 144,000 square foot corporate headquarters building, located in Danbury, Connecticut, is owned by the Company.

WeWholesale Segment. As of June 30, 2021, we operate nine manufacturing facilities located in the United States, Mexico and Honduras. These facilities are owned by the Company and include five case goods plants (including one sawmill, one rough mill and one lumberyard) totaling 1,306,000 square feet and four upholstery furniture plants totaling 1,171,000 square feet. Three of our case goods manufacturing facilities are located in Vermont, one is in Honduras and one is in North Carolina. We have two upholstery manufacturing facilities at our North Carolina campus and two in Mexico. Our wholesale divisionsegment also owns and operates fourthree national distribution and fulfillment centers, which are a combined 1,427,0001,175,000 square feet. Our distribution facilities are located in North Carolina Oklahoma, and Virginia.

Retail Segment. As of June 30, 2021, there were 141 Company-operated retail design centers totaling 2,071,000 square feet and averaging approximately 14,700 square feet in size per location. Of the 141 Company-operated retail design centers, 49 of the properties are owned and 92 are leased. We also own three and lease 13 retail home delivery centers, totaling approximately 860,000845,000 square feet. Our retail home delivery centers are located throughout the United States and Canada and serve to support our various retail design centers.

As of June 30, 2020, there were 144 Company-operated retail design centers totaling 2,159,000 square feet and averaging approximately 15,000 square feet in size per location. Of the 144 Company-operated retail design centers, 51 of the properties are owned and 93 are leased.

The location activity and geographic distribution of our retail network for fiscal years ended June 30, 2021 and 2020, respectively, are as follows:

We believe that all our properties are well maintained, in good condition, are being used productively and are adequate to meet our requirements for the foreseeable future. In the past two fiscal years, in an effort to further improve and optimize our manufacturing and logistics operations, we executed on the following projects during fiscal 2020: (i) converted our Old Fort, North Carolina plant into a state-of-the-art distribution center to support our national distribution structure, and growing United States government General Services Administration (“GSA”) contract business; (ii) consolidated our United States case goods manufacturing to Vermont; (iii)into Vermont, expanded our Maiden, North Carolina campus;campus and (iv) moved theconsolidated two separate distribution operations from our Passaic, New Jersey facility to our operations inOld Fort, North Carolina and outsourced the art framing operations.facility.

For additional information regarding leases for our properties, see Note 6, LeasesLeases, of the notes to our consolidated financial statements included under Item 8 of this Annual Report on Form 10-K.

ITEM 3.LEGAL PROCEEDINGS

From time to time, we are subject to legal proceedings, claims, litigation and other proceedings arising in the ordinary course of business. Such legal proceedings may include claims related to our employment practices, wage and hour claims, claims of intellectual property infringement, including with respect to trademarks, claims asserting unfair competition and unfair business practices, and consumer class action claims relating to our consumer practices. In addition, from time to time, we are subject to product liability and personal injury claims for the products that we sell and the design centers we operate. We could also face a wide variety of employee claims against us, including general discrimination, privacy, labor and employment, ERISA and disability claims. Any claims could result in litigation against us and could also result in regulatory proceedings being brought against us by various federal and state agencies that regulate our business, including the U.S. Equal Employment Opportunity Commission.

Based on a review of all currently known facts and our experience with previous legal matters, we have recorded expense in respect of probable and reasonably estimable losses arising from legal matters and wematters. We currently do not believe it is probable that we will have any additional loss that would have a material adverse effect on our consolidated financial position, our annual results of operations or our annual cash flows. However, these matters are subject to inherent uncertainties and our view of these matters may change in the future. For additional information regarding legal matters, refer to Note 20, Commitments and Contingencies, of the notes to our consolidated financial statements included under Item 8 of this Annual Report on Form 10-K.

Regulations issued under the Clean Air Act Amendments of 1990 required 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 addition, 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/audit 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, and (iii) continuously improving environmental and job safety programs on the factory floor which serve to minimize emissions and safety risks for employees. To reduce the use of hazardous materials in the manufacturing process, we will continue to evaluate the most appropriate, cost-effective control 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.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5.MARKET FOR REGISTRANT’SREGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information.Information. Ethan Allen common stock is traded on the New York Stock Exchange (“NYSE”(the “NYSE”) under ticker symbol “ETD”. On August 4, 2021, the Company announced that it was changing its ticker symbol from “ETH”. to “ETD”, using the “D” for Design, which is reflective of our focus on interior design and the personal services of our design professionals throughout our global retail network of over 300 design centers. The ticker symbol change became effective on August 16, 2021.

Holders of RecordRecord..As of August 20, 2020,11, 2021, there were 222256 shareholders of record of our common stock, including Cede & Co., the nominee of the Depository Trust Company. However, because many of our shares of common stock are held by brokers and other institutions on behalf of shareholders, we are unable to estimate the total number of shareholders represented by these record holders.

DividendsDividends..At On April 28, 2020, in response to the quarterly meeting of theCOVID-19 pandemic, our Board of Directors held on April 28, 2020, our Board temporarily suspended the Company’s regular quarterly cash dividend in consideration of the impacts of the ongoing COVID-19 pandemic. Ourdividend. Subsequently on August 4, 2020, our Board of Directors met with management at its next quarterly meeting held on August 4, 2020 to review the effects of the COVID-19 pandemic on the business and determined that it was appropriate to return capital to shareholders in the form of a quarterly cash dividend and reinstated the regular quarterly dividend equal to the pre-COVID-19 level of $0.21 per share. The Company’s policy isOn November 12, 2020, our Board increased the regular quarterly cash dividend by 19% to issue$0.25 per share and in the just completed fourth quarter of fiscal 2021, we paid a special cash dividend of $0.75 per share. Total cash dividends paid to shareholders during fiscal 2021 was $1.71. We have historically paid quarterly cash dividends and we expect to continue to declare and pay comparable quarterly cash dividends for the foreseeable future, business conditions permitting.permitting and subject to final determination by our Board of Directors.

Securities Authorized for Issuance under Equity Compensation Plans.Plans. Refer to Part III of this Annual Report on Form 10-K.

Stock Performance Graph.Graph. The annual changes for the five-year period shown in the graph below are based on the assumption that $100 had been invested in our common stock, the Standard & Poor’s 500 Index and the Standard & Poor’s Retail Select IndustryDow Jones U.S. Furnishings Index (“SPSIRE”) on June 30, 2015.2016. The total cumulative dollar returns shown on the graph represent the value that such investments would have had on June 30, 2020.2021. Stockholder returns over the indicated period are based on historical data and should not be considered indicative of future stockholder returns.

*This performance graph shall not be deemed “soliciting material”“soliciting material” or to be “filed”“filed” with the SEC for purposes of Section18 of the Securities Exchange Act, of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Ethan Allen under the Securities Act of 1933, as amended, or the Exchange Act whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.filing.

There were no sales of unregistered equity securities during fiscal 2020.2021.

As of April 1, 2020, as partWe did not repurchase any shares of our COVID-19 action plan,outstanding common stock during the fourth quarter of fiscal 2021 under the Share Repurchase Program. At June 30, 2021, we temporarily haltedhad a remaining Board authorization to repurchase 2,007,364 shares of our share repurchase program. However, incommon stock pursuant to the Share Repurchase Program. In the future we may from time to time make repurchases in the open market and through privately negotiated transactions, subject to market conditions, including pursuant to our previously announced Share Repurchase Program. There is no expiration date on the repurchase program. During fiscal 2020 we repurchased 1,538,363 shares at an average price of $15.81 for a total of $24.3 million. At June 30, 2020, we had a remaining Board authorization to repurchase 2,007,364 shares of our common stock pursuant to our program.authorization.

ITEM 6.SELECTED FINANCIAL DATA

The following tables set forth, forNot applicable as the periods and atCompany has applied the dates indicated, ouramendment to Regulation S-K Item 301, which became effective on February 10, 2021.

For selected historical consolidated financial data. We have derived the selected consolidated financial data, for the years ended June 30, 2020, 2019including certain significant trends in our financial condition and 2018, and asresults of June 30, 2020 and 2019, from our audited consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. We have derived the selected consolidated financial data for the years ended June 30, 2017 and 2016, and as of June 30, 2018, 2017 and 2016 from our consolidated financial statements not appearing elsewhere in this report. This financial data should be read in conjunction withoperations, refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8, FinancialFinancial Statements and Supplementary Data, of this Annual Report on Form 10-K.

The selected financial data as of and for the year ended June 30, 2020 reflects the modified retrospective application of the new lease accounting standard (Accounting Standards Update 2016-02, Leases). Prior year selected financial data was not restated to reflect the impact of the new lease accounting standard. For information regarding recently issued accounting pronouncements, refer to Note 3, Summary of Significant Accounting Policies in our consolidated financial statements within Part II of this Annual Report on Form 10-K.