UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

(Mark One)

 

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

 

For the quarterly period ended September 30,December 31, 2021

 

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)		(I.R.S. Employer Identification No.)

 

 

25 Lake Avenue Ext., Danbury, Connecticut		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, $0.01 par value		ETD		New York Stock Exchange
(Title of each class)		(Trading symbol)		(Name of each exchange on which registered)

 

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, a 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).          ☐ Yes         ☒ No

 

The number of shares outstanding of the registrant’s common stock, $0.01 par value, as of OctoberJanuary 20, 2021,2022, was 25,260,036.25,301,091.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

See accompanying notes to consolidated financial statements.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(In thousands, except per share data)

See accompanying notes to consolidated financial statements.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)

See accompanying notes to consolidated financial statements.

ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)

(In thousands)

See accompanying notes to consolidated financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Organization

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.

Nature of Business

We are a global luxury home fashion brand that is vertically integrated from product design through home delivery, which offers our customers stylish product offerings, artisanal quality, and personalized service. We provide complimentary interior design service to our clients and sell a full range of home furnishings through a retail network of approximately 300design centers inlocated throughout the United States and abroad as well as online at ethanallen.com.

Ethan Allen design centers represent a mix of locations operated by independent licensees and Company-operated locations. As of September 30,December 31, 2021, the Company operates 141 retail design centers with 136 located in the United States and five in Canada. Our160 independently operated design centers are located in the United States, Asia, the Middle East and Europe. We also own and operate nine manufacturing facilities in the United States, Mexico and Honduras, including one 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.

Impact of the COVID-19 Pandemic Upon our Financial Condition and Results of Operations

We have been and continue to be impacted by the ongoing global coronavirus (“COVID-1919”) pandemic. All of ourOur design centers are open and written orders taken at both the retail and wholesale segments have exceeded levels from a year prior as customers continue to allocate more discretionary spending to home furnishings. Demanddemand for our products continues to outpacebe strong as customers allocate greater amounts of discretionary spending to home furnishings than at the start of the COVID-19 pandemic. After having re-opened our manufacturing facilities in May 2020, we have ramped up and increased production capacity and import receipts leading to an order backlog still at a record level. Our manufacturing capacity has increased by adding headcount as well as second shifts and weekend production shifts to our North American plants. Our ability to expand production combined with higher import receipts has led to a reduction in order backlog during the second quarter of fiscal 2022. However, because we continue to experience strong written orders taken at both the retail and wholesale segments, our order backlog is approximately 50% higher than our backlog during the prior year period.

However,While we have increased production to meet the strong demand for our products, we continue to experience ongoing logistical challenges that we, as well as the entire home furnishings industry, have faced resulting from COVID-19 related supply chain disruptions creating delays in order fulfillment and increasing order backlogs.fulfillment. Our focus on inventory and supply chain management areis critical as we balance the need to maintain supply chain flexibility to help ensure competitive lead times with the risk of inventory shortage and obsolescence. The receipt of inventory and raw materials imported from certain geographic areas has been slowed. In addition, ocean freight capacity issues continue to persist worldwide due to the ongoing global COVID-19 pandemic, which has resulted in price increases per shipping container. While we continue to manage and evaluate our logistics providers, there iswe do nonot indication thatbelieve ocean freight container rates will return to pre-COVID-19 levels in the near-term. We are also experiencingWhile we improved our headcount during the second quarter of fiscal 2022, we continue to experience a shortage of qualified labor in certain geographies, particularly with United States manufacturing plant production workers and at our distribution facilities. Outside suppliers that we rely on have also experienced shortages of qualified labor. While we continue to actively identify, recruit, develop and retain qualified talent, an ongoing shortage in certain geographies could result in increased costs from higher overtime and the need to hire temporary help to meet demand and higher wage rates from actions to attract and retain employees, as well as higher costs to purchase raw materials or services from such third parties, all of which would have negativelya negative impact on our results of operations.

The COVID-19 pandemic has also exposed us to greater market risk as a result of increases in the cost of raw materials that we use in our manufacturing processes, principally wood, fabric and foam products. These raw materials have been, and continue to be, subject to rising inflationary pressures, partially attributable to the COVID-19 pandemic, which has led to increased costs of production. As commodity prices rise, we continue to evaluate whether a price increase to our customers to offset these costs is warranted.

In addition, in recent months, the United States federal government has issued orders and regulations directing employers to require their employees to be vaccinated against COVID-19. Due to our United States government General Services Administration contract, we are classified as a government contractor. In addition, we are a company with more than 100 employees, thus subject to these recently issued orders and regulations, if finalized. However, given the uncertainty surrounding if the mandates are legal and when they become effective, it is not possible to predict with certainty the impacts the mandates would have on us.

Although we actively manage the impact of the ongoing COVID-19 pandemic, we are unable to predict the impact COVID-19 will have on our financial operations in the near- and long-term. We also continue to manage our global supply chain and manufacturing operations, which may continue to be adversely impacted with respect to availability and pricing based on uncontrollable factors. The timing of any future actions in response to COVID-19 is dependent on the mitigation of the spread of the virus along with the adoption and continued effectiveness of vaccines, status of government orders, directives and guidelines, recovery of the business environment, global supply chain conditions, economic conditions, raw material prices, and consumer demand for our products.

Principles of Consolidation

Ethan Allen conducts business globally and has strategically aligned its business into 2two reportable segments: Wholesale and Retail. These two segments represent strategic business areas of our vertically integrated enterprise that operate separately and provide their own distinctive services. The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Our consolidated financial statements also include the accounts of an entity in which we are a majority shareholder with the power to direct the activities that most significantly impact the entity’s performance. Noncontrolling interest amounts in the entity are immaterial and included in the Consolidated Statements of Comprehensive Income within Other income (expense), net. All intercompany activity and balances have been eliminated from the consolidated financial statements. In our opinion, all adjustments, consisting only of normal recurring adjustments necessary for fair presentation, have been included in the consolidated financial statements. The results of operations for the three and sixmonths ended September 30,December 31, 2021 are not necessarily indicative of results that may be expected for the entire fiscal year. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our fiscal 2021 Annual Report on Form 10-K (the “2021 Annual Report on Form 10-K”).

Use of Estimates

We prepare our consolidated financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”), which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of net sales and expenses during the reporting period. Due to the inherent uncertainty involved in making those estimates, actual results could differ from those estimates. Areas in which significant estimates have been made include, but are not limited to, goodwill and indefinite-lived intangible asset impairment analyses, useful lives for property, plant and equipment, inventory obsolescence, lease accounting, business insurance reserves, tax valuation allowances and the evaluation of uncertain tax positions and other loss reserves.positions.

ReclassificationsRestricted Cash

The Company reclassified in the Consolidated StatementWe present restricted cash as a component of Comprehensive Income certain prior year comparative figures from Interest (expense), nettotal cash and cash equivalents as presented on our consolidated statement of interest income to Interestcash flows and other financing costs andwithin Other income (expense), netAssets on our consolidated balance sheet. As of December 31, 2021, we held $0.9 million of restricted cash related to conform to the current year’s presentation. This change was made for disclosure purposes only andan Ethan Allen insurance captive. We did not have hold any impact on previously reported results.restricted cash as of June 30, 2021.

The Company hasWe have evaluated subsequent events through the date thatof issuance of the financial statements were issued.included in this Quarterly Report on Form 10-Q.

New Accounting Standards or Updates Adopted in Fiscal 2022

Simplifying the Accounting for Income Taxes. In December 2019, the FASBFinancial Accounting Standards Board (the “FASB”) issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, an update intended to simplify various aspects related to accounting for income taxes. This guidance removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The adoption of this accounting standards update in the first quarter of fiscal 2022 did not have a material impact on our consolidated financial statements.

Recent Accounting Standards or Updates Not Yet Effective

There wereBusiness Combinations. In noOctober 2021, the FASB issued ASU 2021-08, recentBusiness Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires an acquirer to recognize and measure contract assets and liabilities acquired in a business combination in accordance with Revenue from Contracts with Customers (Topic 606) rather than adjust them to fair value at the acquisition date. This accounting standards or updates not yetupdate will be effective for us as ofbeginning in the end of our first quarter of fiscal 2022.2024. We are currently evaluating the impact of this accounting standard, but do not expect it to have a material impact on our consolidated financial statements.

No other new accounting pronouncements issued or effective as of September 30,December 31, 2021 have had or are expected to have a material impact on our consolidated financial statements.

Our reported revenue (net sales) consists substantially of product sales. We report product sales net of discounts and recognize them at the point in time when control transfers to the customer. For sales to our customers in our wholesale segment, control typically transfers when the product is shipped. The majority of our shipping agreements are freight-on-board shipping point and risk of loss transfers to our wholesale customer once the product is out of our control. Accordingly, revenue is recognized for product shipments on third-party carriers at the point in time that our product is loaded onto the third-party container or truck. For sales in our retail segment, control generally transfers upon delivery to the customer. As our contracts with customers are typically less than one year in length and do not have significant financing components, we do not adjust promised consideration.

Shipping and Handling. Our practice has been to sell our products at the same delivered cost to all retailers and customers nationwide, regardless of shipping point. Costs incurred by the Company to deliver finished goods are expensed and recorded in selling, general and administrative expenses. We recognize shipping and handling expense as fulfillment activities (rather than as a promised good or service) when the activities are performed even if those activities are performed after the control of the good has been transferred. Accordingly, we record the expenses for shipping and handling activities at the same time we recognize net sales. 

Sales Taxes. We exclude from the measurement of the transaction price all taxes imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer, including sales, use, excise, value-added, and franchise taxes (collectively referred to as sales taxes). Sales taxes collected are not recognized as revenue but are included in Accounts payable and accrued expenses on the consolidated balance sheets as it is ultimately remitted to governmental authorities.

Returns and Allowances. Estimated refunds for returns and allowances are based on our historical return patterns. We record these estimated sales refunds on a gross basis rather than on a net basis and have recorded an asset for product we expect to receive back from customers in Prepaid expenses and other current assets and a corresponding refund liability in Other current liabilities on our consolidated balance sheets. At September 30,December 31, 2021 and June 30, 2021, these amounts were immaterial.

Allowance for Doubtful Accounts. Accounts receivable arise from the sale of products on trade credit terms and is presented net of allowance for doubtful accounts. We maintain an allowance for estimated losses resulting from the inability of our customers to make required payments. The allowance for doubtful accounts is based on a review of specifically identified accounts in addition to an overall aging analysis. Judgments are made with respect to the collectability of accounts receivable based on historical experience and current economic trends. On a monthly basis, we review all significant accounts as to their past due balances, as well as collectability of the outstanding trade accounts receivable for possible write-off. It is our policy to write-off the accounts receivable against the allowance account when we deem the receivable to be uncollectible. Additionally, we review orders from retailers that are significantly past due, and we ship product only when our ability to collect payment from our customer for the new order is probable. At December 31, 2021 and June 30, 2021, the allowance for doubtful accounts was immaterial.

Commissions. We capitalize commission fees paid to our associates as contract assets within Prepaid expenses and other current assets on our consolidated balance sheets. These prepaid commissions are subsequently recognized as a selling expense upon delivery (when we have transferred control of our product to our customer). At September 30,December 31, 2021, we had prepaid commissions of $24.9$22.1 million, which we expect to recognize during the remainder of fiscal 2022 as Selling, general and administrative expenses within our consolidated statements of comprehensive income.

Customer Deposits. In most cases we receive deposits from customers before we have transferred control of our product to our customers, resulting in contract liabilities. These customer deposits are reported as a current liability in Customer deposits and deferred revenue on our consolidated balance sheets. At June 30, 2021, we had customer deposits of $129.8$130.6 million, of which we recognized $68.7$44.3 million and $113.0 million as net sales upon delivery to the customer during the three and sixmonths ended September 30,December 31, 2021. Customer deposits totaled $139.2$124.2 million at September 30,December 31, 2021. 

The following table disaggregates our net sales by product category by segment for the three months ended December 31, 2021 (in thousands):

The following table disaggregates our net sales by product category by segment for the three months ended September 30, 2021December 31, 2020 (in thousands):

The following table disaggregates our net sales by product category by segment for the threesix months ended September 30,December 31, 2021 (in thousands):

The following table disaggregates our net sales by product category by segment for the six months ended December 31, 2020 (in thousands):

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. In determining fair value, the use of various valuation methodologies, including market, income and cost approaches is permissible. We consider the principal or most advantageous market in which it would transact and assumptions that market participants would use when pricing the asset or liability.

Fair Value Hierarchy. We have categorized our cash equivalents as Level 1 assets within the fair value hierarchy as there are quoted prices in active markets for identical assets or liabilities. As of September 30,December 31, 2021 and June 30, 2021, we did not have any outstanding bank borrowings, which we historically have categorized as a Level 2 liability. There were no Level 3 assets or liabilities held by the Company as of September 30,December 31, 2021 and June 30, 2021.

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis. We did not record any other-than-temporary impairments on assets required to be measured at fair value on a non-recurring basis during fiscal 2022. In addition, we did not hold any available-for-sale securities during fiscal 2022 and 2021, and thus no fair value measurements were required.

Assets and Liabilities Measured at Fair Value for Disclosure Purposes Only. We had no outstanding bank borrowings as of September 30,December 31, 2021 and June 30, 2021.

We have operating leases for many of our design centers that expire at various dates through fiscal 2040. In addition, we also lease certain tangible assets, including computer equipment and vehicles with initial lease terms ranging from three to five years. We determine if a contract contains a lease at inception based on our right to control the use of an identified asset and our right to obtain substantially all of the economic benefits from the use of that identified asset. Certain operating leases have renewal options and rent escalation clauses as well as various purchase options. We assess these options to determine if we are reasonably certain of exercising these options based on all relevant economic and financial factors. Any options that meet these criteria are included in the lease term at lease commencement. Most of our leases do not have an interest rate implicit in the lease. As a result, for purposes of measuring our ROU asset and lease liability, we determine our incremental borrowing rate by computing the rate of interest that we would have to pay to (i) borrow on a collateralized basis (ii) over a similar term (iii) at an amount equal to the total lease payments and (iv) in a similar economic environment. The incremental borrowing rate is subsequently reassessed upon a modification to the lease agreement. Some of our leases contain variable lease payments based on a Consumer Price Index or percentage of sales, which are excluded from the measurement of the lease liability.

The Company's lease terms and discount rates are as follows:

The following table discloses the location and amount of our operating and financing lease costs within our consolidated statements of comprehensive income (in thousands):

The table below reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under noncancelable leases with terms of more than one year to the total lease liabilities recognized on the consolidated balance sheets as of September 30,December 31, 2021 (in thousands):

As of September 30,December 31, 2021, we have entered into twoone additional operating leaseslease for a retail design centers,center, which havehas not yet commenced and areis therefore not part of the tables above nor included in the lease right-of-use assets and liabilities. These leasesThis lease will commence when we obtain possession of the underlying leased asset, which is expected to be within the next three months. The twooperating leases arelease is for a period of seven years and ten years, respectively, and havehas an aggregate undiscounted future rentlease payments of $4.4$2.7 million. As of September 30,December 31, 2021, we did not have any financing leases that had not commenced.

Other supplemental information for our leases is as follows (in thousands):

There were no0 non-cash financing lease obligations obtained in exchange for new financing lease assets during the threesix months ended September 30,December 31, 2021 and 2020, respectively.

Inventories are summarized as follows (in thousands):

Property, plant and equipment are summarized as follows (in thousands):

Our goodwill and intangible assets are comprised of goodwill, which represents the excess of cost over the fair value of net assets acquired, and our Ethan Allen trade name and related trademarks. At September 30,December 31, 2021 and June 30, 2021, we had $25.4 million of goodwill and $19.7 million of indefinite-lived intangible assets, all of which are recorded in our wholesale segment.

Both goodwill and indefinite-lived intangible assets are not amortized as they are estimated to have an indefinite life. We test our wholesale goodwill and indefinite-lived intangibles for impairment on an annual basis in the fourth quarter of each fiscal year, and more frequently if events or changes in circumstances indicate that it might be impaired.

We recorded income tax expense of $7.2$9.3 million inand $16.5 million, respectively, for the firstthree quarter of fiscaland 2022six months ended December 31, 2021 compared with $1.9$5.3 million and $7.2 million in the prior year comparable period.periods. Our current quarter consolidated effective tax rate was 26.3% 25.7% and 26.0% for the three and six months ended December 31, 2021 compared with 16.8%23.9% and 21.5% in the prior year.year periods. Ourfirst quarter of fiscal 2022 effective tax rate of 26.3% varies from the 21% federal statutory rate primarily due to state taxes. The increase in the effective tax rate compared with the first quarter aprior year prior was primarily due to a $0.9 million reduction in our valuation allowance on retail state and local deferred tax assets.

As of September 30, 2021, a valuation allowance of $0.6 million wasassets in place against the retail segment's Canadian tax assets, consistent with June 30, 2021. prior year.

We recognize interest and penalties related to income tax matters as a component of income tax expense. As of September 30,December 31, 2021, we had $2.2$2.5 million of unrecognized tax benefits compared with $2.0 million as of June 30, 2021. It is reasonably possible that various issues relating to approximately $0.4$0.5 million of the total gross unrecognized tax benefits as of September 30,December 31, 2021 will be resolved within the next 12 months as exams are completed or statutes expire. If recognized, approximately $0.4 million of unrecognized tax benefits would reduce our income tax expense in the period realized.

On December 21, 2018, the Company and most of its domestic subsidiaries (the “Loan Parties”) entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A. as administrative agent and syndication agent and Capital One, National Association, as documentation agent. The Credit Agreement provides for a $165 million revolving credit facility (the “Facility”), subject to borrowing base availability, with the maturity date of December 21, 2023. We incurred financing costs of $0.6 million in fiscal 2019, which are being amortized as interest expense over the remaining life of the Facility using the effective interest method.

At the Company’s option, revolving loans under the Facility bear interest, based on the average availability, at an annual rate of either (a) the London Interbank Offered rate (“LIBOR”) plus 1.5% to 2.0%, or (b) the higher of (i) the prime rate, (ii) the federal funds effective rate plus 0.5%, or (iii) LIBOR plus 1.0% plus in each case 0.5% to 1.0%.

Availability. The availability of credit at any given time under the Facility will be constrained by the terms and conditions of the Facility, including the amount of collateral available, a borrowing base formula based upon numerous factors, including the value of eligible inventory and accounts receivable, and other restrictions contained in the Facility. All obligations under the Facility are secured by assets of the Loan Parties, including inventory, receivables, and certain types of intellectual property. Total borrowing base availability under the Facility was $102.2 million at December 31, 2021 and $75.7 million at June 30, 2021.

Borrowings. We borrowed $100.0 million under the Facility in March 2020 at a weighted average interest rate equal to the one-month LIBOR rate plus a spread using a debt leverage pricing grid. We repaid $50.0 million of our outstanding borrowings in June 2020 and the remaining $50.0 million was repaid in September 2020 using available cash on hand. As such, we had 0 outstanding borrowings under the Facility as of SeptemberDecember 31, 2021, June 30, 2021 or at any time during fiscal June 30, 2021. 2022.Interest expense on our outstanding borrowings induring the prior year firstsix quarter months ended December 31, 2020, was $0.3$0.4 million.

Letters of Credit. At September 30,December 31, 2021 and June 30, 2021, there was $4.0 million and $5.0 million, respectively, of standby letters of credit outstanding under the Facility.

Total borrowing base availability under the Facility was $89.6 million at September 30, 2021 and $75.7 million at June 30, 2021.

Covenants and Other Ratios. The Facility contains various restrictive and affirmative covenants, including required financial reporting, limitations on the ability to grant liens, make loans or other investments, incur additional debt, issue additional equity, merge or consolidate with or into another person, sell assets, pay dividends or make other distributions or enter into transactions with affiliates, along with other restrictions and limitations similar to those frequently found in credit agreements of this type and size. Loans under the Facility may become immediately due and payable upon certain events of default (including failure to comply with covenants, change of control or cross-defaults) as set forth in the Facility.

The Facility does not have any significant financial ratio covenants or coverage ratio covenants other than a fixed charge coverage ratio covenant based on the ratio of (a) EBITDA, plus cash Rentals, minus Unfinanced Capital Expenditures to (b) Fixed Charges, as such terms are defined in the Facility (the “FCCR Covenant”). The FCCR Covenant only applies in certain limited circumstances, including when the unused availability under the Facility falls below $18.5 million. The FCCR Covenant ratio is set at 1.0 and measured on a trailing twelve-month basis. At both September 30,December 31, 2021 and June 30, 2021, we were in compliance with all the covenants under the Facility.

Amendment to the Credit Agreement. On January 26, 2022, we entered into a Third Amended and Restated Credit Agreement (the “Amended Facility”) with JPMorgan Chase Bank, N.A. as Administrative Agent and Syndication Agent and Capital One, National Association as Documentation Agent. The Amended Facility amends and restates the existing Facility and provides a revolving credit line of up to $125 million, subject to borrowing base availability, and extends the maturity of the Facility to January 2027. Refer to Note 18,Subsequent Event, for additional details on the Amended Facility.

Restructuring and other impairment charges, net of gains, were as follows (in thousands):

Restructuring payments made by the Company during the first quarter of fiscal 2022 were $0.4 million, which were primarily for severance, lease exit costs (ongoing monthly rent) and Atoka wind down costs. As of September 30, 2021, remaining restructuring liabilities totaled $0.9 million.

Restructuring payments made by the Company during the firstsix months of fiscal 2022 were $0.6 million, which were primarily for severance, lease exit costs (ongoing monthly rent in exited space) and closing costs related to our Atoka, Oklahoma distribution center. As of December 31, 2021, remaining restructuring liabilities totaled $1.0 million and are primarily reported as a current liability in Accrued Compensation and Benefits on our consolidated balance sheets.

Basic and diluted earnings per share (“EPS”) are calculated using the following weighted average share data (in thousands):

Dilutive potential common shares consist of stock options, restricted stock units and performance units. 

As of September 30,December 31, 2021 and 2020, total share-based awards of 142,083115,710 and 437,449,270,108, respectively, were excluded from the diluted EPS calculations because their inclusion would have been anti-dilutive.

As of September 30,December 31, 2021 and 2020, the number of performance units excluded from the calculation of diluted EPS were 293,752220,082 and 316,445, respectively. Contingently issuable shares with performance conditions are evaluated for inclusion in diluted EPS if, at the end of current period, conditions would be satisfied as if it were the end of the contingency period.

Accumulated other comprehensive income (loss) consists of foreign currency translation adjustments which are the result of changes in foreign currency exchange rates related to our operations in Canada, Honduras and Mexico. Assets and liabilities are translated into U.S. dollars using the current period-end exchange rate and income and expense amounts are translated using the average exchange rate for the period in which the transaction occurred.

The following table sets forth the activity in accumulated other comprehensive loss (in thousands).

We recognized total share-based compensation expense of $0.3$0.6 million and $0.7 million during the threesix months ended September 30,December 31, 2021 and 2020, respectively. These amounts have been included in the consolidated statements of comprehensive income within SG&A. As of September 30,December 31, 2021, $3.4$3.1 million of total unrecognized compensation expense related to non-vested equity awards is expected to be recognized over a weighted average period of 2.72.6 years. There was no share-based compensation capitalized for the three months ended September 30,December 31, 2021 and 2020, respectively.

At September 30,December 31, 2021, there were 1,245,4001,302,526 shares of common stock available for future issuance pursuant to the Ethan Allen Interiors Inc. Stock Incentive Plan (the “Plan”), which provides for the grant of stock options, restricted stock, and stock units. 

Stock Option Activity

Employee Stock Option Grants. There were 0 stock option awards granted to employees during the threesix months ended September 30,December 31, 2021 and 2020.

Non-Employee Stock Option Grants. The Plan also provides for the grant of share-based awards, including stock options, to non-employee directors of the Company. During the first quarter of fiscal 2022, we granted 25,410 stock options at an exercise price of $23.61 to our existing non-employee directors. In the prior year first quarter, we granted 37,008 stock options at an exercise price of $12.97. These stock options vest in three equal annual installments beginning on the first anniversary of the date of grant so long as the director continues to serve on our Board.the Company’s Board of Directors (the “Board”). All options granted to directors have an exercise price equal to the fair market value of our common stock on the date of grant and remain exercisable for a period of up to ten years, subject to continuous service on our Board. There were no other non-employee stock option grants during fiscal 2021 and have been no such grants during fiscal 2022 to date.

As of September 30,December 31, 2021, $0.20.1 million of total unrecognized compensation expense related to non-vested stock options is expected to be recognized over a weighted average remaining period of 2.22.0 years.

Restricted Stock Unit Activity

During the first three monthshalf of fiscal 2022, we granted 51,100 non-performance based restricted stock units ("RSUs"(“RSUs”), with a weighted average grant date fair value of $20.71. The RSUs granted to employees entitle the holder to receive the underlying shares of common stock as the unit vests over the relevant vesting period. The RSUs do not entitle the holder to receive dividends declared on the underlying shares while the RSUs remain unvested and vest in four equal annual installments on the anniversary of the date of grant. WeIn the first half of the prior fiscal year, we granted 38,000 RSUs during the firstthree months of fiscal 2021, with a weighted average grant date fair value of $9.58. The fiscal 2021 RSUs vest in two equal annual installments on the first and second anniversary date of the grant.

During the first quarterhalf of fiscal 2022, 50% or 19,000 RSUs vested. These awards were previously granted in fiscal August 2020. 2021.As of September 30,December 31, 2021, a total of 100,10098,100 RSUs were outstanding at a weighted average grant date fair value of $15.12. Total$15.24.

As of December 31, 2021, $1.2 million of total unrecognized compensation expense related to non-vested restricted stock units as of September 30, 2021, was $1.4 million, and is expected to be recognized over a weighted average remaining period of 3.33.2 years.

Performance Stock Unit Activity

Payout of performance stock unit (“PSU”) grants depend on the attainment of certain financial and shareholder-return goals over a specific performance period, which is generally three fiscal years. The number of awards that will vest, as well as unearned and canceled awards, depend on the achievement of certain financial and shareholder-return goals over the three-year performance periods, and will be settled in shares if service conditions are met, requiring employees to remain employed with us through the end of the three-year performance periods.

During the first three monthshalf of fiscal 2022 we granted 90,367 PSUs with a weighted average grant date fair value of $17.15 compared with 117,338 RSUs at a weighted average grant date fair value of $8.76 in the prior year first quarter.year. We estimate, as of the date of grant, the fair value of PSUs with a discounted cash flow model, using as model inputs the risk-free rate of return as the discount rate, dividend yield for dividends not paid during the restriction period, and a discount for lack of marketability for a one-year post-vest holding period. The lack of marketability discount used is the present value of a future put option using the Chaffe model.

During the first quarterhalf of fiscal 2022, 35,124 PSUs, that were previously granted in July 2018, vested. As of September 30,December 31, 2021, a total of 419,752409,032 PSUs were outstanding at a weighted average grant date fair value of $16.22. Our unrecognized$16.42.

Unrecognized compensation expense as of September 30,December 31, 2021, related to PSUs, was $1.8 million based on the current estimates of the number of awards that will vest, and is expected to be recognized over a weighted average remaining period of 2.32.2 years.

Our operating segments are aligned with how the Company, including our chief operating decision maker, manages the business. As such, our reportable operating segments are the wholesale segment and the retail segment. Our wholesale and retail operating 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 more effectively while controlling quality and cost. We evaluate performance of the respective segments based upon revenues and operating income. Inter-segment transactions result, primarily, from the wholesale sale of inventory to the retail segment, including the related profit margin. We account for intersegment sales transactions between our segments consistent with independent third-party transactions, that is, at current market prices. As a result, the manufacturing profit related to sales to our retail segment is included within our wholesale segment. Operating income realized on intersegment revenue transactions is therefore generally consistent with the operating income realized on our revenue from independent third-party transactions. Segment operating income is based on profit or loss from operations before interest and other financing costs, other income (expense), net and income taxes. Sales are attributed to countries on the basis of the customer's location.

As of September 30,December 31, 2021, the Company operated 141 design centers (our retail segment) and our independent retailers operated 160161 design centers. Our wholesale segment net sales include sales to our retail segment, which are eliminated in consolidation, and sales to our independent retailers and other third parties. Our retail segment net sales accounted for 85.0%85.7% of our consolidated net sales during the first quarterhalf of fiscal 2022 compared with 78.2%79.7% a year prior. Our wholesale segment net sales accounted for the remaining 15.0%14.3%.

Segment information is provided below (in thousands):