THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Securities and Exchange Commission
Washington, D.C. 20549
----------------------------
FORM 11-K
Annual Report
Pursuant to Section 15(d) of the
Securities Exchange Act of 1974
(Mark One):
(X) Annual Report pursuant to Section 15(d) of the Securities Exchange Act
of 1934 (No Fee Required)
( ) Transition Report pursuant to Section 15(d) of the Securities Exchange
Act of 1934 (No Fee Required)
For the transition period from _____ to _____
Commission file Number 1-11806
A. Full title of plan and the address of plan, if different
from that of the issuer named below:
THE ETHAN ALLEN PROFIT SHARING AND 401(k) RETIREMENT PLAN
B. Name of issuer of the securities held pursuant to the plan
and the address of its principal office:
ETHAN ALLEN INTERIORS INC.
ETHAN ALLEN DRIVE
DANBURY, CT 06811
<PAGE>
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Financial Statements and Schedules
December 31, 1996 and 1995
(With Independent Auditors Report Thereon)
<PAGE>
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Financial Statements and Schedules
December 31, 1996 and 1995
Table of Contents
Independent Auditors' Report
Statements of Net Assets Available for Plan Benefits,
With Fund Information, December 31, 1996 and 1995
Statements of Changes in Net Assets Available for Plan Benefits, With
Fund Information, Years Ended December 31, 1996 and 1995
Notes to Financial Statements
Schedules*:
Item 27a - Schedule of Assets Held for Investment Purposes Schedule 1
Item 27d - Schedule of Reportable Transactions Schedule 2
* All other schedules have been omitted since they are not applicable.
<PAGE>
Independent Auditors' Report
Plan Administrative Committee and Participants
The Ethan Allen Profit Sharing and 401(k) Retirement Plan:
We have audited the accompanying statements of net assets available for plan
benefits, with fund information for the Ethan Allen Profit Sharing and 401(k)
Retirement Plan (the "Plan") as of December 31, 1996 and 1995, and the related
statement of changes in net assets available for plan benefits, with fund
information for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits as of December
31, 1996 and 1995 and the changes in net assets available for plan benefits for
the years then ended in conformity with generally accepted accounting
principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of (1) assets
held for investments purposes as of December 31, 1996 and (2) reportable
transactions for the year ended December 31, 1996 are presented for purposes of
additional analysis and are note required as part of the basic financial
statements but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosures under the Employee
Retirement Income Security Act of 1974. The Fund Information in the statements
of net assets available for plan benefits and the statement of changes in net
assets available for plan benefits is presented for purposes of additional
analysis rather than to present the net assets available for plan benefits and
changes in net assets available for plan benefits for each fund. The
supplemental schedules and the Fund Information have been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, are fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
June 2, 1997 /s/ KPMG Peat Marwick, LLP
<PAGE>
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Statement of Net Assets Available for Plan Benefits, With Fund Information
December 31, 1996
<TABLE>
<CAPTION>
20th Century
20th Century 20th Century 20th Century Strategic
Benham Select Ultra International Restricted Unrestricted Allocation
Preservation Investors Investors Equity Ethan Allen Ethan Allen Conservative
Fund Fund Fund Fund Stock Fund Stock Fund Fund
---- ---- ---- ---- ---------- ---------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments, at fair value ...... $ -- 12,169,271 10,482,690 3,017,927 7,672,051 2,291,395 1,012,126
Investments, at contract value .. 20,290,969 -- -- -- -- -- --
Participant loans ............... -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total investments .......... 20,290,969 12,169,271 10,482,690 3,017,927 7,672,051 2,291,395 1,012,126
Employer contributions receivable 270,114 253,146 238,572 68,514 -- 38,122 27,203
Employee contributions receivable 60,815 62,141 65,891 19,361 -- 9,724 6,036
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total assets ............... 20,621,898 12,484,558 10,787,153 3,105,802 7,672,051 2,339,241 1,045,365
Liabilities:
Refunds payable for excess
contributions ................. 26,610 7,234 9,419 -- -- -- 2,446
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net assets available for
plan benefits .......... $20,595,288 12,477,324 10,777,734 3,105,802 7,672,051 2,339,241 1,042,919
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
(Continued)
<PAGE>
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Statement of Net Assets Available for Plan Benefits,
With Fund Information, Continued
December 31, 1996
<TABLE>
<CAPTION>
20th Century 20th Century
Strategic Strategic Charles Schwab 20th Century
Allocation Allocation Personal Choice(R) Vista Investors
Moderate Aggressive Retirement Fund Fund 20th Century Loan
Fund Fund Value Fund Fund Total
---- ---- -------------- ------ ---------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments, at fair value ....... $5,977,304 1,681,730 194,413 2,496,070 1,832,753 -- 48,827,730
Investments, at contract value ... -- -- -- -- -- -- 20,290,969
Participant loans ................ -- -- -- -- -- 2,101,144 2,101,144
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total investments ........... 5,977,304 1,681,730 194,413 2,496,070 1,832,753 2,101,144 71,219,843
Employer contributions receivable 129,796 66,485 -- 65,151 37,343 -- 1,194,446
Employee contributions receivable 31,343 17,395 -- 19,467 11,102 -- 303,275
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total assets ................ 6,138,443 1,765,610 194,413 2,580,688 1,881,198 2,101,144 72,717,564
Liabilities:
Refunds payable for excess
contributions .................. 834 3,583 -- 3,678 8,228 -- 62,032
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net assets available for plan
benefits ................ $6,137,609 1,762,027 194,413 2,577,010 1,872,970 2,101,144 72,655,532
========== ========== ========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Statement of Net Assets Available for Plan Benefits, With Fund Information
December 31, 1995
<TABLE>
<CAPTION>
20th 20th 20th
Century Century Century Restricted
Capital Select Balanced Ultra International Ethan Allen Unrestricted
Preservation Investors Investors Investors Equity Stock Ethan Allen Loan
Fund Fund Fund Fund Fund Fund Stock Fund Fund Total
---- ---- ---- ---- ---- ---- ---------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments, at fair value ...... $ -- 10,671,053 6,956,346 7,571,644 2,484,553 4,431,807 1,623,604 -- 33,739,007
Investments, at contract value .. 23,455,732 -- -- -- -- -- -- -- 23,455,732
Participant loans ............... -- -- -- -- -- -- -- 1,725,406 1,725,406
--------- ----------- ---------- ---------- ---------- ---------- ---------- --------- ---------
Total investments .......... 23,455,732 10,671,053 6,956,346 7,571,644 2,484,553 4,431,807 1,623,604 1,725,406 58,920,145
Employer contributions receivable 798,730 333,564 193,700 192,701 70,642 -- 46,176 -- 1,635,513
Employee contributions receivable 95,528 60,992 35,804 42,461 14,239 -- 9,224 -- 258,248
---------- ---------- ---------- ---------- ---------- ----------- --------- -------- ----------
Net assets available for plan
benefits ................ $24,349,990 11,065,609 7,185,850 7,806,806 2,569,434 4,431,807 1,679,004 1,725,406 60,813,906
=========== ========== ========= ========== ========== ========== ======== ========= ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Statement of Changes in Net Assets Available for Plan Benefits, With Fund
Information
Year ended December 31, 1996
<TABLE>
<CAPTION>
20th 20th 20th 20th 20th
Century Century Century Century Century
Benham Select Balanced Ultra International Restricted Unrestricted Strategic
Preservation Investors Investors Investors Equity Ethan Allen Ethan Allen Allocation
Fund Fund Fund Fund Fund Stock Fund Stock Fund Conservative
Fund
-------- -------- --------- -------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Additions to net assets:
Net appreciation/(depreciation)
in fair value of investments .... $-- 839,223 153,476 597,433 70,607 3,752,473 1,165,054 41,201
Interest income ................... 1,101,199 -- -- -- -- -- -- --
Dividend income ................... -- 1,144,198 40,963 599,785 310,231 8,275 2,711 23,036
----------- ---------- -------- ---------- --------- ------------ --------- -----------
Net investment income (loss) .... 1,101,199 1,983,421 194,439 1,197,218 380,838 3,760,748 1,167,765 64,237
----------- ---------- -------- ---------- --------- ------------ --------- -----------
Contributions:
Employer contributions .......... 252,589 264,282 5,248 244,732 70,699 -- 39,814 27,714
Employee contributions .......... 1,209,723 1,100,605 150,707 1,179,159 356,823 -- 171,810 108,530
----------- ---------- -------- ---------- --------- ----------- ---------- ---------
1,462,312 1,364,887 155,955 1,423,891 427,522 -- 211,624 136,244
----------- ---------- -------- ---------- --------- ----------- --------- ---------
Total additions ................. 2,563,511 3,348,308 350,394 2,621,109 808,360 3,760,748 1,379,389 200,481
----------- --------- -------- ---------- --------- ----------- --------- ----------
Deductions from net assets:
Distributions to participants ..... (2,481,804) (923,426) (224,840) (629,029) (146,076) (520,504) (158,014) (40,165)
Administrative expenses ........... (17,236) (6,077) (817) (1,981) (176) -- (350) (1,417)
--------- -------- --------- ---------- --------- --------- ------------
Total deductions ................ (2,499,040) (929,503) (225,657) (631,010) (146,252) (520,504) (158,364) (41,582)
----------- --------- -------- ---------- --------- --------- ---------- ------------
Net transfers between funds ........ (3,819,173) (1,007,090)(7,310,587) 980,829 (125,740) -- (560,788) 884,020
----------- ---------- --------- -------- --------- --------- --------- ------------
Net increase (decrease) ........ (3,754,702) 1,411,715 (7,185,850) 2,970,928 536,368 3,240,244 660,237 1,042,919
Net assets available for plan benefits:
Beginning of year ................ 24,349,990 11,065,609 7,185,850 7,806,806 2,569,434 4,431,807 1,679,004 --
---------- ---------- --------- --------- --------- --------- --------- ---------
End of year ..................... $ 20,595,288 12,477,324 -- 10,777,734 3,105,802 7,672,051 2,339,241 1,042,919
============ =========== ======== ========== ========= ========== ========== ==========
</TABLE>
(Continued)
<PAGE>
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Statement of Changes in Net Assets Available for Plan Benefits,
With Fund Information, Continued
Year ended December 31, 1996
<TABLE>
<CAPTION>
20th Century
20th Century Strategic Charles Schwab
Strategic Allocation Personal 20th Century
Allocation Aggressive Choice(R) Vista Investors 20th Century Loan
Moderate Fund Fund Retirement Fund Fund Value Fund Fund Total
------------- ---- --------------- ---- ---------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Additions to net assets:
Net appreciation/(depreciation)
in fair value of investments ... $ 383,518 126,088 (3,769) (103,760) 50,689 -- 7,072,233
Interest income ................... -- -- -- -- -- 180,625 1,281,824
Dividend income ................... 106,367 12,202 -- 198,862 174,204 -- 2,620,834
----------- ----------- --------- ----------- ----------- --------- ----------
Net investment income (loss) ... 489,885 138,290 (3,769) 95,102 224,893 180,625 10,974,891
----------- ----------- --------- ----------- ----------- --------- ----------
Contributions:
Employer contributions ......... 131,062 66,652 -- 65,395 37,553 -- 1,205,740
Employee contributions ......... 478,967 263,621 -- 254,216 179,196 -- 5,453,357
----------- ----------- --------- ----------- ----------- -------- ---------
610,029 330,273 -- 319,611 216,749 -- 6,659,097
----------- ----------- --------- ----------- ----------- -------- ---------
Total additions ................ 1,099,914 468,563 (3,769) 414,713 441,642 180,625 17,633,988
----------- ----------- --------- ----------- ----------- -------- ----------
Deductions from net assets:
Distributions to participants ..... (394,652) (38,672) -- (16,538) (9,576) (176,022) (5,759,318)
Administrative expenses ........... (2,903) (1,547) -- (3) (537) -- (33,044)
-------- ----------- --------- ----------- ----------- -------- ----------
Total deductions ............... (397,555) (40,219) -- (16,541) (10,113) (176,022) (5,792,362)
-------- ----------- --------- ----------- ----------- -------- ----------
Net transfers between funds ........ 5,435,250 1,333,683 198,182 2,178,838 1,441,441 371,135 --
--------- ----------- ---------- ----------- ----------- --------- ---------
Net increase (decrease) ........ 6,137,609 1,762,027 194,413 2,577,010 1,872,970 375,738 11,841,626
Net assets available for plan benefits:
Beginning of year ................. -- -- -- -- -- 1,725,406 60,813,906
--------- ----------- ---------- ----------- ----------- ---------- --------
End of year ....................... $ 6,137,609 1,762,027 194,413 2,577,010 1,872,970 2,101,144 72,655,532
========== =========== ========= =========== =========== ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Statement of Changes in Net Assets Available for Plan Benefits,
With Fund Information
Year ended December 31, 1995
<TABLE>
<CAPTION>
20th 20th 20th 20th
Capital Century Century Century Century Ethan Allen Ethan Allen
Preservation Select Balanced Ultra International Restricted Unrestricted Loan
Fund Investors Investors Investors Equity Stock Fund Stock Fund Fund Total
Fund Fund Fund Fund
------- ---- ---- ---- ---- -------- --------- ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Additions to net assets:
Net appreciation/(depreciation)
in fair value of investments ... $-- 638,649 626,901 1,462,066 259,979 (842,936) (235,980) -- 1,908,679
Interest income ................... 1,264,405 -- -- -- -- -- -- 144,748 1,409,153
Dividend income ................... -- 1,296,692 569,214 357,534 2,306 -- -- -- 2,225,746
---------- --------- ------- ---------- -------- -------- ---------- --------- ---------
Net investment income (loss) ... 1,264,405 1,935,341 1,196,115 1,819,600 262,285 (842,936) (235,980) 144,748 5,543,578
---------- --------- --------- ---------- -------- -------- ---------- --------- ---------
Contributions:
Employer contributions ......... 940,171 348,833 212,258 207,910 78,810 322,482 55,220 -- 2,165,684
Employee contributions ......... 1,894,900 1,169,460 691,790 797,523 315,082 -- 191,258 -- 5,060,013
--------- --------- -------- ---------- -------- -------- ---------- --------- ---------
2,835,071 1,518,293 904,048 1,005,433 393,892 322,482 246,478 -- 7,225,697
--------- --------- -------- --------- -------- -------- ---------- --------- ---------
Total additions ................ 4,099,476 3,453,634 2,100,163 2,825,033 656,177 (520,454) 10,498 144,748 12,769,275
--------- --------- -------- --------- -------- -------- ---------- --------- ----------
Deductions from net assets:
Administrative expenses ........... (26,594) (4,585) (3,630) (2,175) (192) -- (304) -- (37,480)
Distributions to participants ..... (2,800,466) (670,199) (428,348) (303,794) (135,584) (322,482) (112,052)(143,446)(4,916,371)
--------- --------- --------- --------- -------- -------- ---------- -------- ---------
Total deductions ............... (2,827,060) (674,784) (431,978) (305,969) (135,776) (322,482) (112,356)(143,446)(4,953,851)
---------- --------- --------- --------- -------- -------- ---------- -------- ---------
Net transfers between funds ......... (421,728) (399,859) (41,024) 710,271 (428,610) -- 181,356 399,594 --
---------- --------- --------- --------- --------- --------- ----------- -------- --------
Net increase (decrease) ........ 850,688 2,378,991 1,627,161 3,229,335 91,791 (842,936) 79,498 400,896 7,815,424
Net assets available for plan benefits:
Beginning of year ................. 23,499,302 8,686,618 5,558,689 4,577,471 2,477,643 5,274,743 1,599,506 1,324,510 52,998,482
----------- --------- --------- --------- --------- --------- ----------- -------- ---------
End of year ....................... $24,349,990 11,065,609 7,185,850 7,806,806 2,569,434 4,431,807 1,679,004 1,725,406 60,813,906
=========== ========== ========= ========= ========= ========= =========== ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Notes to Financial Statements
December 31, 1996 and 1995
(1) Plan Description
The Ethan Allen Profit Sharing and 401(k) Retirement Plan (the "Plan") is
a defined contribution savings plan sponsored by Ethan Allen Interiors
Inc. (the "Company").
The following brief description is provided for general information
purposes only. Participants should refer to the Plan Document for a more
complete description of the Plan's provisions.
General
The Plan was formed effective July 1, 1994 through the merger of the
Retirement Program of Ethan Allen Inc. (the "Retirement Program") into
the Ethan Allen 401(k) Employee Savings Plan (the "401(k) Plan"). As a
result of the merger on July 1, 1994, all participant investments in the
Retirement Program (except for the Ethan Allen Restricted stock which was
transferred directly) were liquidated and the proceeds were transferred
to the Plan and allocated to participant accounts at each participant's
request.
The Plan is offered to substantially all employees of the Company who
have completed both one year and 1,000 hours of service during the Plan
year. The Plan is subject to the Employee Retirement Income Security Act
of 1974 ("ERISA").
Contributions and Vesting
Participants may contribute from 1% to 15% of their compensation (as
defined in the Plan) up to a limit of $9,500 in 1996 (tax-deferred
contribution) to the 401(k) portion of the plan. The Company may, at its
discretion, make a matching contribution on behalf of each participant,
provided the matching contribution does not exceed the lesser of (a) 50%
of the participant's contribution or (b) $400 per participant per plan
year ($200 in 1995). Participants may, in addition, contribute amounts in
excess of their tax deferred contribution on an after-tax basis in the
amount of 1% to 15% of their compensation.
Employer contributions, if any, to the profit sharing portion of the
Plan, on behalf of each participant are determined by the Board of
Directors of the Company at the close of each fiscal year and are limited
to the lesser of (i) $30,000 (or, if greater, 25% of the dollar
limitation in effect under Section 415(b)(1)(A) of the Internal Revenue
Code) or (ii) 25% of each participant's compensation for that Plan year,
reduced by employee contributions and any other employer contributions to
defined contribution plans of the Company. The Company declared profit
sharing contributions of $0 and $328,421 for the Plan in 1996 and 1995,
respectively. The actual contribution, if any, is made in the ensuing
year.
Participant contributions and employer 401(k) contributions are 100%
vested immediately. Effective July 1, 1996, profit sharing contributions
are also 100% vested immediately and the profit sharing portion of the
participant accounts of active employees became 100% vested (see note 7).
Prior to that date, vesting of profit sharing contributions was subject
to a vesting schedule based on credited years of service.
<PAGE>
2
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Notes to Financial Statements, Continued
(1), Continued
During 1996, certain participants contributed $62,032 in excess of the
allowable qualified contribution. The excess contribution amounts are
reflected as a Plan liability at December 31, 1996. The excess
contributions were refunded in 1997 within the penalty free deadline.
Investment of Funds
During 1996, the amounts contributed to the Plan were invested in one of
the following commingled funds at the direction of the participants. A
brief description of the funds are as follows:
Benham Preservation Fund - The Benham Preservation Fund,
formerly known as the Capital Preservation Fund, invests
primarily in benefit responsive guaranteed investment
contracts issued by major financial institutions, including
banks and life insurance companies. The Benham Preservation
Fund was created on July 31, 1996 by a transfer of cash and
assets in-kind from Bankers Trust Pyramid Trust, the
underlying assets of the Capital Preservation Fund, which was
discontinued as of this date. The fund is managed by SEI Trust
Company, Benham Management Corporation and Dwight Asset
Management Company.
Twentieth Century Balanced Investors - Effective April 1,
1996, the Balanced Investors Fund is no longer an investment
option. Participants who had invested in this fund were
required to transfer their balance to other funds. If no fund
was selected by the participant, the fund balances were
transferred to the Strategic Allocation: Moderate Fund.
Twentieth Century Select Investors - The Select Investors Fund
invests in common stocks considered by fund managers to have a
better than average prospect for appreciation. In addition,
80% of the fund's stock investments must have a record of
paying or have committed to paying regular dividends.
Twentieth Century Ultra Investors - The Ultra Investors Fund
invests in small to medium-sized companies that show
accelerating growth and earnings.
Twentieth Century International Equity Fund - The
International Equity Fund invests in common stocks of foreign
companies considered to have better than average prospects for
appreciation.
Ethan Allen Restricted/Unrestricted Stock Funds - At December
31, 1996, the Plan held 199,274 restricted shares and 58,840
unrestricted shares of Ethan Allen Interiors Inc. common
stock. At December 31, 1995, the Plan held 217,512 restricted
shares and 79,675 unrestricted shares of Ethan Allen Interiors
Inc. common stock. All of the restricted shares are subject to
proxies granted to Mr. Kathwari, the Chairman of the Board of
Directors, President and Chief Executive Officer of the
Company, which expire on the earlier of Mr. Kathwari's
termination of employment with the Company or March 22, 2003,
and 180,915 of these shares are restricted from being sold by
the
<PAGE>
3
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Notes to Financial Statements, Continued
(1), Continued
Plan, other than to the Company, in accordance with applicable
securities laws. Additionally, the Ethan Allen Restricted
Stock Fund restricts participants from transferring their
balances in this fund to other funds of the Plan. Effective
July 1, 1996, withdrawing participants have the option of
receiving a distribution from the Ethan Allen Restricted Stock
Fund in shares of Ethan Allen Interiors Inc. stock or cash.
Prior to that date all distributions were made in cash. No
such restrictions exist on investments in the Unrestricted
Stock Fund.
Ethan Allen Interiors Inc. common stock is publicly traded and
had a readily ascertainable market value of $38.50 per share
at December 31, 1996. At June 2, 1997, the closing price of
Ethan Allen Interiors Inc. common stock was $52.875 per share.
The following investment funds became available as of April 1, 1996:
Twentieth Century Strategic Allocation: Conservative - The
Strategic Allocation: Conservative Fund invests in a
diversified portfolio of stocks, bonds and money market
securities with an emphasis on quality bonds and money market
securities over stocks. The Fund's targeted mix of assets is
45% bonds, 40% stocks, and 15% money market securities.
Twentieth Century Strategic Allocation: Moderate - The
Strategic Allocation: Moderate Fund invests in a diversified
portfolio of stocks, bonds and money market securities. The
Fund's targeted mix of assets is 60% stocks, 30% bonds and 10%
money market securities.
Twentieth Century Strategic Allocation: Aggressive - The
Strategic Allocation: Aggressive Fund invests in a diversified
portfolio of stocks, bonds and money market securities. The
Fund's targeted mix of assets is 75% stocks, 20% bonds and 5%
money market securities.
Charles Schwab Personal Choice(R) Retirement - The Personal
ChoiceAE Retirement Fund allows the investor to purchase
mutual funds, stocks and bonds offered through Charles Schwab
& Co., Inc. Participants must transfer a minimum of $2,500
from their current plan balance to elect this option.
Participants may transfer up to a maximum of 50% of their
fully vested balance.
Twentieth Century Vista Investors - The Vista Investors Fund
invests in common stocks of growing small- to medium-sized
companies considered to have better than average prospects for
appreciation.
Twentieth Century Value - The Value Fund invests primarily in
equity securities of well established companies that appear to
be undervalued at the time of purchase.
<PAGE>
4
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Notes to Financial Statements, Continued
(1), Continued
Loans
The Loan Fund is a non-contributory fund used to account for and
administer loans to participants. Each participant may apply to the Plan
administrator for a loan against the vested 401(k) portion of that
participant's account. The maximum amount which may be borrowed by the
participant is limited to the lesser of (a) $50,000 or (b) 50% of the
vested 401(k) portion of such participant's account at the time of such
loan. The term of these loans generally shall not exceed the earlier of
five years or such participant's termination of service.
Loans are processed the first day of each month. The Plan administrator
has determined that loans shall bear interest equal to the Prime Rate as
of the preceding month's close plus 1%. The Prime Rate during 1996 and
1995 ranged from 8.25% to 8.50% and 8.50% to 9.00%, respectively.
Participants' Accounts
A separate account is maintained for each participant. Net investment
income (loss) is allocated daily to each participant's account on a
proportional basis according to account balances so that each account
bears its proportionate share of income or loss. Employer profit sharing
contributions and, prior to January 1, 1996, all profit sharing
forfeitures by participants were allocated to each participant based on
each participant's compensation to total compensation of all participants
during the year. Effective January 1, 1996, all profit sharing
forfeitures are no longer allocated to participants (see note 7). These
funds are now used first to restore any prior forfeitures from terminated
employees who are rehired within five years of termination, then to
reduce the amount of the Company profit sharing contributions, Company
match contributions, or administrative expenses paid by the Plan sponsor.
In 1996 and 1995, administrative expenses, other than certain transaction
fees borne by the participants, were paid by the Plan administrator.
Distributions and Withdrawals
Participants may elect to receive their benefits when they reach normal
retirement age (65), or when they leave the Company. The Plan also
provides death benefits to the designated beneficiary of eligible
participants.
An employee may withdraw any or all of his after tax 401(k) contribution
($250 minimum) at any time; early withdrawal of tax-deferred and Company
401(k) contributions may only be made by a participant upon attaining the
age 59-1/2 or because of serious financial hardship, subject to
limitations.
In no event shall distributions commence later than 60 days after the
close of the Plan Year in which the latest of the following events
occurs: the participant's attainment of age 65; the 10th anniversary of
the date on which the participant began participating in the Plan; or the
participant's termination date. These provisions notwithstanding,
participants must commence distributions from the Plan within a year of
attaining the age of 71.
<PAGE>
5
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Notes to Financial Statements, Continued
(2) Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements have been prepared on the accrual
basis of accounting and present the net assets available for plan
benefits and the changes in those net assets.
Valuation of Investments Held in Trust
Under the terms of a trust agreement between Chase Manhattan Bank, N.A.
(the "Trustee") and the Company, the Trustee administers a trust fund on
behalf of the Plan. The value of the investments and changes therein of
this trust have been reported to the Plan by the Trustee, as determined
through the use of quoted market prices, except for the guaranteed
investment contracts, which are valued at contract value.
Contract value equals the principal of investments in the Benham
Preservation Fund plus accrued interest at the contract rate as reported
by SEI Trust Company ("SEI"), the manager of the Benham Preservation
Fund. SEI has established procedures to value the investment contracts of
the Benham Preservation Fund in good faith. These procedures include a
review of information provided by investment managers relating to each
investment's contract value relative to its issuing entity's financial
strength, current financial ratings, current interest rates, and a
comparative review of similar investment vehicles. SEI also provides
audited financial statements of the Benham Preservation Fund that
coincide with the Plan's year end. In these financial statements, the
contract value and fair value of the Benham Preservation Fund's assets
are reported as equal.
Loans to participants are valued at face value which approximates fair
value.
(3) Certain Significant Risks and Uncertainties
The preparation of financial statements requires the use of plan
administrator estimates. Actual results may differ from those estimates.
(4) Obligation for Plan Benefits
Although the Plan is intended to be permanent, the Company expressly
reserves the right to amend or terminate the Plan at any time. In the
event that the Plan is terminated, participants are entitled to 100
percent of the net current value of their vested account.
<PAGE>
6
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Notes to Financial Statements, Continued
(5) Investments
The following table presents the Plan's investments at December 31, 1996
and 1995. An asterisk denotes investments which represent 5% or more of
the Plan's net assets at the end of the plan year.
<TABLE>
<CAPTION>
December 31, December 31,
1996 1995
---- ----
<S> <C> <C>
Investments at fair value as determined by
quoted market price:
Cash equivalents ...................................... $ 26,057 --
Mutual funds:
Balanced Investors Fund ............................ -- 6,956,346*
20th Century Select Investors Fund ................. 12,169,271* 10,671,053*
20th Century Ultra Investors Fund .................. 10,482,690* 7,571,644*
20th Century International Equity Fund ............. 3,017,927 2,484,553
20th Century Strategic Allocation: Conservative Fund 1,012,126 --
20th Century Strategic Allocation: Moderate Fund ... 5,977,304* --
20th Century Strategic Allocation: Aggressive Fund . 1,681,730 --
20th Century Vista Investors Fund .................. 2,496,070 --
20th Century Value Fund ............................ 1,832,753 --
----------- -----------
38,669,871 27,683,596
Common Stock:
Ethan Allen Interiors Inc. - Restricted ............ 7,672,049* 4,431,807*
Ethan Allen Interiors Inc. - Unrestricted .......... 2,265,340* 1,623,604*
----------- -----------
9,937,389 6,055,411
----------- -----------
Other:
Charles Schwab Personal ChoiceAERetirement Fund .... 194,413 --
----------- -----------
48,827,730 33,739,007
Investments at contract value, as determined by issuer:
Investment contracts:
Benham Preservation Fund (formerly, the Capital
Preservation Fund) ................................... 20,290,969* 23,455,732*
----------- -----------
Investments at face value, which approximates fair value:
Participant loans ..................................... 2,101,144 1,725,406
----------- -----------
Total investments ....................................... $71,219,843 58,920,145
=========== ===========
</TABLE>
Net investment income (loss) reported on the Statements of Changes in Net Assets
Available for Plan Benefits comprises interest income for the Benham
Preservation Fund and appreciation or depreciation in the current redemption
value of the investments in the other funds plus any dividends paid.
<PAGE>
7
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Notes to Financial Statements, Continued
(6) Tax Status
The Company has received a determination letter from the Internal Revenue
Service dated May 2, 1996 stating that the Plan is a qualified plan under
Section 401(a) of the Internal Revenue Code and the corresponding trust
is exempt from income tax under Section 501(a) of the Internal Revenue
Code. The Company believes that the Plan continues to be administered in
accordance with the applicable sections of the Internal Revenue Code.
(7) Subsequent Events
Amendment to Plan
On June 2, 1997, an amendment to the Plan was adopted that changed the
participants' vesting in profit sharing contributions retroactive to July
1, 1996 and the allocation of forfeitures retroactive to January 1, 1996
(see note 1).
Change in Recordkeeper and Investment Manager's Name
Effective January 1, 1997, Twentieth Century Services, Inc. (the
Recordkeeper and Investment Manager) changed its name to American Century
Services Corporation. All funds with "Twentieth Century" in their names
were also changed accordingly.
Change in Company Matching Contribution
Effective January 1, 1997, the Company may, at its discretion, make a
matching contribution on behalf of each participant, provided the
matching contribution does not exceed the lesser of (a) 50% of the
participant's contribution or (b) $600 (previously $400) per participant
per plan year.
(8) Reconciliation of Financial Statements to Form 5500
Net assets available for plan benefits identified in the financial
statements presented herein have not been reduced for participant
benefits payable of $30,774 and $400,482 at December 31, 1996 and 1995,
respectively. However, these amounts have been identified as a reduction
to net assets available for plan benefits in the Form 5500 to be filed
with the Internal Revenue Service.
<PAGE>
8
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Notes to Financial Statements, Continued
(8), Continued
The following is a reconciliation of net assets available for benefits
reported in these financial statements and on the Form 5500:
December 31, 1996 December 31,1995
Net assets available for benefits per the
financial statements ................. $ 72,655,532 60,813,906
Benefits payable to participants ........ (30,774) (400,482)
------------ ------------
Net assets available for benefits per the
Form 5500 ............................ $ 72,624,758 60,413,424
============ ============
The following is a reconciliation of benefits paid to participants reported in
these financial statements and on the Form 5500:
Year ended Year ended
December 31, 1996 December 31, 1995
----------------- -----------------
Benefits paid to participants per the
financial statements ................. $ 5,759,318 4,916,371
Add: Benefits payable to participants at
December 31, 1996 .................... 30,774 400,482
Less: Benefits payable to participants at
December 31, 1995 .................... (400,482) (643,254)
----------- -----------
Benefits paid to participants per the
Form 5500 ............................ $ 5,389,610 4,673,599
=========== ==========
Benefits payable to participants are recorded on the Form 5500 for benefit
claims that have been processed and approved for payment prior to the Plan
year-end, but not yet paid as of that date.
<PAGE>
Schedule 2
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Item 27a Schedule of Assets Held for Investment Purposes
December 31, 1996
<TABLE>
<CAPTION>
Description of investments Fair value at
Identity of issuer, borrower, Maturity date Rate of Par or December 31,
lessor or similar party Shares date interest maturity value Cost 1996
- ----------------------- ------ ---- -------- -------------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Cash equivalents ....................................... -- -- Variable $- $ 26,057 $ 26,057
Benham Preservation Fund ............................... 20,290,969 -- -- - 20,290,969 20,290,969
Twentieth Century Select Investors Fund ................ 315,839 -- -- - 11,911,087 12,169,271
Twentieth Century Ultra Fund ........................... 373,182 -- -- - 9,134,333 10,482,690
Twentieth Century International Equity Fund ............ 379,137 -- -- - 2,936,697 3,017,927
Restricted Common Stock Ethan Allen Interiors, Inc. .... 199,274 -- -- - 2,953,004 7,672,049
Unrestricted Common Stock Ethan Allen Interiors, Inc. .. 58,840 -- -- - 1,352,938 2,265,340
Twentieth Century Strategic Allocation Conservative Fund 195,769 -- -- - 974,165 1,012,126
Twentieth Century Strategic Allocation Moderate Fund ... 1,117,253 -- -- - 5,621,950 5,977,304
Twentieth Century Strategic Allocation Aggressive Fund . 308,574 -- -- - 1,568,234 1,681,730
Twentieth Century Vista Investors Fund ................. 172,024 -- -- - 2,603,444 2,496,070
Twentieth Century Value Fund ........................... 278,111 -- -- - 1,790,011 1,832,753
Charles Schwab Personal ChoiceAERetirement Fund assets . 194,413 -- -- - 194,413 194,413
Participant Loans ...................................... -- -- Prime + 1% - 2,101,144 2,101,144
----------- ---------
Total Investments .................................. $63,458,446 $71,219,843
=========== ===========
</TABLE>
See accompanying independent auditors report.
<PAGE>
Schedule 2
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Item 27d - Schedule of Reportable Transactions
Year Ended December 31, 1996
Party Involved - Chase Manhattan Bank
- -------------------------------------
<TABLE>
<CAPTION>
Current value of
Expenses assets on
Description of assets Purchase price Selling price Lease rental incurred Cost of assets transaction date Net gain/(loss)
- --------------------- -------------- ------------- ------------ -------- -------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Benham Preservation Fund
Purchases ............... $6,351,018 -- - - -- 6,351,018 --
Sales ................... -- 10,623,251 - - 10,623,251 10,623,251 --
Twentieth Century Select Fund
Purchases ............... 3,723,182 -- - - -- 3,723,182 --
Sales ................... -- 4,209,278 - - 4,154,489 4,209,278 54,789
Twentieth Century Ultra Fund
Purchases ............... 5,167,813 -- - - -- 5,167,813 --
Sales ................... -- 3,458,861 - - 2,981,624 3,458,861 477,237
Twentieth Century Strategic
Allocation: Moderate Fund
Purchases ............... 6,544,564 -- - - -- 6,544,564 --
Sales ................... -- 1,057,058 - - 1,029,402 1,057,058 27,656
Twentieth Century Vista Fund
Purchases ................. 3,393,325 -- - - -- 3,393,325 --
Sales ..................... -- 992,384 - - 988,823 992,384 3,561
Twentieth Century Balanced Fund
Purchases ............... 509,583 -- - - -- 509,583 --
Sales ................... -- 7,660,071 - - 6,976,091 7,660,071 683,980
</TABLE>
See accompanying independent auditors report.
<PAGE>
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
SIGNATURES
The Plan - Pursuant to the requirements of the Securities and Exchange
Act of 1934, Ethan Allen Interiors Inc., as administrator of the Retirement
Program of Ethan Allen Inc., has duly caused this annual report to be signed on
its behalf by the undersigned hereto duly authorized.
THE ETHAN ALLEN PROFIT SHARING AND 401(k)
RETIREMENT PLAN
By Ethan Allen Interiors Inc.
Date: June 27, 1997 By (s) Edward P. Schade
--------------------
Name: Edward P. Schade
Title: Vice President and Treasurer
<PAGE>
