THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Financial Statements and Schedules
December 31, 1997 and 1996
(With Independent Auditors' Report Thereon)
<PAGE>
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) For the fiscal year ended December 31, 1997
OR
( ) 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 the 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 executive office:
ETHAN ALLEN INTERIORS INC.
ETHAN ALLEN DRIVE
DANBURY, CT 06811
<PAGE>
ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Financial Statements and Schedules
December 31, 1997 and 1996
(With Independent Auditors' Report Thereon)
<PAGE>
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Financial Statements and Schedules
December 31, 1997 and 1996
Table of Contents
Independent Auditors' Report
Statements of Net Assets Available for Plan Benefits,
With Fund Information, December 31, 1997 and 1996
Statements of Changes in Net Assets Available for Plan Benefits, With
Fund Information, Years Ended December 31, 1997 and 1996
Notes to Financial Statements
Schedules (1):
Item 27a - Schedule of Assets Held for Investment Purposes Schedule 1
Item 27d - Schedule of Reportable Transactions Schedule 2
(1) All other schedules have been omitted since they are not applicable.
<PAGE>
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
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 of the Ethan Allen Profit Sharing and 401(k)
Retirement Plan (the "Plan") as of December 31, 1997 and 1996, and the related
statements 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 of 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 statement 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, 1997 and 1996 and the changes in net assets available for plan benefits for
the years then ended in conformity with generally 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 investment purposes as of December 31, 1997 and (2) reportable
transactions for the year ended December 31, 1997, are presented for purposes of
additional analysis and are not a required part of the basic financial
statements but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. These supplemental schedules are the
responsibility of the Plan's management. The Fund Information in the statements
of net assets available for plan benefits and statements 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 of each fund. The supplemental
schedules and Fund Information have been subjected to the auditing procedures
applied in the audits 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.
KPMG Peat Marwick, LLP
June 19, 1998
<PAGE>
<TABLE>
<CAPTION>
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Statement of Net Assets Available for Plan Benefits, With Fund Information
December 31, 1997
American
Twentieth Twentieth Century
Century Twentieth Century Strategic
Benham Select Century 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 ......$ -- 17,381,534 13,863,693 4,062,359 14,348,181 6,888,680 1,165,492
Investments, at contract value .. 19,398,451 -- -- -- -- -- --
Participant loans ............... -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------
Total investments .......... 19,398,451 17,381,534 13,863,693 4,062,359 14,348,181 6,888,680 1,165,492
Employer contributions receivable 344,180 368,054 339,126 103,834 -- 100,920 40,300
Employee contributions receivable 32,672 37,302 37,611 11,892 -- 12,570 4,280
----------- ----------- ----------- ----------- ----------- ----------- ----------
Total assets ............... 19,775,303 17,786,890 14,240,430 4,178,085 14,348,181 7,002,170 1,210,072
Liabilities:
Refunds payable for excess
contributions ................. 24,456 3,520 4,462 -- -- 3 1,941
----------- ----------- ----------- ----------- ----------- ----------- ----------
Net assets available for
plan benefits ..........$19,750,847 17,783,370 14,235,968 4,178,085 14,348,181 7,002,167 1,208,131
=========== =========== =========== =========== =========== =========== ==========
(Continued)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Statement of Net Assets Available for Plan Benefits, With Fund Information, Continued
December 31, 1997
American American
Century Century Charles Schwab Twentieth
Strategic Strategic Personal Century
Allocation Allocation Choice(R) Vista American
Moderate Aggressive Retirement Investors Century Loan
Fund Fund Fund Fund Value Fund Fund Total
---------- ---------- -------------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments, at fair value ....... $6,884,378 2,217,917 409,313 2,485,602 2,886,880 -- 72,594,029
Investments, at contract value ... -- -- -- -- -- -- 19,398,451
Participant loans ................ -- -- -- -- -- 2,622,164 2,622,164
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total investments ........... 6,884,378 2,217,917 409,313 2,485,602 2,886,880 2,622,164 94,614,644
Employer contributions receivable 176,424 95,829 -- 93,053 72,132 -- 1,733,852
Employee contributions receivable 18,211 10,846 -- 10,617 8,984 -- 184,985
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total assets ................ 7,079,013 2,324,592 409,313 2,589,272 2,967,996 2,622,164 96,533,481
Liabilities:
Refunds payable for excess
contributions .................. 2,751 1,834 -- 20 2,564 -- 41,551
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net assets available for plan
benefits ................ $7,076,262 2,322,758 409,313 2,589,252 2,965,432 2,622,164 96,491,930
========== ========== ========== ========== ========== ========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Statement of Net Assets Available for Plan Benefits, With Fund Information
December 31, 1996
American
Twentieth Twentieth Century
Century Twentieth Century Strategic
Benham Select Century Ultra International Restricted Unrestricted Allocation
Preservation Investors Investors Equity Ethan Allen Ethan Allen Conservative
Fund Fund Fund Fund Stock Fund Stock Fund Fund
------------ --------- ------------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments, at fair value ......$ -- 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
=========== =========== =========== =========== =========== =========== ===========
(Continued)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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
American American
Century Century Charles Schwab Twentieth
Strategic Strategic Personal Century
Allocation Allocation Choice(R) Vista American
Moderate Aggressive Retirement Investors Century Loan
Fund Fund 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
========== ========== ========== ========== ========== ========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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, 1997
American
Twentieth Twentieth Twentieth Century
Century Century Century Strategic
Benham Select Ultra International Restricted Unrestricted Allocation
Preservation Investors Investors Equity Ethan Allen Ethan Allen Conservation
Fund Fund Fund Fund Stock Fund Stock Fund Fund
------------ --------- --------- ------------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Additions to net assets:
Net appreciation/(depreciation)
in fair value of investments ... $ -- 1,288,843 (407,452) 81,308 7,454,563 3,023,514 26,743
Interest income ................... 1,088,509 -- -- -- -- -- --
Dividend income ................... -- 2,763,075 2,836,100 551,958 38,687 15,069 108,970
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net investment income (loss) .... 1,088,509 4,051,918 2,428,648 633,266 7,493,250 3,038,583 135,713
----------- ----------- ----------- ----------- ----------- ----------- -----------
Contributions:
Employer contributions .......... 367,722 369,794 340,379 104,227 -- 101,313 41,741
Employee contributions .......... 1,171,197 1,319,309 1,417,994 442,510 -- 382,044 129,973
----------- ----------- ----------- ----------- ----------- ----------- -----------
1,538,919 1,689,103 1,758,373 546,737 -- 483,357 171,714
----------- ----------- ----------- ----------- ----------- ----------- -----------
Other receipts:
Transfers from other plans ...... 598,592 -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total additions ................. 3,226,020 5,741,021 4,187,021 1,180,003 7,493,250 3,521,940 307,427
----------- ----------- ----------- ----------- ----------- ----------- -----------
Deductions from net assets:
Distributions to participants ..... (1,708,658) (777,328) (653,229) (126,341) (817,120) (458,337) (165,354)
Administrative expenses ........... (41,846) (6,930) (3,562) (513) -- (531) (1,810)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total deductions ................ (1,750,504) (784,258) (656,791) (126,854) (817,120) (458,868) (167,164)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net transfers between funds ........... (2,319,957) 349,283 (71,996) 19,134 -- 1,599,854 24,949
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) ......... (844,441) 5,306,046 3,458,234 1,072,283 6,676,130 4,662,926 165,212
Net assets available for plan benefits:
Beginning of year ................. 20,595,288 12,477,324 10,777,734 3,105,802 7,672,051 2,339,241 1,042,919
----------- ----------- ----------- ----------- ----------- ----------- -----------
End of year ....................... $ 19,750,847 17,783,370 14,235,968 4,178,085 14,348,181 7,002,167 1,208,131
=========== =========== =========== =========== =========== =========== ===========
(Continued)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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, 1997
American American Charles
Century Century Schwab
Strategic Strategic Personal
Allocation Allocation Choice(R) Twentieth American
Moderate Aggressive Retirement Century Vista Century Loan
Fund Fund Fund Investors 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 ... $ 529,454 189,958 20,176 (352,091) 103,481 -- 11,958,497
Interest income ................... -- -- -- -- -- 192,378 1,280,887
Dividend income ................... 376,431 100,129 -- 143,114 456,991 -- 7,390,524
----------- ----------- ----------- ----------- ----------- ---------- -----------
Net investment income (loss) ... 905,885 290,087 20,176 (208,977) 560,472 192,378 20,629,908
----------- ----------- ----------- ----------- ----------- ---------- -----------
Contributions:
Employer contributions ......... 177,517 95,868 -- 93,367 72,184 -- 1,764,112
Employee contributions ......... 646,773 384,021 -- 389,845 345,652 -- 6,629,318
----------- ----------- ----------- ----------- ----------- ---------- -----------
824,290 479,889 -- 483,212 417,836 -- 8,393,430
----------- ----------- ----------- ----------- ----------- ---------- -----------
Other receipts:
Transfers from other plans ..... -- -- -- -- -- -- 598,592
----------- ----------- ----------- ----------- ----------- ---------- -----------
Total additions ................ 1,730,175 769,976 20,176 274,235 978,308 192,378 29,621,930
----------- ----------- ----------- ----------- ----------- ---------- -----------
Deductions from net assets:
Distributions to participants ..... (410,691) (89,897) -- (131,327) (177,734) (205,105) (5,721,121)
(89,897)
Administrative expenses ........... (4,547) (3,027) -- (369) (1,276) -- (64,411)
----------- ----------- ----------- ----------- ----------- ---------- -----------
Total deductions ............... (415,238) (92,924) -- (131,696) (179,010) (205,105) (5,785,532)
----------- ----------- ----------- ----------- ----------- ---------- -----------
Net transfers between funds ........... (376,284) (116,321) 194,724 (130,297) 293,164 533,747 --
----------- ----------- ----------- ----------- ----------- ---------- -----------
Net increase (decrease) ........ 938,653 560,731 214,900 12,242 1,092,462 521,020 23,836,398
Net assets available for plan benefits:
Beginning of year ................. 6,137,609 1,762,027 194,413 2,577,010 1,872,970 2,101,144 72,655,532
----------- ----------- ----------- ----------- ----------- ---------- -----------
End of year ....................... $ 7,076,262 2,322,758 409,313 2,589,252 2,965,432 2,622,164 96,491,930
=========== =========== =========== =========== =========== ========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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
American
Twentieth Twentieth Twentieth Twentieth Century
Century Century Century Century Strategic
Benham Select Balanced Ultra International Restricted Unrestricted Allocation
Preservation Investors Investors Investors Equity Ethan Allen Ethan Allen Conservative
Fund Fund Fund Fund Fund Stock Fund Stock Fund 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
========== ========== ========= ========== ========= ========== =========== ==========
(Continued)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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
American Charles
American Century Schwab
Century Strategic Personal
Strategic Allocation Choice(R) Twentieth American
Allocation Aggressive Retirement Century Vista Century Loan
Moderate Fund Fund Fund Investors 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
Notes to Financial Statements
December 31, 1997 and 1996
(1) Plan Description
The Ethan Allen Profit Sharing and 401(k) Retirement Plan (the "Plan") is
a defined contribution savings plan sponsored and administered 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 Interiors Inc. restricted
stock which was transferred directly) were liquidated and the proceeds
were transferred to the Plan, allocated to participants' accounts and
invested in accordance with each participant's direction.
The Plan is offered to substantially all employees of the Company who
have completed 1,000 hours of service during their first year of
employment or subsequent plan year. The Plan is subject to the provisions
of 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 1997 (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) $600 per participant per plan
year ($400 in 1996). 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. The participant's tax-deferred
contribution and after-tax contribution, in the aggregate, may not exceed
15% of their compensation.
<PAGE>
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Notes to Financial Statements, Continued
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, although the
maximum amount that can be contributed to a participant's account in any
year is 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 the participant's compensation for that Plan year,
reduced by any other contributions on the participant's behalf to any
other defined contribution plans of the Company. The actual contribution,
if any, is made in the ensuing year. The Company declared no profit
sharing contributions for the Plan in 1997 and 1996.
<PAGE>
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Notes to Financial Statements, Continued
(1), Continued
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.
Prior to that date, vesting of profit sharing contributions was subject
to a vesting schedule based on credited years of service.
During 1997 and 1996, certain participants contributed $41,551 and
$62,032, respectively, in excess of the allowable qualified contribution.
The excess contribution amounts are reflected as a Plan liability at
December 31, 1997 and 1996. The excess contributions were refunded in the
subsequent year within the penalty free deadline.
Investment of Funds
During 1997 and 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 is as follows:
Benham Preservation Fund - The Benham Preservation Fund,
formerly known as the Capital Preservation Fund, invests
primarily in fully 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 Select Investors Fund - 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.
<PAGE>
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Notes to Financial Statements, Continued
(1), Continued
Twentieth Century Ultra Investors Fund - The Ultra Investors
Fund invests in medium to large-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, 1997, the Plan held 372,075 restricted shares and 177,935
unrestricted shares of Ethan Allen Interiors Inc. common stock.
At December 31, 1996, the Plan held 398,548 restricted shares
and 117,680 unrestricted shares of Ethan Allen Interiors Inc.
common stock as adjusted for a 2 for 1 stock split on September
2, 1997. 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
<PAGE>
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Notes to Financial Statements, Continued
(1), Continued
expire on the earlier of Mr. Kathwari's termination of
employment with the Company or March 22, 2003, and 337,796 of
these shares are restricted from being sold by the 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 Ethan Allen
Unrestricted Stock Fund.
Ethan Allen Interiors Inc. common stock is publicly traded and
had a readily ascertainable market value of $38.56 per share at
December 31, 1997. At June 19, 1998, the closing price of Ethan
Allen Interiors Inc. common stock was $46.69 per share.
The following investment funds became available as of April 1,
1996:
American Century Strategic Allocation Conservative Fund - 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.
American Century Strategic Allocation Moderate Fund - 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.
American Century Strategic Allocation Aggressive Fund - 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.
<PAGE>
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Notes to Financial Statements, Continued
(1), Continued
Charles Schwab Personal Choice(R) Retirement Fund - The Personal
Choice(R) 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 Fund - The Vista Investors
Fund invests in common stocks of growing small- to medium-sized
companies considered to have better than average prospects for
appreciation.
American Century Value Fund - The Value Fund invests primarily
in equity securities of well established companies that appear
to be undervalued at the time of purchase.
<PAGE>
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 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 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 1997 and
1996 ranged from 9.25% to 9.50% and 8.25% to 8.50%, 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. 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 Company profit sharing contributions, Company match contributions, or
administrative expenses paid by the Plan sponsor. In 1997 and 1996,
administrative expenses, other than certain transaction fees borne by the
participants, were paid by the Plan sponsor.
<PAGE>
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Notes to Financial Statements, Continued
(1), Continued
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 before tax and Company
match 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 sixty 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 tenth 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>
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.
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.
<PAGE>
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Notes to Financial Statements, Continued
(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>
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, 1997
and 1996. An asterisk denotes investments which represent 5% or more of
the Plan's net assets at the end of the plan year.
December 31, December 31,
1997 1996
---- ----
Investments at fair value as determined
by quoted market price:
Mutual funds:
Twentieth Century Select Investors Fund $17,381,534* $12,169,271*
Twentieth Century Ultra Investors Fund 13,863,693* 10,482,690*
Twentieth Century International Equity Fund 4,062,359 3,017,927
American Century Strategic Allocation 1,165,492 1,012,126
Conservative Fund
American Century Strategic Allocation 6,884,378* 5,977,304*
Moderate Fund
American Century Strategic Allocation 2,217,917 1,681,730
Aggressive Fund
Twentieth Century Vista Investors Fund 2,485,602 2,496,070
Twentieth Century Value Fund 2,886,880 1,832,753
--------- ---------
50,947,855 38,669,871
---------- ----------
Common Stock:
Ethan Allen Interiors Inc. - Restricted 14,348,181* 7,672,051*
Ethan Allen Interiors Inc. - Unrestricted 6,888,680* 2,291,395
--------- ---------
21,236,861 9,963,446
---------- ---------
Other:
Charles Schwab Personal Choice(R)
Retirement Fund 409,313 194,413
------- -------
72,594,029 48,827,730
---------- ----------
Investments at contract value,
as determined by issuer:
Investment contracts:
Benham Preservation Fund (formerly,
the Capital Preservation Fund) 19,398,451* 20,290,969*
---------- ----------
Investments at face value, which
approximates fair value:
Participant loans 2,622,164 2,101,144
--------- ---------
Total investments $94,614,644 $71,219,843
=========== ===========
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>
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 Plan has been amended since receiving the determination letter.
However, the Company believes that the Plan continues to be administered
in accordance with the applicable sections of the Internal Revenue Code.
(7) Subsequent Events
Effective January 1, 1998, 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) $1,000 (previously $600) 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 $6,996 and $30,774 at December 31, 1997 and 1996,
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>
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, 1997 December 31,1996
----------------- ----------------
Net assets available for benefits per the
financial statements $96,491,930 72,655,532
Benefits payable to participants (6,996) (30,774)
------ -------
Net assets available for benefits per the
Form 5500 $96,484,934 72,624,758
=========== ==========
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, 1997 December 31, 1996
----------------- -----------------
Benefits paid to participants per the
financial statements $5,721,121 5,759,318
Add: Benefits payable to participants at
year-end 6,996 30,774
Less: Benefits payable to participants at
previous year-end (30,774) (400,482)
------- --------
Benefits paid to participants per the
Form 5500 $5,697,343 5,389,610
========== =========
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 I
----------
THE ETHAN ALLEN PROFIT SHARING AND
401(k) RETIREMENT PLAN
Item 27a - Schedule of Assets Held for Investment Purposes
December 31, 1997
<TABLE>
<CAPTION>
Description of investments
--------------------------
Maturity Current value
Identity of issuer, borrower, date Rate of Par or at December 31,
lessor or similar party Shares date interest maturity value Cost 1997
- ----------------------- ------ ---- -------- -------------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Cash equivalents ...................................... -- -- Variable $ -- $ 16,691 $ 16,691
Benham Preservation Fund .............................. 19,398,451 -- -- -- 19,398,451 19,398,451
*Twentieth Century Select Investors Fund .............. 408,113 -- -- -- 16,073,685 17,381,534
*Twentieth Century Ultra Investors Fund ............... 507,828 -- -- -- 13,297,693 13,863,693
*Twentieth Century International Equity Fund .......... 496,015 -- -- -- 3,975,881 4,062,359
*Restricted Common Stock - Ethan Allen Interiors, Inc. 372,075 -- -- -- 3,894,693 14,348,181
*Unrestricted Common Stock - Ethan Allen Interiors, Inc. 177,935 -- -- -- 3,277,815 6,871,989
*American Century Strategic Allocation
Conservative Fund .................................... 219,904 -- -- -- 1,122,001 1,165,492
*American Century Strategic Allocation Moderate Fund .. 1,182,883 -- -- -- 6,099,210 6,884,378
*American Century Strategic Allocation Aggressive Fund 367,814 -- -- _ 1,969,012 2,217,917
*Twentieth Century Vista Investors Fund ............... 200,129 -- -- -- 2,868,873 2,485,602
*American Century Value Fund .......................... 415,378 -- -- -- 2,806,298 2,886,880
Charles Schwab Personal Choice(R)Retirement Fund assets 409,313 -- -- -- 409,313 409,313
Participant loans ..................................... -- -- Prime + 1% -- 2,622,164 2,622,164
--------- ---------
Total investments ................................... $77,831,780 $94,614,644
=========== ===========
</TABLE>
* Denotes a party-in-interest to the Plan.
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, 1997
<TABLE>
<CAPTION>
Party Involved - Chase Manhattan Bank
- -------------------------------------
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 $ 6,877,643 - - - - 6,877,643 -
Sales - 7,770,161 - - 7,770,161 7,770,161 -
Twentieth Century Select
Investors Fund
Purchases 6,380,750 - - - - 6,380,750 -
Sales - 2,457,331 - - 2,218,152 2,457,331 239,179
Twentieth Century Ultra
Investors Fund
Purchases 6,861,121 - - - - 6,861,121 -
Sales - 3,072,665 - - 2,697,760 3,072,665 374,905
Twentieth Century
International
Equity Fund
Purchases 2,363,280 - - - - 2,363,280 -
Sales - 1,400,156 - - 1,324,367 1,400,156 75,789
Unrestricted common
stock -
Ethan Allen
Interiors Inc.
Purchases 4,681,351 - - - - 4,681,351 -
Sales - 3,109,150 - - 2,767,748 3,109,150 341,402
</TABLE>
See accompanying independent auditors' report.
<PAGE>
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 hereunto duly authorized.
THE ETHAN ALLEN PROFIT SHARING AND
401(K) RETIREMENT PLAN
By Ethan Allen Interiors Inc.
Date: June 19, 1998 By: (s) Gerardo Burdo
-----------------
Name: Gerardo Burdo
Title: Vice President and Corporate
Controller
See accompanying independent auditors' report.
