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Note 4 - Revenue Recognition
 9 Months Ended
Mar. 31, 2021
Notes to Financial Statements  
Revenue from Contract with Customer [Text Block]

(4)

Revenue Recognition

 

Our reported revenue (net sales) consist substantially of product sales. We report product sales net of discounts and recognize them at the point in time when control transfers to the customer. For sales to our customers in our wholesale segment, control typically transfers when the product is shipped. The majority of our shipping agreements are freight-on-board shipping point and risk of loss transfers to our wholesale customer once the product is out of our control. Accordingly, revenue is recognized for product shipments on third-party carriers at the point in time that our product is loaded onto the third-party container or truck. For sales in our retail segment, control generally transfers upon delivery to the customer. We recognize the promised amount of consideration without adjusting for the effects of a significant financing component if the contract has a duration of one year or less. As our contracts typically are less than one year in length and do not have significant financing components, we have not adjusted consideration.

 

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. 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 is not recognized as revenue but is included in Accounts payable and accrued expenses on the consolidated balance sheets as it is ultimately remitted to governmental authorities.

 

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 March 31, 2021 and June 30, 2020, these amounts were immaterial.

 

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 March 31, 2021, we had prepaid commissions of $19.7 million, which we expect to recognize to selling expense in the next three months.

 

In many 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, 2020 we had customer deposits of $62.6 million, of which we recognized $1.2 million and $59.0 million, respectively, as net sales upon delivery to the customer during the three and nine months ended March 31, 2021. Customer deposits totaled $115.3 million at March 31, 2021.

 

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

 

  

Wholesale

  

Retail

  

Total

 

Upholstery(1)

 $57,448  $71,297  $128,745 

Case goods(2)

  33,054   38,225   71,279 

Accents(3)

  19,022   28,884   47,906 

Other(4)

  (1,704)  2,990   1,286 

Total before intercompany eliminations

 $107,820  $141,396   249,216 

Intercompany eliminations(5)

          (72,254)

Consolidated net sales

         $176,962 

 

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

 

  

Wholesale

  

Retail

  

Total

 

Upholstery(1)

 $163,756  $203,069  $366,825 

Case goods(2)

  92,777   109,886   202,663 

Accents(3)

  55,021   82,638   137,659 

Other(4)

  (4,850)  8,702   3,852 

Total before intercompany eliminations

 $306,704  $404,295   710,999 

Intercompany eliminations(5)

          (204,153)

Consolidated net sales

         $506,846 

 

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

 

  

Wholesale

  

Retail

  

Total

 

Upholstery(1)

 $47,214  $54,791  $102,005 

Case goods(2)

  30,096   31,822   61,918 

Accents(3)

  16,942   25,849   42,791 

Other(4)

  (1,113)  3,236   2,123 

Total before intercompany eliminations

 $93,139  $115,698   208,837 

Intercompany eliminations(5)

          (59,063)

Consolidated net sales

         $149,774 

 

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

 

  

Wholesale

  

Retail

  

Total

 

Upholstery(1)

 $141,563  $181,723  $323,286 

Case goods(2)

  95,922   110,465   206,387 

Accents(3)

  51,109   86,078   137,187 

Other(4)

  (2,237)  13,799   11,562 

Total before intercompany eliminations

 $286,357  $392,065   678,422 

Intercompany eliminations(5)

          (180,153)

Consolidated net sales

         $498,269 

 

 

(1)

Upholstery furniture includes fabric-covered items such as sleepers, recliners and other motion furniture, chairs, ottomans, custom pillows, sofas, loveseats, cut fabrics and leather.

 

 

(2)

Case goods furniture includes items such as beds, dressers, armoires, tables, chairs, buffets, entertainment units, home office furniture and wooden accents.

 

 

(3)

Accents includes items such as window treatments and drapery hardware, wall décor, florals, lighting, clocks, mattresses, bedspreads, throws, pillows, decorative accents, area rugs, wall coverings and home and garden furnishings.

 

 

(4)

Other includes membership revenue, product delivery sales, the Ethan Allen Hotel room rentals and banquets, sales of third-party furniture protection plans and other miscellaneous product sales less prompt payment discounts, sales allowances and other incentives.

 

 

(5)

Intercompany eliminations represent the elimination of all intercompany wholesale segment sales to the retail segment during the period presented.