Ethan Allen Interiors Inc. (“Ethan Allen” or the “Company”) (NYSE:
ETH) today announced its action plan in response to the COVID-19
health crisis. Everything has changed as a result of the rapid
spread of COVID-19 around the world. Our sympathy goes out to all
of those whose lives are being impacted by the virus, and we are
thankful for those putting their health at risk to protect ours.
Farooq Kathwari, Ethan Allen’s Chairman,
President and CEO commented, “As you know, we are going through
unprecedented times. Our enterprise over the past 88 years has gone
through the Great Depression, a World War and several recessions,
and we have come out stronger and more vibrant each time. The
coronavirus crisis is unique and severe. Never in our history, in
fact in world history, has mankind been asked to stay locked up in
their homes and businesses asked in mass to close down their
operations.”
“We are taking many steps to manage this crisis
with compassion and collaboration. An important aspect is to have
cash to continue to exist. Fortunately, we have been prudent and so
far, have been debt free. However, we have now taken on debt to
ensure we have cash availability to survive this crisis. We have to
make tough decisions to conserve cash. We are taking many measures
including reduced compensation of our management associates. I have
personally decided to take zero salary to June 30th, and we will
reduce the salaries of all our associates making a salary of
$80,000 and up.”
“We are taking a major workforce reduction
through temporary layoffs,” said Mr. Kathwari. “We take very
seriously the responsibilities we have with our associates,
customers and all shareholders. Our objective is to persevere
through this, get back to work, open our 200 North American design
centers and restart our North American manufacturing and logistics
operations,” Mr. Kathwari concluded.
The Company’s action plans are outlined below
into three key categories: Operations, Human Capital, and Cash
& Expense Management; and are based on its continued assessment
of the COVID-19 health crisis and to ensure the well-being of its
employees and their families, its customers and the communities
where it operates.
Operations
Ethan Allen has taken the following operational
actions:
- The Company’s design centers, which were originally planned to
be closed from March 19th through March 27th, will remain closed as
multiple counties and states have imposed shelter in place, or stay
at home orders extending through mid to late April.
- The Company, which has been paying its associates since the
March 19, 2020 closures will continue to pay its affected
associates through April 2, 2020.
- Temporary closure of most of its manufacturing facilities,
effective immediately.
- The Company will continue to serve its customers. Customers can
schedule in-person appointments with the Company’s design
consultants and interact virtually with them through Live Chat
online at www.ethanallen.com. Design consultants will work remotely
utilizing technology, including the Ethan Allen inHome augmented
reality app, the 3-D room planning tool, Skype and
FaceTime.
Human Capital
Ethan Allen has taken the following actions with
its workforce:
- The furlough of approximately 70% of its global workforce. The
recently signed Coronavirus Aid, Relief and Economic Security
(CARES) Act provides larger unemployment benefits than at any other
time in U.S. history.
- Farooq Kathwari, Ethan Allen’s Chairman, President and CEO will
forego his salary through June 30, 2020.
- A salary reduction of up to 40% for all senior management and
up to 20% for other salaried employees through June 30, 2020.
- The Company’s Board of Directors will reduce their cash
compensation by 50% through June 30, 2020.
- As noted earlier, the Company will pay its affected associates
through April 2, 2020. In addition, impacted employees will
continue to receive enrolled benefits for up to 2 months.
Cash & Expense Management
In light of these temporary closures and
workforce reductions, Ethan Allen is taking the following actions
to manage cash flow, control expenses and facilitate a strong
return to business once it resumes operations:
- Elimination of all non-essential operating expenses so that
operations are maintained at minimum levels.
- The delay of capital expenditures.
- Temporary halt of the share repurchase program.
- The Company’s regular quarterly cash dividend is currently
being evaluated.
As previously announced on March 23, 2020, the
Company borrowed $80 million under its revolving credit facility.
To further increase liquidity and strengthen its financial
position, the Company borrowed an additional $20 million on March
30th, bringing its cash and investments on hand to approximately
$110 million as of March 31, 2020. The Company remains committed to
paying dividends over the long-term and will review dividend
payments in the short-term. Likewise, Ethan Allen will reinstate
share repurchases when it deems appropriate.
Ethan Allen plans to report its fiscal 2020
third quarter results in early May and will update the investment
community with more details on its various initiatives at that
time. Until that time, the Company undertakes no obligation to
update the investment community.
ABOUT ETHAN ALLEN
Ethan Allen Interiors Inc. (NYSE: ETH) is a
leading interior design company and manufacturer and retailer of
quality home furnishings. The Company offers complimentary interior
design service to its clients and sells a full range of furniture
products and decorative accessories through ethanallen.com and a
network of approximately 300 design centers in the United States
and abroad. Ethan Allen owns and operates nine manufacturing
facilities including six manufacturing plants in the United States,
two manufacturing plants in Mexico and one manufacturing plant in
Honduras. Approximately 75% of its products are made in its North
American plants. For more information on Ethan Allen's products and
services, visit www.ethanallen.com.
Investor / Media Contact: Matt McNulty Vice President,
Finance IR@ethanallen.com
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995, Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), which represent management's beliefs
and assumptions concerning future events based on information
currently available to the Company relating to its future results.
Such forward-looking statements are identified in this press
release and the related webcasts, conference calls and other
related discussions or documents incorporated herein by
reference by use of forward-looking words such as “anticipate,”
“believe,” “plan,” “estimate,” “expect,” “intend,” “will,” “may,”
“continue,” “project,” “target,” “outlook," "forecast," “guidance,"
and similar expressions and the negatives of such forward-looking
words. These forward-looking statements are subject to management
decisions and various assumptions about future events and are not
guarantees of future performance. Actual results could differ
materially from those anticipated in the forward-looking statements
due to a number of risks and uncertainties including, but not
limited to the following: a volatile retail environment and
changing economic conditions may further adversely affect consumer
demand and spending; global and local economic uncertainty may
materially adversely affect manufacturing operations or sources of
merchandise and international operations; disruptions of supply
chain; changes in U.S. trade and tax policy; competition from
overseas manufacturers and domestic retailers; failure to
successfully anticipate or respond to changes in consumer tastes
and trends in a timely manner; ability to maintain and enhance the
Ethan Allen brand; the number of manufacturing and logistics sites
may increase exposure to business disruptions and could result in
higher transportation costs; fluctuations in the price,
availability and quality of raw materials could result in increased
costs or cause production delays; current and former manufacturing
and retail operations and products are subject to increasingly
stringent environment, health and safety requirements; the use of
emerging technologies as well as unanticipated changes in the
pricing and other practices of competitors; reliance on information
technology systems to process transactions, summarize results, and
manage its business and that of certain independent retailers;
disruptions in both primary and back-up systems; product recalls or
product safety concerns; successful cyber-attacks and the ability
to maintain adequate cyber-security systems and procedures; loss,
corruption and misappropriation of data and information relating to
customers; loss of key personnel; additional asset impairment
charges that could reduce profitability; access to consumer credit
could be interrupted as a result of conditions outside of the
Company’s control; its ability to locate new design center sites
and/or negotiate favorable lease terms for additional design
centers or for the expansion of existing design centers; changes to
fiscal and tax policies; its operations present hazards and risks
which may not be fully covered by insurance; possible failure to
protect its intellectual property; failure to successfully
transition from a promotional to a membership model; potential
risks and uncertainties relating to the duration, severity and
geographic spread of the COVID-19 pandemic; actions that may be
taken by governmental authorities to contain the COVID-19 pandemic
or to mitigate its impact; the potential negative impact of
COVID-19 on the global economy, consumer demand and the supply
chain; and the impact of COVID-19 on the Company's financial
condition, business operations and liquidity.
Given the risks and uncertainties surrounding
forward-looking statements, you should not place undue reliance on
these statements. Many of these factors are beyond the Company’s
ability to control or predict. These forward-looking statements
speak only as of the date of this news release. Other than as
required by law, the Company undertakes no obligation to update or
revise its forward-looking statements, whether because of new
information, future events, or otherwise. Accordingly, actual
circumstances and results could differ materially from those
contemplated by the forward-looking statements.
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