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Ethan Allen Interiors: Soliciting Material Under §240.14A-12 ETHAN ALLEN INTERIORS INC.

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THOMSON REUTERS STREETEVENTS EDITED TRANSCRIPT ETH - Q1 2016 Ethan Allen Interiors Inc Earnings Call EVENT DATE/TIME: OCTOBER 27, 2015 / 9:00PM GMT OVERVIEW: Co. reported 1Q16 net sales of $190.4m and net income of $13.1m or $0.46 per diluted share. THOMSON REUTERS STREETEVENTS | www.streetevents.com | Contact Us ©2015 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.

OCTOBER 27, 2015 / 9:00PM, ETH - Q1 2016 Ethan Allen Interiors Inc Earnings Call CORPORATE PARTICIPANTS Corey Whitely Ethan Allen Interiors Inc. - EVP of Administration & CFO Farooq Kathwari Ethan Allen Interiors Inc. - Chairman & CEO CONFERENCE CALL PARTICIPANTS Bobby Griffin Raymond James - Analyst Brad Thomas KeyBanc Capital Markets - Analyst John Baugh Stifel Nicolaus - Analyst Jeremy Hamblin Dougherty & Company - Analyst Kristine Koerber Barrington Research Associates, Inc. - Analyst Cristina Fernandez Telsey Advisory Group - Analyst Justin Bergner Gabelli & Company - Analyst PRESENTATION Operator Good day, ladies and gentlemen, and welcome to the Ethan Allen FY16 first-quarter earnings release conference call. Now, I will introduce your host for today's conference, Mr. Corey Whitely, Executive Vice President, Administration and CFO. Please begin. Corey Whitely - Ethan Allen Interiors Inc. - EVP of Administration & CFO Thank you, Lateef, and good afternoon, everyone. Welcome to Ethan Allen's earnings conference call for our FY16 first quarter ended September 30, 2015. This call is being recorded and webcast live on EthanAllen.com, where you will also find our press release, which contains supporting details, including reconciliations of non-GAAP information referred to in the release and on this call. As a reminder, our comments today will include forward-looking statements that are subject to risks and uncertainties, which could cause actual results to differ materially. Please refer to our SEC filings for a complete review of those risks. The Company assumes no obligation to update or revise any forward-looking matters discussed during this call. Also joining the call today is John Bedford, our Vice President, Corporate Controller. After our Chairman and CEO, Farooq Kathwari, provides his opening remarks, I will follow with details on the financial results. Farooq will then provide further updates on our ongoing business initiatives, before opening up the telephone lines for questions. With that, here is Farooq Kathwari. Farooq Kathwari - Ethan Allen Interiors Inc. - Chairman & CEO Yes, thank you, Corey, and thank you for participating in our conference call to discuss the results of our first quarter, ending September 30, 2015. We are pleased with our results, considering we are in the midst of a substantial transformation that is leveraging our unique, vertically integrated structure, while repositioning our offerings, interior design network, our technology platform, manufacturing and logistics. The main financial highlights of the quarter are gross margin of 55%, operating margin of 11% on $190.4 million sales, which were flat from the previous-year quarter. Earnings per share of $0.46, compared to adjusted EPS of $0.44 last year. EBITDA of $25.7 million, or 13.5% of sales. A dividend of $4 million during the quarter increased 38% from the previous-year first quarter. With a healthy balance sheet of cash and securities of $95 million as of September 30, 2015, and no net debt, we are well-positioned to execute our initiative to raise up to $250 million in the debt markets, as previously announced. Written orders for the Company Retail division decreased 9.3%, with comparable decreasing by 9.8%. 2 THOMSON REUTERS STREETEVENTS | www.streetevents.com | Contact Us ©2015 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.

OCTOBER 27, 2015 / 9:00PM, ETH - Q1 2016 Ethan Allen Interiors Inc Earnings Call As mentioned in our prior release on October 19, 2015, the timing of our marketing initiatives had an impact on our written orders during the quarter. We are, however, seeing increased trends of written orders in October 2015, and we expect stronger written orders in the second quarter and moving forward. As we have discussed in the past, I will be discussing in greater detail about transformational strategy. But before I do that, Corey will give a brief overview of our financials. Corey Whitely - Ethan Allen Interiors Inc. - EVP of Administration & CFO Thank you, Farooq. We ended our FY16 first quarter with strong operating metrics and earnings. Net sales for the quarter of $190.4 million were 17 basis points off, compared to prior-year period sales of $190.7 million, which were impacted by timing this year of our marketing programs, and the annual price increase. Our manufacturing achieved increased efficiencies that contributed to a strong growth margin of 55% for the first quarter, same as in the prior-year first quarter. The Retail segment net sales for the first quarter were 76.7% of consolidated net sales, compared to 76.1% during the FY15 first quarter. Consolidated operating income for the first quarter was $20.9 million, with an operating margin of 11%, compared to $20.5 million in the prior-year first quarter, with an operating margin of 10.7%, and adjusted operating income in the prior-year period of $21.9 million, with an adjusted operating margin of 11.5%. There were no material adjustments this year. And in the prior year, the adjustments excluded $1.4 million expense associated with the disposition of real estate. Additional operating expenses this year primarily related to increased advertising expense, up about 15% this quarter, as compared to the prior-year quarter. With the extended time of our current promotions running through December 31, along with our strong September 76 -page magazine, and mix of TV, print and electronic media, the first-half advertising cost was somewhat front-loaded in the first quarter, due to a heavy September. However, we expect our advertising costs for the first six months of FY16 to level out, with an overall increase of approximately 5% to 7% over the prior-year first half. Wholesale division net sales of $120.5 million for the first quarter decreased 3.3% from the prior-year period, when we benefited from the strong shipments from the Phase 1 new product introductions. Wholesale first-quarter operating income of $20.6 million, with an operating margin of 17.1%, compared to 17.3% operating margin, and 17.7% adjusted operating margin, for the first quarter of FY15. Retail division net sales for the first quarter increased 0.7%, and produced operating income of $1.6 million, for an operating margin of 1.1%, compared to an operating margin of 1.2%, and an adjusted operating margin of 1.8%, for the first quarter of FY15. Retail division comparable net sales increased 0.2% for the first quarter. Retail division profitability was impacted by clearance sales, as well as higher advertising expense. Comparable written orders by the Retail division for the first quarter of FY16 decreased 9.8%, compared to the first quarter of FY15, and total written orders decreased 9.3%. Our global Retail market network included 300 design centers at September 30, 2015, compared to 294 in the prior year. The Company operated 145 design centers, including 7 International locations, and our independent retailers operated 155 design centers, including 98 International locations, as of September 30, 2015. This compared with 143 Company operated, including 8 International and 151 independently operated, including 92 International locations last year. Our global Retail network had a total of 105 International locations at September 30, 2015, and 100 in the prior year. For the FY16 first quarter, International sales accounted for 11.9% of our consolidated net sales, compared to 12.1% in the prior year. Net income for the first quarter was $13.1 million, or $0.46 per diluted share, compared to $11.9 million, or $0.41 per diluted share, in the prior-year first-quarter. Adjusted net income in the prior-year first quarter was $12.8 million, or $0.44 per diluted share. Our normalized income tax rate for both the current and prior year was approximately 36.5%. Our effective tax rate was 36.1% this quarter, and 36.6% for the prior-year quarter. Please refer to our press release reconciliation tables showing the adjustments made to our results for all periods. We strengthened our financial structure during the quarter, and our balance sheet at September 30, 2015 is healthy, positioning us well as we work with lenders to raise up to $250 million in debt. At September 30, 2015, there were $74.4 million outstanding under our credit facility, together with $0.2 million of standby letters of credit, leaving $74.8 million of availability. For the FY16 first quarter, we generated $16.1 million of cash from operations. 3 THOMSON REUTERS STREETEVENTS | www.streetevents.com | Contact Us ©2015 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.

OCTOBER 27, 2015 / 9:00PM, ETH - Q1 2016 Ethan Allen Interiors Inc Earnings Call Our total cash and securities at September 30 totaled $94.8 million, a decrease of $40.4 million compared to September 30, 2014, mostly due to the $55.6 million reduction in debt. For the quarter, we also paid out dividends of $4 million, an increase of 38% compared to the prior-year quarter. There were no share repurchases this quarter, and our remaining repurchase authorization at September 30, 2015 was 2.5 million shares. Our first-quarter capital expenditures totaled $3.1 million, compared to $5.4 million in the prior year. We expect total FY16 capital expenditures of $22 to $25 million, as we continue to invest in new technology in the Retail and Wholesale segments, as well as incur capital expenditures related to improving and growing our design centers and manufacturing, including the announced expansion of our Mexico facility. Inventory of $156.6 million decreased slightly from September 30, 2014. With that, I will pass it back over to Farooq. Farooq Kathwari - Ethan Allen Interiors Inc. - Chairman & CEO Thank you, Corey. As we have discussed in the past, we are aggressively pursuing a transformational strategy, repositioning Ethan Allen as a leaner, vertically integrated interior design Company. We believe that beginning in FY17, we will be well-positioned to begin an accelerated growth phase, towards sales of $1 billion, at which level we expect to increase our operating margins from our current industry-leading 11% to about 15%. A brief overview of our various initiatives and offerings. As discussed, Phase 1 focused on casual designs and was introduced to consumers in winter of 2014. Phase 2, referred to as Georgetown, focusing on formal classics, was introduced to consumers in May/June of 2015. And Phase 3, referred to as Romantic Classics inspired by European attributes, mostly French and Italian, is just now getting into our design centers. Phase 4, covering attributes of classics with modern attitudes, are scheduled to be marketed from late spring 2016. Regarding our design center network, in North America, our focus remains to attract talented interior designers, to add to our qualified team of 1,500 designers. Last week, we had our annual interior design recognition conference at our Danbury headquarters, and recognized over 200 of our top interior designers. One of our major competitive advantages is the talent of our 1,500 in-house interior designers, supplemented with about 5,000 interior design affiliates, resulting in about 70% of product custom-made to order, when orders are received. This makes North American manufacturing very advantageous, and also helps in inventory and cash management and lower returns. We also continue to open new design centers, and are renovating existing design centers. During the last six months, we've opened new and relocated design centers in Philadelphia; Pittsburgh; Wichita, Kansas; Toledo, Ohio. And under construction are design centers in San Francisco; in Baltimore, Maryland; Cranston, Rhode Island; Hyannis, Massachusetts. We're also continuing our aggressive plans of renovating existing design centers, including major --including, currently, our major design centers in Chicago, Atlanta, San Diego, Toronto, Rockville(which is a suburb of Washington, DC), Norwalk, Connecticut and others. Internationally, we also continued to make progress. This quarter, a number of flagship locations in major cities in China are being renovated, and a new design center in Zhejiang, China was opened. During the quarter, we opened our first location in Hanover, Germany, and expect to open several others in the next 12 months. We are harnessing technology to drive growth. We continue to add technology at all levels of our business, to create a dynamic omni-channel environment. This also includes investing in our technology infrastructure, including digital, retail, manufacturing, operations and logistics platforms, to seamlessly provide information across our virtually-integrated Company. By effectively combining technology with personal service of our interior designers, we have a unique and relevant structure for sale of furniture and furnishings, where personal service and the ability to see the product prior to purchase is important to increased sales, higher tickets and reducing returns. About 90% of our customers today visit our website prior to coming to design centers. We have rebranded our website, with the focus of driving traffic to design centers in North America and internationally. With our 200 design centers in North America with close proximity to where 70% of our targeted customers live provides us a unique opportunity to have more qualified customers interact with our interior designers. This also helps create longer-term relationship and repeat business. We have also streamlined our website to increase online sales. Transactions are up 28% from FY15, and conversion rates are up 22%. We have continued opportunity to increase sales online, while recognizing our unique competitive advantage of personal interior design service. Our continued focus is on manufacturing, and logistics also. Despite introduction of 4 THOMSON REUTERS STREETEVENTS | www.streetevents.com | Contact Us ©2015 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.

OCTOBER 27, 2015 / 9:00PM, ETH - Q1 2016 Ethan Allen Interiors Inc Earnings Call new products, which results in inefficiencies to our manufacturing and logistics, they have performed well, and continue to improve operating margins. We continue to invest in our North American manufacturing, which includes US, Mexico and Honduras. During the last year, we made major capital investments to our US manufacturing operations, and recently announced plans to build a new 300,000 square foot upholstery plant adjacent to our current 240,000 square foot plant in Mexico, at a cost of about $15 million. We are accelerating our marketing efforts, and we continue. In the first quarter ended September 30, 2015, we expanded our direct mail magazines by increasing the page count by about 30% in July and August compared to last year. And in September, as Corey mentioned, mailed a 76 page direct mail, as compared to about a 28 page in September 2014. As we have mentioned, timing of our marketing initiatives had an impact on our written business, and also on our advertising expenditures. Our annual price increase this year benefited our June 30, 2015 quarter. In addition to managing the introduction of new products, we decided this year to have an umbrella sale offer until December 31, 2015, as compared to ending each month, as we did last year. This had an impact of changing the timing of written, and to some extent delivered sales. As we have mentioned, we see October written trending strong compared to last year. As Corey mentioned, our advertising in the first quarter increased by about 15%, and part of it will benefit our second quarter. As we complete the Phase 4 of our product introductions, make major headway in absorbing new products in our manufacturing, and complete a substantial part of our design center renovations, we plan to accelerate our marketing to help grow sales. With that, I will be very happy to open it up for any questions and comments. QUESTIONS AND ANSWERS Operator (Operator Instructions) Budd Bugatch, Raymond James. Farooq Kathwari - Ethan Allen Interiors Inc. - Chairman & CEO Hello, Budd. Bobby Griffin - Raymond James - Analyst Good afternoon, Farooq and Corey. This is actually Bobby filling in for Budd. I appreciate you guys taking my questions. Just real quick I was wondering if you can give some more detail around the size of Phase 4's introduction compared to the first three phases? Farooq Kathwari - Ethan Allen Interiors Inc. - Chairman & CEO Yes, Bobby, it is a good question. The Phase 4 actually is going to be somewhat larger than Phase 2 and 3. This is as I mentioned, these products are classics with a modern attitude, and we believe will expand our reach to a larger population base, including the millennials. Bobby Griffin - Raymond James - Analyst Okay, so is it larger than Phase 2 and 3 combined? Or larger than Phase 2 and 3 on their standalone basis? 5 THOMSON REUTERS STREETEVENTS | www.streetevents.com | Contact Us ©2015 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies.

OCTOBER 27, 2015 / 9:00PM, ETH - Q1 2016 Ethan Allen Interiors Inc Earnings Call Farooq Kathwari - Ethan Allen Interiors Inc. - Chairman & CEO On the standalone basis. Bobby Griffin - Raymond James - Analyst Okay. And then maybe could you also maybe provide a little color, as with the first three phases, have you been able to reach that younger customer in any of your...


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