Ethan Allen Interiors Inc. (ETD) Earnings Call Transcript & Summary

Welcome to the Ethan Allen Interiors Inc. 2020 Annual Shareholders Meeting. My name is Eric Koster, and I'm Vice President, General Counsel and Secretary of Ethan Allen. Before we begin, please note the safe harbor statement, which is posted in the Meeting Materials link, which appears in the lower section of your screen. The matters discussed at today's meeting may include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially as further detailed in the safe harbor statement. This meeting is scheduled to conclude by 11:00 a.m. Eastern Time. We will now start our meeting, and I am pleased to turn it over to our Chairman, President and CEO, Mr. Farooq Kathwari.

Thank you, Eric, and good morning. As Chairman of the Board of Directors of Ethan Allen, it is my pleasure to welcome you to the Ethan Allen Interiors Inc. Annual Meeting of Stockholders. We are pleased to be able to conduct our 2020 annual meeting virtually via the Internet for the first time, and appreciate your participation. It is now just after 10:00 a.m. Eastern Time, and in accordance with the notice of the meeting, I hereby call to order the Annual Meeting of the Stockholders of Ethan Allen Interiors Inc. I'd like to first acknowledge the presence of all of our directors at our virtual meeting today. In addition to myself, we have James B. Carlson; John J. Dooner, Jr.; Domenick J. Esposito; Mary Garrett; James W. Schmotter; and Tara I. Stacom. We are fortunate to have such an outstanding Board of Directors. Each of our directors is experienced and brings unique capabilities to our board. You can learn more about them by referring to our proxy statement. In addition to our Board of Directors, joining me today is Corey Whitely, Executive Vice President, Administration and Chief Financial Officer; Eric Koster, Vice President, General Counsel and Secretary; and Matt McNulty, Vice President, Finance and Treasurer; as well as representatives from KPMG LLP, our independent auditors. Eric Koster will lead us through much of the formalities today as well as acting as our secretary for the meeting. Before we move to our official business, I have a few comments about our business over this past year. As you all know, we are going through unprecedented times. Our enterprise over the past 89 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 crisis related to the COVID-19 pandemic has been a unique challenge to our business and the world in general. Despite the challenges, we are pleased and gratified that through the efforts of our teams, we have been able to generate business even during our fiscal 2020 fourth quarter when most of our retail network was closed due to the pandemic. We have been able to maintain business due to a number of factors, including strong talent throughout our vertically integrated structure, the trust in our brand, our focus on great quality, value and service, and by combining the personal service of our interior designers with technology. Adding technology to facilitate client interaction was a major focus in the last few years, and that benefited us greatly during fiscal 2020. We had strong marketing initiatives during fiscal 2020, and continuing them into fiscal 2021. We also remain very focused on safety and social responsibility. An important part of our COVID-19 action plan is to have a strong cash position. Fortunately, we have been prudent. And after paying down $15 million of debt from available cash, and we had paid $50 million previously of debt, we ended the September 30 quarter with cash of $62 million and no debt. For our fiscal 2021 first quarter ended September 30, 2020, our written business for the retail division increased 79% from the fourth quarter ended June 30, 2020, impacted by the pandemic. We have continued strong business, increasing retail written orders by over 50% in October compared to the prior year month. We are making very good progress in growing our sales, profits and further strengthening our balance sheet. Our focus for fiscal 2021 remains on the following important initiatives to grow our sales and profits. Number one is to continue focusing on strengthening our talent. We have a strong team managing our vertically integrated enterprise. During the past year, we have strengthened our retail, marketing and product development teams, and we are continuing this effort. Second is our focus on service. It is critical. Our advantage of making about 75% of furniture in our North American facilities is that it provides a competitive advantage of control over our supply chain, which is especially critical during these challenging times. We are adding 2 plant capacity and investing in technology. Third is maintaining strong marketing initiatives, including television, direct mail, digital and print. We've also introduced digital specialty magazines focused on categories such as mattresses, outdoor, lighting and rugs, and have seen an increase in business in these categories, we plan to continue a strong marketing as we move forward. Fourth is combining personal service with technology. Our investments are providing tools to assist with the interior design process, such as our augmented reality app and 3D floor planner, live chat and our online make-an-appointment app allows our interior designers to interact with clients virtually or in person in our design centers. And through all our efforts, we are committed to operating our business with high standards of safety, including following CDC guidelines for safe business operations for the sake of our customers and our associates. We're committed throughout our operations to be a responsible steward of the environment and to instill a strong sense of social responsibility. We look forward to continuing our progress and remain cautiously optimistic. With this, I will now turn the meeting back over to Eric Koster. Eric?

Thank you, Mr. Kathwari, and thank the shareholders and guests who are participating in our virtual meeting today. Our 2020 annual meeting agenda is displayed on the virtual shareholder meeting website, and the rules of conduct are posted on the same web page. We plan to conduct the meeting in accordance with the rules of conduct. Your cooperation in observing these rules is greatly appreciated. Observance of the rule will provide an equal opportunity for all stockholders to participate. If you wish to ask a question or make a comment, please follow the directions on the web page and type of question or comment in the appropriate space on your screen. After each proposal is read, we will answer questions related to that proposal. We will answer other questions, time permitting, after voting is completed. Only stockholders of record at the close of business on the record date of September 16, 2020, or their newly appointed proxies, are entitled to address the meeting and to vote. As secretary of the meeting, I can report that notice of this meeting was duly given on or about October 2, 2020. As of the record date, there were 25,053,082 shares of common stock issued outstanding and entitled to vote at this meeting. The list of stockholders entitled to vote at this meeting has been available for examination by any stockholder at the company's offices in Danbury, Connecticut for the past 10 days. This list is also posted on the virtual meeting web page, where it will remain open for inspection during the meeting. The inspectors of election for this meeting are Peter W. Descovich, of IOE Services Inc.; and Christopher Hayden of Georgeson LLC, who have signed the judges' oath, which will be filed with the records of this meeting. The inspectors of election have confirmed that more than a majority of the corporation's outstanding shares of common stock are represented at this meeting either in person or by proxy, and we have a quorum present. It is now 10:10 a.m. I now declare the polls for voting are open. If you have already voted online by phone or by mail, you do not need to vote again. Any stockholder who has not yet voted or wishes to change their vote, may do so by clicking on the "Vote Now" button on your screen, and following the directions. There are 3 proposals properly brought forth to be voted at the meeting. Proposition 1. At this time, we will proceed with the first proposal for the election of 7 directors of the company. The Board of Directors has nominated M. Farooq Kathwari; James B. Carlson; John J. Dooner, Jr.; Domenick J. Esposito; Mary Garrett; James W. Schmotter; and Tara I. Stacom, for election to the Board of Directors. There are being no additional timely nominations, the foregoing 7 nominees are the only individuals to be considered for election. I'm noticing my screen, and I have no questions relating to this proposal. The second proposal is to approve by a nonbinding advisory vote executive compensation for the company's named executive officers. We have not received any questions relating to this proposal. I'm checking my screen again, and no questions have come in at this prior time. The third proposal is to ratify the appointment of KPMG LLP as our independent public accounting firm for the 2021 fiscal year. We have not received any questions relating to this proposal. And in checking my screen, nothing has come in during my reading of the proposal. We are not aware of any other business to be conducted at this meeting. Now that all proposals have been submitted for consideration, and everyone has had an opportunity to vote, it is now 10:13 a.m., and I declare that the polls are closed. The judges of the vote have calculated the votes on the items of business brought before this meeting. Based upon the judges' report, I declare that M. Farooq Kathwari; James B. Carlson; John J. Dooner, Jr.; Domenick J. Esposito; Mary Garrett; James W. Schmotter; and Tara I. Stacom, has been elected as directors of the company for a term of 1 year. I further declare that the proposal to approve by a nonbinding advisory vote, the executive compensation for the company's named executive officers has been approved. And the proposal to ratify the appointment of KPMG LLP as our independent registered public accounting firm for the 2021 fiscal year has also been approved. The report of the inspector of election with the final vote count will be filed with the minutes of this meeting. That now concludes the formal business to come before the meeting, I would like to turn the meeting back to Mr. Kathwari.

Well, thank you, Eric, and thank you for all participating in this meeting. We are pleased that we continue to focus on growing the business. And also, as we said, we want to make sure that during this time period, we are -- we do it sensibly and safely. We look forward to continued growth, and thank you for all participating in this meeting.

And there are no questions that have come in during the time that we've been speaking. I would like to thank everybody for participating in the 2020 annual meeting, and I declare this meeting adjourned. At any time though, if you have questions about our company, please contact our Investor Relations team at ir@ethanallen.com. Thank you all for your participation today.

Thank you, everybody.

This now concludes the meeting. Thank you for joining, and have a pleasant day.