ISS and Glass Lewis Reject Sandell's Attempt to Take Control of the Ethan Allen Board
Glass Lewis Recommends ALL of Ethan Allen's Nominees
Ethan Allen Expects Continuing Positive Sales Trends in November Following Record Total Written Orders in October
Ethan Allen Urges Shareholders to Vote FOR ALL Ethan Allen Directors on the WHITE Proxy Card
DANBURY, Conn., Nov. 16, 2015 (GLOBE NEWSWIRE) -- Ethan Allen Interiors Inc. ("Ethan Allen" or the "Company") (NYSE: ETH) today announced that Institutional Shareholder Services ("ISS") and Glass Lewis, two leading independent proxy advisory firms, have recommended that shareholders reject efforts by Sandell Asset Management Corp. ("Sandell") to replace six members of the Company's Board of Directors.
Glass Lewis has recommended Ethan Allen shareholders vote FOR ALL of the Ethan Allen nominees on the WHITE proxy card. The Ethan Allen Board has been recently refreshed through the addition of two new independent directors and is composed of highly qualified directors with a range of experience and expertise in areas critical to Ethan Allen's business, including furniture and retail, e-commerce, real estate and finance. The Ethan Allen Board has a strategic and operating plan in place that is delivering value and continuing to transform the Company, with industry leading margins and accelerating top line growth due to its ongoing initiatives.
Ethan Allen stockholders are reminded that their vote is important, no matter how many or how few shares they own. The Ethan Allen Board urges shareholders to vote the WHITE proxy card today "FOR ALL" of Ethan Allen's director nominees: James B. Carlson, Clinton A. Clark, John J. Dooner, Jr., Domenick J. Esposito, M. Farooq Kathwari, James W. Schmotter and Tara I. Stacom.
As Glass Lewis stated in its November 13, 2015 report1:
"Overall, we ultimately see greater reason in this case for shareholders to continue to defer to the board and management team with respect to strategic and financial matters."
"As such, considering that the Company has continued to deliver generally positive financial results below the "top-line" in the meantime, including strong cash flow generation and improved margins, we're more apt to recommend that shareholders afford the current board and management team additional time to realize the envisioned benefits of the Company's current strategic and financial initiatives."
"We believe the Company has presented a reasoned defense of its decision not to pursue sale-leasebacks or a REIT structure at this time, beyond the repositioning of real estate and property sales that the Company has completed in recent years and intends to continue."
"Therefore, we don't believe the Dissident's nominees, much of whom have expertise in financial or real estate matters, would add significant value to the Ethan Allen board at this time."
- "Ultimately, we believe the election of Dissident nominees is not warranted at this time nor likely to lead to a superior outcome for all shareholders."
1 Permission to use quotations neither sought nor obtained.
In its November 14, 2015 report, ISS did not recommend Sandell nominees Kathy Hebert, Annelise Osborne and Alexander Wolf. In addition, ISS recommended in favor of Say on Pay and in favor of amending the Omnibus Stock Plan.
Ethan Allen noted:
The Ethan Allen Board is highly engaged, and together with the Company's strong management team, are overseeing the execution of the Company's transformation strategy, which we are pleased has been acknowledged by a leading independent proxy advisory firm as the right path forward for the Company. The execution of the Company's plan will allow us to continue to innovate, extend our competitive advantage and create compelling opportunities for enhanced financial performance and continued value creation. Ethan Allen has the right strategy, the right management team and the right Board to drive near- and long-term value creation for ALL Ethan Allen stockholders.
Our recent actions and results reflect the strength of our plan. For the fiscal first quarter ended September 30, 2015 we reported industry leading gross margin of 55% and operating margin of 11%, and the Company increased cash dividends by 38% over the prior year quarter. In October 2015, following receipt by our Design Centers of the phase 3 new product offerings, we accelerated our advertising and had record written orders for the month of October 2015 that exceeded any prior month of October. We are also expecting positive sales trends to continue in November.
Importantly, on an annualized basis, October written order results indicate that Ethan Allen can generate revenues at the $1 billion level within its current structure – our retail network in North America is equipped to service annual sales more than $1 billion. Importantly, our manufacturing centers are also prepared to support these increased volumes. At revenues of $1.1 billion, we have the opportunity to achieve gross margin of 56% and operating margin of 15%, resulting in a significant increase to earnings per share. We believe we are well positioned to deliver results through the remainder of 2015, into 2016 and beyond.
Ethan Allen strongly agrees with the ISS and Glass Lewis recommendations that shareholders should NOT allow Sandell to take control of the Ethan Allen Board. Glass Lewis recommends shareholders vote FOR ALL of the Company's nominees, which we believe underscores our position that the Sandell nominees would not be additive to the Ethan Allen Board. Furthermore, in rejecting Sandell's attempt to take control of the full Board, ISS frequently acknowledges the Company's positive steps in its transformation, including our performance in the face of the Great Recession. ISS also notes that Ethan Allen's Chairman, President and CEO – who is also the Company's largest shareholder owning more than 11% of outstanding shares – is fully aligned with shareholder interests.
While ISS further acknowledges the Company's efforts to enhance its governance, including recent Board refreshment and responsiveness to shareholders through changes to executive compensation, removal of the poison pill and addressing the dead-hand provision, we are disappointed that ISS disregards the importance of such positive progress, and we believe that ISS reached the wrong conclusion in failing to recommend that shareholders should elect ALL of Ethan Allen's director nominees by voting the WHITE proxy card.
The Ethan Allen Board urges shareholders to protect their investment by voting FOR all the Company's nominees in the WHITE proxy card TODAY.
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 eight manufacturing facilities including five manufacturing plants and one sawmill in the United States plus one plant each in Mexico and Honduras. Approximately seventy percent of its products are made in its North American plants. For more information on Ethan Allen's products and services, visit ethanallen.com.
Forward Looking Statements
This press release and related discussions should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended June 30, 2015 (the "2015 Form 10-K") and other reports filed with the Securities and Exchange Commission. This press release and related discussions contain forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include statements about such matters as: our capital structure; future or targeted operational and financial performance; liquidity, capital and debt levels; strategic plans; transformation initiatives; the pending proxy contest, the impacts thereof and other possible changes in the composition of the Company's board of directors; stock repurchase and dividend plans; our intent to secure debt or other forms of financing; demand for our products; our position in markets we serve; and regional and global economic and industry market conditions and changes therein. Such forward-looking statements reflect management's current expectations concerning future events and results of the Company, and are subject to various assumptions, risks and uncertainties including specifically, and without limitation, those set forth in Part I, Item 1A "Risk Factors" of the 2015 Form 10-K. Accordingly, actual future events or results could differ materially from those contemplated by the forward-looking statements. The Company assumes no obligation to update or provide revision to any forward-looking statement at any time for any reason.
The Company and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the Company`s stockholders in respect of the 2015 annual meeting. Ethan Allen has filed with the U.S. Securities and Exchange Commission a definitive proxy statement and an accompanying white proxy card in connection with the 2015 annual meeting (the "2015 proxy materials"). The 2015 proxy materials contain important information about the Company, its directors and executive officers, the 2015 annual meeting and related matters. Stockholders are strongly urged to read the 2015 proxy materials, any amendments and supplements thereto, and the accompanying proxy card carefully. Stockholders will be able to obtain free copies of the 2015 proxy materials and other documents filed with the SEC by the Company through the web site maintained by the SEC at www.sec.gov and on the company`s web site at http://www.ethanallen.com/en_us/investor-relations1.html. Information regarding the identity of potential participants, and their direct or indirect interests, by security holdings or otherwise, are set forth in the 2015 proxy materials.