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Retail, Retailers

Farooq Kathwari Details Ethan Allen Action Plan in Response to COVID-19

The head of Ethan Allen outlines drastic steps for dramatic times for the nationwide retailer.

4/1/2020
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DANBURY, Conn. -- Ethan Allen Interiors today announced its action plan in response to the Covid-19 health crisis.
 
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," Kathwari continued.
 
"We are taking a major workforce reduction through temporary layoffs," he continued. "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," 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.

Ethan Allen design consultants will work remotely utilizing the Ethan Allen inHome augmented reality app, the 3-D room planning tool, Skype and FaceTime.

Operations
 
Ethan Allen has taken the following operational actions:
 
The company's design centers, which were originally planned to be closed from March 19-27, 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 company has furloughed approximately 70 percent 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 percent for all senior management and up to 20 percent for other salaried employees through June 30, 2020.
 
-The company's Board of Directors will reduce their cash compensation by 50 percent 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 30, 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.
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