August 26, 2015
The Board of Directors
Ethan Allen Interiors Inc.
Ethan Allen Drive
Danbury, CT 06811
Attn: Farooq Kathwari, Chairman of the Board, CEO and President
Ladies and Gentlemen:
Is there a link between intelligence, knowledge and successful investing? At first glance, it might appear as if there is. Wall Street is known for only hiring the best and brightest. However, some of the world’s most successful investors didn’t attend the world’s best universities and don’t claim to have a higher than average I.Q. Read More
As you know from our August 14th letter to Farooq Kathwari, we are significant shareholders of Ethan Allen Interiors Inc. (“Ethan Allen” or the “Company”). In the letter, we noted our belief that a combination of sub-optimal fiscal policies and inefficient allocation of shareholder capital has resulted in the Company`s stock trading at a significant discount to its intrinsic value and has contributed to years and years of stock price underperformance. Additionally, we made very clear our concerns regarding the August 12th revelation in Ethan Allen`s 10-K that the 2015 Annual Meeting of Shareholders (the “Annual Meeting”) was being accelerated to October 15. Fortunately, following our publicly-voiced concerns, the Company moved the date for this meeting back to November 25.
We were initially encouraged by Ethan Allen`s decision to re-schedule its Annual Meeting to a date that was more consistent with its longstanding practices and reached out to the Company`s CFO Corey Whitely on August 14 seeking to enter into discussions with the Company. We were subsequently taken aback by the e-mail that we received from Mr. Whitely on August 18 indicating that the Company does not intend to speak with us until “later in September after Labor Day,” a delay of more than three weeks. We find this refusal to engage in any dialogue with us for such an extended period of time to be irresponsible and possibly reflective of a strategy to play for time.
As we had stated previously, we are fully prepared to nominate a slate of director candidates to stand for election at the Company`s Annual Meeting and, as you know, the nomination window opens today and runs through September 25. While we prefer to reach a cordial resolution addressing our concerns and avoid the need for a proxy contest, this requires the Company to engage in a timely and robust dialogue with us. We do not view waiting until the second week in September as timely by any stretch of the imagination. Should the Company, like us, prefer to resolve this matter without the distraction and expense of a proxy fight, we ask it to enter into discussions with us immediately. If the Company refuses to do so until the second week of September, we will have no choice but to proceed with plans for a public solicitation of proxies, which will no doubt serve to decrease the chances for a negotiated settlement.
Thomas E. Sandell
Chief Executive Officer