Ethan Allen reports plans to improve vertical integration operatoins
Ethan Allen Interiors announced plans to further improve its vertical integration operations with the following initiatives. The 550,000 sq. ft. Old Fort, NC plant, while maintaining a lumber processing facility, will be converted into a state-of-the-art distribution center to support the company's national distribution structure and growing U.S. government GSA contract business. Consolidating U.S. case goods manufacturing to Vermont. This involves consolidating approximately half of the case goods manufacturing at the Old Fort, NC plant into the company's case goods plants in Orleans and Beecher Falls, Vermont, which together have approximately 1.0 million sq. ft. of manufacturing space, with the balance of the Old Fort manufacturing to be consolidated into the company's other case goods manufacturing facilities. The company's U.S. upholstery manufacturing has previously been consolidated to our Maiden, NC campus where it has three plants totaling 714,000 sq. ft. "We are in the process of expanding the campus with the addition of 80,000 sq. ft. at an investment of approximately $5M," the company said. The distribution operations at the company's 250,000 sq. ft. Passaic, NJ facility will be moved to its operations in North Carolina and the art framing operations will be outsourced. As a result of these initiatives, the company expects to incur restructuring and other consolidation costs of approximately $7M-$8M of which approximately 40% is expected to be non-cash asset impairment charges, primarily during the fourth quarter. In addition, the company will also make related capital investments of approximately $8M, which includes the expansion in Maiden, NC, over the next twelve months. The company expects these changes will provide an opportunity to benefit gross profit by $5M-$6M during fiscal 2020 and beginning in fiscal 2021, after the completion of these initiatives, provide the opportunity for a 100 to 200 bps improvement to gross margin. ""These decisions are not easy, especially as they affect approximately 325 of our associates in Old Fort, NC and 55 associates in Passaic, NJ," said Chairman, President and CEO Farooq Kathwari.