Corey Whitely - EVP, Administration and CFO Farooq Kathwari - Chairman and Chief Executive Officer.

Jessica Mace - Nomura Securities Bobby Griffin - Raymond James Brad Thomas - KeyBanc Jeremy Hamblin - Dougherty & Company John Baugh - Stifel Kristine Koerber - Barrington Research Cristina Fernandez - Telsey Advisory Group Justin Bergner - Gabelli & Co.

Good day, ladies and gentlemen. And welcome to the Ethan Allen Fiscal 2015 Fourth Quarter and Yearend Earnings Conference Call. Now, I will introduce your host for today’s conference, Mr. Corey Whitely, Executive Vice President, Administration and CFO. Please begin..

Thank you, John. And good afternoon, everyone. Welcome to Ethan Allen’s earnings conference call for our fourth quarter and fiscal year ended June 30, 2015.

This telephone call is being recorded and webcast live on ethanallen.com, where you will also find our press release, which contains supporting details, including reconciliations of non-GAAP information referred to in the release and on this call.

As a reminder, our comments today will include forward-looking statements that are subject to risks and uncertainties, which could cause actual results to differ materially. Please refer to our SEC filings for a complete review of those risks. The company assumes no obligation to update or revise any forward-looking matters discussed during this call.

Also joining the call today is John Bedford, our Vice President of Corporate Controller. After our Chairman and CEO, Farooq Kathwari, provides his opening remarks, I will follow with details on the financial results. Farooq will then provide further updates on our ongoing business initiatives before opening up the telephone lines for questions.

With that, here is Farooq Kathwari..

in the fourth quarter comparable written sales increased by 10.4% and total written by 11.2%. Gross margin increased to 54.9% from previous year of 54.6% mainly due to efficiency at the wholesale level. Adjusted operating income of $19.8 million and 10.3% of sales. Adjusted EPS of $0.43 versus $0.50 last year.

During the fourth quarter increased dividends by 20% from previous year and in April 2015 increased dividends by 40% from previous year. For the fiscal year sales of $754.6 million, gross margin of 54.5%, adjusted operating margin of 9.3% of sales and comparable written in Retail division increased to 4.4%.

We strengthened our balance sheet by redeeming $129.4 million of our bonds, invested $21.8 million in capital expenditures. We are gratified at our financial results and the implementation of many important initiatives. We have the opportunity to further improve our financial results with increase in sales.

After Corey gives the brief financial overview of the quarter and the year, I'll give more details about our business initiatives.

And Corey?.

Thank you, Farooq. We are pleased that despite a major disruption due to the transitions we went through during fiscal 2015 that we ended the year relatively well.

Our fourth quarter fiscal 2015 consolidated net sales of $193.6 million, decreased 2.6% compared to the fourth quarter of fiscal 2014, we have most of the record prior year 9.1% increase that we are up against.

The full fiscal year of 2015 consolidated net sales were $754.6 million, an increase of 1.1% compared to $746.7 million in fiscal year 2014? The consolidated gross margin of 54.9% for the fourth quarter of fiscal 2015 improved from 54.6% the prior year fourth quarter primarily benefiting from improved efficiencies in our manufacturing that offset the clearance sales negative impact on retail gross margins.

The Retail segment net sales for the fourth quarter were 78.5% of consolidated net sales. That compared to 78.3% during the fiscal 2014 fourth quarter. The fiscal year gross margin was 54.5% compared to 54.4% the prior fiscal year to date period.

Consolidated operating income for the fourth quarter was $18.6 million with an operating margin 9.6%, that compared to $24.3 million in the prior year fourth quarter with an operating margin of 12.2%.

The 2015 year-to-date operating income was $65.9 million with an operating margin of 8.7%, compared with operating income of $69.6 million with an operating margin of 9.3% in the prior year-to-date.

Consolidated adjusted operating income for the fourth quarter was $19.8 million with an adjusted operating margin of 10.3% compared to $24.9 million in the prior year fourth quarter with an adjusted operating margin of 12.5%.

Adjusted operating expenses in the fourth quarter increased $2.6 million over the prior year fourth quarter primarily by increased advertising media spend and other additional expenses at retail.

Year-to-date adjusted operating income was $70.5 million with an adjusted operating margin of 9.3% compared to $74.3 million with an adjusted operating margin of 9.9% in the prior year.

Wholesale division net sales for the fourth quarter increased 0.2% and generated adjusted operating income of $17.8 million for an adjusted operating margin of 15.3% compared to 12.3% operating margin for the fourth quarter fiscal 2014.

Year-to-date Wholesale division net sales increased 3.5% and generated adjusted operating income of $68.4 million for an adjusted operating margin of 14.6% compared to 12.7% in the prior year period.

Retail division net sales for the fourth quarter decreased 2.3% and produced adjusted operating income of $3.4 million for an adjusted operating margin of 2.2% compared to an adjusted operating margin of 5.6% for the fourth quarter of fiscal 2014.

For the fiscal year, Retail division net sales decreased 0.2% and generated adjusted operating income of $4.9 million for an adjusted operating margin of 0.8% compared to 2.6% adjusted operating margin in the prior fiscal year. Retail division comparable net sales increased 0.7% for the fiscal year.

Total comparable written orders by the Retail division for the fourth quarter of fiscal 2015 increased 10.4% compared to the fourth quarter fiscal year 2014 while total written orders increased 11.2%. Year-to-date fiscal 2015 comparable written orders increased 4.4% and total written revenue orders increased 3.9% compared to fiscal year 2014.

The Retail segment undelivered backlog at June 30, 2015 increased 18.6% compared to June 30, 2014.

The Retail division operates a total of seven design centers in Canada and Europe and the strengthening US dollar resulted in the decrease in net sales, written orders and comparative written orders for the retail segment of 27% during the fourth quarter. The Company's consolidated net sales for the fourth quarter were also negatively impacted 0.5%.

Our global network includes a 299 design centers at June 30, 2015 compared to 295 in the prior year. The Company operated 144 design centers including seven international locations and our independent retailers operated the 155 design centers including 97 international locations as of June 30.

This compares with a 143 company operated included eight international locations and 152 independently operating including 91 international locations last year. Our global retail network had a total of 104 international locations at June 30, 2015 and 99 in the prior year.

For the fiscal year 2015, international sales accounted for 11.6% of our consolidated net sales compared to 10.6% in the prior year. Adjusted net income for the fourth quarter was $12.3 million or $0.43 per diluted share compared to $14.6 million or $0.50 per diluted share in the prior year fourth quarter.

Adjusted net income year-to-date was $41.2 million or $1.41 per diluted share compared to $42.6 million or $1.45 per diluted share in the prior year.

Our adjusted results in the fourth quarter of fiscal 2015 exclude $1.3 million expense associated with the disposition of real estate, the prior year fourth quarter included $0.6 million in international start up costs. Our normalized income tax rate for both the current and the prior year was approximately 36.5%.

Please refer to our press release for conciliation tables showing the adjustments made to our results for all periods. GAAP net income for the quarter ended June 30, 2015 was $12.7 million or $0.44 per diluted share compared with $17.1 million or $0.58 per diluted share in the prior year quarter.

GAAP net income for the year was $37.1 million, or $1.27 per diluted share compared to $42.9 million or $1.47 per diluted share in the prior year. Our effective tax rate was 30.1% and 34.5% for the three and twelve months ended June 30, 2015 compared to 23.9% and 31.2% for the three and twelve months ended June 30, 2014.

We strengthened our financial structure during the fiscal year and our balance sheet at June 30, 2015 is healthy. During the fiscal year we put in place a new $150 million credit facility and this part of our cash together with the new facility to redeem the remaining $129.4 million balance of our outstanding 5 3/8% senior notes.

At June 30, 2015 there was $75 million outstanding under our credit facility together with $0.2 million of standby letters of credit leaving $74.8 million of availability. The annual interest rate in effect on the credit facility is currently slightly less than 2%. For fiscal 2015, we generated $51.1 million of cash of operations.

Our total cash and security at June 30, 2015 totaled $86.4 million, a decrease of $49.4 million compared to June 30, 2014 mostly due to the $53.3 million reduction in debt. For the fiscal year, we also paid out dividends of $13.3 million, an increase of 18% compared to fiscal year of 2015.

The company raised the dividend by 20% in Q1 of fiscal 2015 taking out from $0.10 to $0.12 and again by another 17% as announced in April taking the dividend to $0.14 per share. The fiscal year after completing the new credit facility and retiring the senior notes, the company resumed at stock repurchase program.

During the fourth quarter, we utilized $13.7 million to purchase [542.1, 000] shares. For the fiscal year, we utilized $16.5 million to repurchase [645.8, 000] shares. Of the 3 million shares we purchased authorization recently authorized by the Board of Directors, the total open repurchase authorization at June 30, 2015 was 2.5 million shares.

We plan to continue to enhance long-term shareholder value by continuing to invest into our infrastructure, payment of cash dividends, and repurchase of our stock. Our fiscal year 2015 capital expenditures and acquisitions totaled $21.8 million compared to $19.3 million in the prior year.

We expect total fiscal year 2016 capital expenditure of $22 million to $25 million as we continue to invest in new technology in the retail and wholesale segments, as well as incur capital expenditures related to improving and growing our design centers. Total fiscal year 2015 depreciation of $19.1 million increased $1.2 million from fiscal 2014.

We expect total year depreciation and amortization for fiscal 2016 of $20 million to $21 million. Inventory of $151.9 million increased as planned by $5.6 million from June 30, 2014 as we continue to maintain an in stock inventory program at the wholesale level for many of our new products. With that I'll pass it back over to Farooq..

Yes. Thank you, Corey. As I mentioned we made much progress in fiscal 2015 and continue with initiatives in fiscal 2016. In fiscal 2015 we introduced strong product programs. The Phase 2 produce perceived in May and June 2015 by our retail network received good customer reaction.

We introduced Phase 3 of our product introduction early this month to our retail network and planned consumer introduction later this fall and early next year. We've continued to strengthen our interior design network by strengthening management and qualified interior designers.

During fiscal 2015, we also opened up new design centers including in Chattanooga, Tennessee, Charlotte, North Carolina, Marlton which is a New Jersey, Redding California;, Las Vegas, Nevada; Pittsburg, Pennsylvania, second location in Dubai. The first location in Doha, Qatar. A third location in Manila, Philippines, plus 17 locations in China.

We also plan to open new design centers, these are all in under construction or in plans. In Wichita, Kansas, is actually open --already open last weekend.

Pittsburg, Pennsylvania with a relocation, a relocation Hyannis, Massachusetts, in Cranston, Rhode Island, a new one Toledo, Ohio, a relocation in Columbia Maryland, a relocation in Dublin, California in the San Francisco market. A relocation in Rockville, Maryland as a greater Washington market and several more internationally.

And also I am very pleased that we are -- we have signed lease for our second major location in Manhattan, that's in the flatiron area, the downtown and plan to open in early 2016. Our focus continues on a prudent basis to relocate our design centers to more appropriate locations with a smaller footprint.

And dispose of those properties that we own and which no longer meet our future focus. Since 2010, we have generated $35 million through sales of our real estate. We have continue to invest and improve our capabilities in our North American manufacturing with about 70% of our furniture products made in our workshops.

We continue a strong focus on investing in technology in various parts of our vertically integrated enterprise. During last year, we made investment in manufacturing and continue to make major improvements to our website and technology at retail. Our competitive advantage is further enhanced by combining great personal service with technology.

During the year we focused on refining and accelerating our message in various medium including direct mail, digital advertising, and print and importantly with a launch of our 324 page Muses book.

As I stated in our press release, we are well positioned to grow our business on a sound footing by investing for the future consistent with our expressed goal of sustained, long-term growth for the purpose of improving well being of our all stakeholders.

Since 1993 when we took the company public after a management led leveraged buyout, we have been able to invest and return to stockholders.

$740.2 million in capital expenditures including in manufacturing, technology and real estate, repaid $391 million of debt, paid cash dividends of $348 million and repurchased 18.8 million of shares for $549.2 million.

We are positioned well to grow our sales and profits and expect to continue with healthy long-term stockholder returns and look forward to our progress in fiscal 2016 and beyond. We are now open for questions and comments.

John?.

[Operator Instructions] So our first question comes from Jessica Mace from Nomura Securities. Jessica, your line is open. .

Hi, good afternoon, everyone. My first question on the overall environment. And I was wondering if you could maybe distinguish some of the impact you saw in a retail business from a promotional environment and what came from the disruption in your business with related to the transition. .

Our business has been impacted first positively with introduction of new products. But at the same time, it has been negatively impacted with the sell off the product the floor samples and other discontinued inventory.

So I would say that the overall environment, if you are talking about the quarter, I think we had gradual improvement and lot of improvements took place in June when most of our new products of Phase 2 had been received and we started some good reaction to it in the month of June. .

Understood.

And then as far as Phase 3 you mentioned that product line would be introduced to consumers in the fall as well as into the beginning of next year, do you still think that the six months timeframe for the transition that you provided last quarter is still reasonable way to think about how long this impact will last?.

Yes. I would say that we have continued to look at our offerings very critically and to see what -- how we can must remain relevant for the future. So this third phase is also very, very important. And we just going to be -- is very well received by retail network, extremely well received I would say.

And we will start marketing it in the -- towards end of the fall and also by January of next year. So I think we will continue to see impact of clearance from our -- from the floors of our retail network..

Okay. And then just finally on your marketing plans.

Is there anyway you can quantify for us where you expect roughly marketing to be next year versus the levels this year?.

Yes. I mean this last quarter our advertising is about 4.2% versus compared to 3.6% that we spent in the last year quarter. So I think that as we move forward it will range between 4% and 5%. I would say maybe 4.5% or in that range but between 4% and 5%. .

Thank you. So we will take our next question coming from Budd Bugatch from Raymond James. .

Good afternoon, guys. This is Bobby filling in for Budd. I appreciate you are talking my questions and congratulation on a continued progress with the new product introduction.

Real quick, Farooq, could you maybe comment a little on product mix with the new offering and are you seeing any shift in consumer behavior between an upholstery goods and accessories now that you have two phases of the new offering and put into the model. .

Overall in the last 8-10 years the upholstery has shown a greater increase and it continues that way. However, with the introduction of the new products, we are starting to see some improvements in our case goods but also lot of improvements have come in our accent programs both in terms of sales and margins.

So we are going to continue to see some improvements in case goods and more improvement in upholstery and accent..

Okay. Thank you for the detail and could you maybe comment on how Phase 1 and Phase 2 products are now doing on the manufacturing side of the business? I know they initially start off with the few disruptions but can you kind of talk about the progress on now that those have been introduced for a while. .

Well and a good news is this fact we have done better than our expectations in managing this change. If you take a look at our results our margins improved in our wholesale substantially and that was due to the fact of absorbing a lot of these changes, we've learned to absorb things I think better and also technology is helping us.

All our investments in technology, in our manufacturing have made the changes I think more palatable and in fact we've increased -- we increased our margins at the wholesale level. And lot of this came for efficiencies in our manufacturing. And keep in mind we were still not as efficient as we could be because we have lot of disruption. .

I appreciate that color and best of luck next year. .

Thank you. And the next question comes from Brad Thomas from KeyBanc Capital Market. .

Hi, Farooq. Hi, Corey. Yes, Brad Thomas from Keybanc. I wanted to just follow up about the recent trends, certainly when we are out in your stores we hear favorable things about the new merchandize and I think it does look very good.

Your written results do tend to be somewhat volatile, could you maybe help put into context 10% written results that you saw this past quarter and were there any other factors like price increases or timing of the quarter it might have affect things beyond just better receptiveness to the new merchandize. .

Well I would say that most of the increase did come towards in the month of June. And the results and the fact is were the new products to some degree also we had a small price increase this year in July and last year it was in August although part of that did benefit last June.

However, we did get a little benefit of that I would say in this June because of the fact that the -- some of our price increase took place somewhat earlier. But I think a lot of that increase is due to the fact of our new offerings making an impact..

That's great. And then with respect to share repurchase, I think this is one of the bigger quarters that we've seen in a while for share repurchase activity. Any reason for why that was the case and could you give us a little bit more color maybe on what your appetite will be going forward for more repurchase activity. .

Yes. Brad, you know we wanted to first make sure that we redeem those bonds that were out there. And we had to also get new line of credit. So all of that was done in this past quarter and I felt that until we have redeemed all our bonds, got a new line of credit, it was not wise for us to go and make some big purchase, repurchase of our stock.

We've done enough of it. We bought over 18 million shares. So we felt more comfortable and towards the end of the quarter we repurchased the shares. .

Great. And then another question on capital structure if I could. You obviously referenced having sold storage in the past where they weren't necessary, you all obviously own a large number of stores and another facility.

Maybe could you talk about strategically or from a capital perspective, why you'd like to own the property that you do own?.

We are very fortunate that we own all these properties.

And if it wasn't for all these properties that we owned, you know we are in a cyclical business and the great recession really hit it hard when our operating income went from $145 million to almost zero and our salesmen done 40% unimaginable, if it wasn't the fact that we owned all those properties, I mean we think we would have had a pretty, rough, rough, even -- I mean I do not know what the future would have held.

Anyway, our properties are important but they are also many of them are also in the stage of transition. Keep in mind we had 30 manufacturing operations only 20-25 years back. And now we have eight, the rest we have sold and disposed off.

We have on a plan basis we have been selling our retail and lot of these retail, Brad, that we acquired were from our retiring retailers. So we purchased their properties because we bought their businesses. And many of these locations were what you might call free standing destination locations.

Today, we are moving more and more into smaller locations and in locations that are much more relevant for today in terms of their proximity to the right kind of traffic. And practically all of them are leased. So on a plan basis as we find new locations with smaller footprints we are moving them into smaller locations.

For instance if you take a look at the last year with Chattanooga, we used to have 15,000 square foot free standing location. Now it is 6,000 square foot in the lifestyle center. In Marlton, New Jersey, we had a 15,000 to 16,000 square foot, now it is leased close to 8,000 to 9,000 square feet.

We used to have in Pittsburg 16,000 square foot owned property which we sold, replaced with about 7,000 square foot lease space. So similarly the property for instance that we are now in the process of -- another one in Pittsburg that we just the process of selling it and relocating it to a lease property.

Similarly we are just in the process of under construction in Toledo, Ohio from a 15,000 square foot to a 6,000 square foot. And others are of course lease properties that we are relocating.

So on a plan basis our strategy continues to be to sell those properties which strategically are not right for us and then move them into more viable locations and then dispose off as we have been doing. As I mentioned in the last few years we got over $30 million - $35 million proceeds from the sale of our real estate. So we will continue with that. .

That's great. And just follow up on real estate.

How many domestic design centers do you think you will have at the end of this year? Are we going to be growing them in the year ahead?.

Yes but our main focus really has been in position them in the right places. Like for instance, we are going back into markets which number of years we gave up because we had 15,000 -18,000 square foot freestanding like Chattanooga. We were in Chattanooga for many years.

We are now back in Chattanooga, we are going to back in Toledo, we just open in Wichita, Kansas, these are all freestanding. So we are going to go into these markets. Yes, you are going to see an increase in our domestic design centers this fiscal year. .

Thank you. And our next question is coming from Jeremy Hamblin from Dougherty & Company. Jeremy, your line is open. .

Good evening and thanks for taking my questions, guys, appreciate it. So I wanted to just tone in a little bit more, it sounds like you saw really nice acceleration towards the end of the quarter resulting in really strong written orders as well as tremendous growth in backlog.

I don't have data going so far back on that but the 18.6% is certainly the best you have done in the last few years on backlog growth.

As I think about it in the near term and the kind of correlation between the written orders and the next couple of quarters on sale, it would make me think that you would see a fairly significant acceleration on growth that might not -- I am not saying that to expect 10% growth or something like that for the year.

But I think in the near term if you guys have retail backlogs I think it is about 6 to 10 week delivery period on those along with written orders that were up double digits.

Shouldn't that give you really good visibility into the September quarter and then with the delivery of the new Phase 3 product, should that set you up well for the first half of your fiscal 2016.

Can you maybe shed some light some color on that?.

Yes, Jeremy, It is of course good news that our retail backlog has increased. But even though it increased 18.6%, the whole quarter -- we are still depend also how well we do in July and August. But certainly it gives us a good start for this quarter. But it is not something that we can just say that absolutely it is going to mean a fantastic quarter.

I think it is good quarter but also will depend upon how well we do in July and August too..

Okay, fair enough. And I then just wanted to ask on the margin side of the equation. Your gross margins were really strong actually up more than 20 basis points from last year despite the fact that you had higher clearance and softer sales results.

Can you maybe go into that detail as to how you are able to achieve that because I think as you express you have still so many manufacturing inefficiency so I would have expected maybe your gross margins to be lower than last year.

Can you maybe help us think about that a little bit?.

Yes. I mean that is an important issue. And we are pleased as I said earlier that our wholesale margins as we have reported, you have seen that our wholesale margins for the three months was 15.3% as our operating margin versus 12.3% in the previous year. And for the year they were 14.6% versus 12.7%.

This is despite the fact that we still are going through the learning curve in the inefficiencies of all of these new products that are going through our manufacturing. Our gross margins at retail were negatively impacted.

That's why -- and well and the good news is that despite gross margin at retail negatively impacted which we do not give those numbers, it did have positive impact overall by gross margin increasing. If our retail did not have as much as clearance as we had, I think our margins would have even substantially increased, that's good news. .

So as you look forward on that particular line item into 2016 and can we -- you certainly are likely to improve on the manufacturing and efficiencies, is there other reason to think that we can't see improved gross margins moving forward into next year all else being able?.

No. I would say that we still have as I mentioned earlier, and Jessica has raised this question, we still have to sell our products. Now you got to keep in mind we are changing lot of our offerings. We are going to go through Phase 3 and then we will have Phase 4.

But I cannot give you -- I could not give all of these phases to our network and everybody at one time to scare everybody. But we are making changes. So in the next year while we expect to do well in our margins at wholesale and most probably somewhat improved retail margins too.

But we are still going to be affected by the sell of our products in the next one year. So then after that I think we will not -- I don't hope to have as much of a disruption as you had last year and this fiscal year. .

Great. And then just on the flip side of that on your operating expenses. You are seeing some fairly significant de-leveraging in that despite the fact it doesn't sound like your advertising expenses up about $1 million year-over-year.

Can you help us think about that line item going forward and whether or not you kind of have three consecutive quarters of de-leverage on an adjusted basis for operating expenses.

Is that something where we would expect that to be more contained moving forward into next year?.

Yes. I mean overall, our expenses, if you take a look at on adjusted basis we are somewhat up about almost 3% and lot of that was due to the fact of our investing in our management and strengthening our retail division which is very, very important. I am very pleased that we've strengthened the lot of people in there.

And our management and the good news is I think that, that as we move forward we will not have a lot of more of that expense. So lot of that other expense that we are going to have will be all variable based upon increasing sales. And even the advertising as I said it was -- it did increase about $1 million as you mentioned.

I think that going forward operating around 4% -4.5% of sales will give us more advertising dollars and hopefully on larger sales. .

Okay, great.

So it sounds like the historical contribution margins of 30% to 40% if sales increased would still hold true than moving forward?.

That's right. Yes, and if you go to our opportunity scenarios that we did many years back. We are sort of following it pretty close with the $800 million level. .

Thank you. And our next question is from John Baugh from Stifel. Mr. John, your line is open. .

Hello, Farooq. Hello, Corey. Thanks for taking my questions.

A lot of them answered already but just digging in on the -- I guess the last question and maybe getting a little more help, if you want to pass it out for the next six months versus the latter six months of fiscal 2016 that's fine, but just kind of wondering if you look at wholesale and the retail how much impact is going to be from these phases, if you could give us some kind of help overall how to think about the way for the year unfold, that would be great.

Thank you..

John, that's a big question but let me just try to answer it. I believe that in the next six months we will have as I said we have the opportunity obviously of increasing sales. And increased sales have the positive impact on our gross margins.

On one hand on the wholesale side we are improving our efficiencies, on the retail side we still have to get through to these sell of these products. So and then on the other hand as I said we are very much in control of our operating expenses.

So the opportunity is to somewhat improve our operating margins even keep in mind this last having an operating margin of 10.3% is a pretty good margin at any level. So I think that we have an opportunity of somewhat improving it although it is pretty good, John, where we are. .

Okay. So and but could we expect a second half of the year EBIT to be stronger than the first half, obliviously contingent on house sales fall out I understand but just in terms of maybe disruption retail side also clearance and manufacturing start up et cetera. .

Yes, John, I think that's a fair statement, yes. .

Okay. And then on the share buyback, is there kind of -- you are sitting here essentially with net debt at euro and I was just curious whether there is any appetite to put on some amount of leverage or you are more or less just use the free cash flow you generate to buying stock and trying to stay essentially debt free. .

John, we are looking at different options. As you know, we have been fairly aggressive. I would almost say we are pretty strong activist ourselves in terms of the amount of stock that we have purchased, 18 or 18 million shares. We purchased -- we have given out tremendous amount in dividends.

So we will continue to be prudent but aggressive as we've done in the past. And we will consider whether it will make a sense to give a dividend rather than buy us -- keep on buying stock. We are going to look at all options. .

Okay.

And are you -- I think I heard the CapEx more or less matching DNA, would be there any expectation on working capital change this coming year or that be fairly consistent with the past performance?.

I think we are pretty consistent. .

Thank you. And our next question is from Kristine Koerber from Barrington Research. .

Hello. And couple of questions.

First, did you state that you just took price increase with this month?.

We did. We took about 3% to 4% increase, yes. .

Okay. I just want to make sure is it this July or not? Your guide, believe you said last August correct in a year go period. .

That's right, yes. .

Okay. And then as far as the real estate just a follow up on that.

I mean how many more real estate locations do you expect to dispose over, how many do you have about could be potential smaller boxes and smaller design centers that are leased?.

Well, it is hard to sort of give any numbers because this is a moving target. We take a look at our opportunity in many cases we have leases but of course I think you are referring to the once we owned most probably. .

Correct..

Yes. I think that it is -- we look at our properties to see how many properties that in the next 10 years or so that we could possibly will could be moving and most probably it is possible that depends on lot of circumstances but $70 million -$80 million worth of properties could be sold and relocated. .

Okay. And you said over the next decade..

That's right. It could again it depends on availability, it depends on all kinds of factors but it could be sooner too but I think in the next 10 years we have an opportunity of selling off $75 million to $80 million on a planned basis of a gain destination locations and moving them into more what you might say relevant locations for today..

Okay, that's helpful, thank you. And then can you quantify or just tell us where you stand with selling off some of the old product? I mean were you kind of on plan for the fourth quarter as far as clearance and what sort of discount are we seeing the 60% level..

As you know, we don't have outlet centers. So we have to sell it through our own design centers. And in sometimes we use our service centers that are our retail warehouses to sell. So it is sort of a longer process for us.

And I would say that this process will continue and it is important but not material as we move forward on the plan basis, we are able to sell it off. .

Okay.

But you did indicated continue for the next -- at least next quarter or two, correct?.

That's right. At least for the next six months and then after that I think it will -- we expect to taper off quite a bit. .

Okay and then did you also indicate that there is going to be Phase 4 product offering?.

There are always new products offering. You got to keep in mind but yes the Phase 4 will be a process continuing with this repositioning of our products into what we call classics that are fashionable, that are relaxed, that go from the somewhat more you might say the formal to the casual. So our Phase 4 will focus more on the casual side.

Because right now the Phase 2 and Phase 3 have been somewhat more you might say formal but again the formal relax. So Phase 4 is more of a casual side. .

Okay that going to continue with the calendar 2016?.

That's right, yes..

Thank you. And our next question is from Cristina Fernandez from Telsey Advisory Group. Cristina, your line is open. .

Hi, good afternoon, Farooq and Corey. I wanted to ask about your comment last conference call that you had move to two monthly events from one.

Has that brought more traffic and consistency in sales throughout the month?.

It is -- it has but again we have to -- as we move forward we have to vary it. Because what happens is if you make it too predictable then we end up by seeing that people wait. So we are going to keep on varying it. And certainly the ends of the month are still very, very important for lot of reasons.

So lot of our business does come at the end of the month even though we do make it to vary it and that's why we did in some months. We do have a stronger ending in the middle of the month too..

So far in July have the strong -- trends that you saw and the second quarter have those continued?.

It is a little bit early. The fact is that we had a very, very strong June and that does have an impact on what happens in July. So it is a bit early because we really just can't take July, July, August and September combined is what's going to tell us what happens this quarter. .

I wanted to go back to marketing.

Can you talk about the mix and digital print and TV and how your focus will be on our fiscal year 2016 versus what it was for fiscal year 2015?.

Yes. Our focus is going to be very strong in direct mail; we are actually expanding our direct mail starting actually in September. We have strong direct mail also in July and August but September; we are expanding our direct mail going from September onwards. Secondly, we are investing more in digital mediums. Digital advertising is becoming important.

Third, we are also going to on a selective basis continue with some of our print advertising in national shelter magazines. And fourth is, on a very focused advertising on national television. .

Thank you. And then one last one, as far as your CapEx spending, how much of that is stores versus technology and e-commerce and should we expect any changes to your website or e-commerce strategy over the next 6 to 12 months? Thank you..

Yes. We expect to spend between $20 million - $25 million this next fiscal year. And we are spending money and improving our website and all technology. In fact, we have lot of technology in our retail network from tablets to our designers to touch screen, so we are investing in those.

And we have a great focus on improving our digital mediums, our e-commerce and to see how we can combine our ecommerce business with the business that we do through our interior designers. So you are going to see much more focus on that. .

Okay. Assuming we are ready for our next question. So we will take our next question and final question from Justin Bergner from Gabelli & Co. Justin, your line is open..

Good afternoon, Farooq. Good afternoon, Corey. Quick question on the real estate.

Does $35 million that has been generated since 2010 or the $70 million to $80 million that might be generated sort of over the next decade, would you sort of care to share how many locations those numbers will correspond to?.

I'll tell you with this -- let's see whether we want to give that information make it public and if we do then we will share with everybody..

Okay, great.

And what was the real estate disposition cost this quarter the $1.3 million exactly?.

That was net loss on the disposition of the assets. .

Again some of these -- this happen to be a retail or -- the retail location, yes, again some of these locations that we've had and we are moving them and in many cases we sell them at a loss but of course we do cash and then we get the tax benefit. .

Sure. And then switching gears to your international sales, I mean they are becoming a more meaningful component of the total and certainly of the wholesale portion.

Are international sales accretive to your wholesale margin for the most part?.

Yes.

Absolutely because any business almost all business internationally is done with our licensees, so it has an impact on positively on our wholesale and keeping in mid all the business that we do with our own retail network that has a similar impact on our wholesale margins as long as it is sold to a final customer, any business that we do it our own retail network in North America, all of that really helps the wholesale margins whether it is done through our retail network domestically or internationally.

.

Got it. One more question if I may. On the SG&A front, it seems like your earlier comments are suggesting that the SG&A level that maybe that the total SG&A level for the just completed fiscal year with that $345 million.

Is that's a reasonable base off of which one might grow off into then coming fiscal year or is there anything that you would single out on the SG&A side, that's unusual in the just completed fiscal year that we should sort of think will go away. .

No. I don't think in any unusual but basically what other than what we have eliminated due to sale of -- sometimes our real estate is part of our SG&A, so you got to take out our -- in our SG&A we have to take out these extraordinary cost related to our retail real estate, loss or gain is part of our SG&A.

So that you have to exclude and that's what we exclude in our numbers when we give you the adjusted operating margins.

I think what we can say is this that other than this real estate which is extraordinary expense or income, our expense structure is pretty good, I would say it is pretty -- in a good position right now and any increase would basically reflect a variable cost. For instance our delivery costs, our cost to our associates in selling of the products.

So the variable cost would increase and some might decrease if it goes down but it would increase on a variable level. Overall, I think we are in a pretty good shape. .

Thank you. So I am showing no further questions in the queue. I'd like to turn it back to your host for any concluding remarks..

Thank you very much. Any questions, comments, please let us know. .

And ladies and gentlemen, this does conclude your conference. You may now disconnect. And have a great day..