Good morning, everybody, and welcome to our 2018 shareholders meeting. We are also today very pleased to have our members of our board here with us today. We have Domenick Esposito, we have Tara Stacom, we have John Dooner, we have Jim Schmotter, we have Jim Carlson. That is our full board. Mary Garrett. Where are you, Mary? We got all the board members here. What I would like to do is today, I would like to give a very brief overview about our business, then we will go and discuss our various elements of our shareholders meeting. For fiscal 2018, we had sales of about $767 million, a little bit higher than fiscal 2018. We had an operating margin of 6.5%.
It was lower than last year due to many factors, especially in terms of, which I will talk about later, getting a fairly major investment in government contracts. Our EPS of $1.35 was pretty close to what we had last year. We did benefit from the reduction in the taxes. We will continue to generate good cash. We continue to pay strong dividends. In fact, our dividends last year increased by 47%. We also purchased $22 million of our shares, we maintained capital expenditures at about $18.8 million, about what we have been spending in the past year. Basically, we had no debt. We are positioned for growth. In fact, last week, we had our annual convention with about 550 of our team members here, we discussed many of our growth strategy opportunities. We have, in the last few years, continued to make good progress.
Our products are relevant. About 70% have changed in the last three years. We are the world's leading interior design destination. We are leveraging our vertical integration. We are a vertically integrated enterprise. We have focused on increasing marketing. We are enhancing technology. In addition to our retail network, we are also expanding in international government and contract business. We have, and we continue to have, a strong focus on social responsibility. As I said, 70% of our products have been refreshed in the past three years. They are relevant, they are fashionable, they are spanning multiple styles. In fact, as you know, we are known for classics, but today, classics have to have a modern attitude. If you come to our design centers, you will see that attitude there, and also in all our communications. We continue to leverage our vertical structure.
That is what 75% of our products are made in our own workshops in North America. We continue to improve our product offerings. In fact, last week, we introduced new products to our Ethan Allen collection, which will be launched in the spring of 2019. As you can see in the last three years, you are sort of familiar with it, that we have continued to add products that are under this umbrella, are being classic, but with a modern attitude. Today, also, lifestyles are such that even so the so-called formal has to be livable. That is what we have been doing in terms of the products that we have been introducing. We have continued in 2017 with products, again, following this whole attitude of being classic and livable. In 2018, we had very strong product introductions.
All of this also had implications in our manufacturing, in our tooling, in our selling of the products from the floors, which were the positives, that we have a strong product program. The impact was that it did have some impact on our margins because of the fact of selling off as much of products from the floors that we had to do in the last two years. The good news is we are almost towards the end of that. We just introduced product programs that are going to be in the spring of 2019. We'll be marketing them. Very well received by network last week. As I mentioned, we are the world's leading interior design destination. We have about 200 design centers in North America. We have 1,500 interior designers in North America, and 2,000 network-wide and internationally, the rest of them.
In addition to these 1,500 who work directly for our network, we have about 8,000 interior designers who are affiliated with us, who come and utilize our products and work closely with our in-house interior designers. Today, we are combining personal service and technology, very critical. Over the years, we've continued to reposition our design centers. We are reducing the size from an average of 16,000 square feet to about 10,000 square feet, and the new locations are leased in high-traffic town centers and lifestyle centers. Lifestyle center is about 8,000 square feet. Our classic design centers, this is what we had previously. This opened in the 2016 and 2017, averages 15,000 square feet. Before the Great Recession, we also opened up design centers in 18,000-25,000 square feet.
As you can see, 68% of our design centers in North America are new or relocated in the past 15 years. This has been a major focus, and extremely important in our repositioning. Right now, for instance, recently, we opened one, a number of them, but this is in Buckhead, Georgia. We opened in Chicago. We opened also in Calgary, Canada. Right now, under construction is Albany, New York. These are all independent retailers who, some of them retired. In this case, like in Albany, this family worked there for over almost 60 years. We are now relocating. It's under construction. We have just now, it should be opening next week. This is something that we built from ground up in Denver, and it's opening up next week for our consumers. Again, a relocation. Rancho Mirage in California.
We purchased this building, again, it's a relocation, and it will be opening up in the January of 2019. Under construction is also a design center. We're moving from Cedar Rapids to Coralville. Under construction, April 2019 is the date. Our manufacturing, as I said, 75% of our products are made in our North American manufacturing. It enables product customization. It also manages our inventories. Our custom quick-ship upholstery is delivered in-home within 30 days anywhere in the United States. We have a short replenishment lead time for stocked wood products. We're also now supporting the GSA, that is our State Department and the government contracts. We have seven plants in the United States and one complex in Mexico and in Honduras. We have invested and we continue to invest in technology. Keep in mind, 25 years back, we had 30 manufacturing plants in North America.
Today, these 9 plants have the capacity of producing more than the 30 plants that we had 25, 30 years back. Our logistics is tremendously important because we deliver our products at one cost nationally. As you know, in our business, logistics is tremendously important. Managing returns, managing service is critical. We do have a world-class logistics structure. We have a strong network in terms of from trucking to parcel shipping. We are C-TPAT certified. We have also about 10%, 25% of our products, especially in accessories, are coming overseas. We also have international retailers, especially. We have about 85 locations in China, and most of that product is shipped from North America to China. Talent is critical. We are blessed with people. As you know, we started in Northeast Vermont, and we've got lots of craftspeople in Vermont.
In the Blue Ridge Mountains of North Carolina, that's where a lot of our manufacturing is. Talented people, long tenure. This is our team in Silao, Mexico. Went there 10 years back. We started with a 40,000 sq ft. Now we have 600,000 sq ft. We've been expanding it. About 1,000 people. Went from 90 to 1,000. Good people, we've been training them in terms of in the upholstery area, especially in cutting and sewing. In addition to Mexico, we also have one in Honduras, which we also operated 7 years back, that also is helping maintain our presence in North America. Now in marketing, our focus has been to be known and desired. We are a known brand, 86 years known.
We need to make sure that we reach, we expand the demographic base, we utilize and increase our broadcast and print, we expand digital marketing, we utilize technology to expand reach. The media mix is important, it's changing based on what we did 10, 15, 20 years back. Today, we are using direct mail. We're using magazine and New Movers. This is New Movers who are moving into markets. We have a very strong entrepreneurial marketing. Each one of our 1,200 interior designers is an entrepreneur. Their grassroots marketing is critical. Our national print is important. All the various elements, from social media to local digital, to email, to search and SEO, that is all part of our media mix. Our message in our website is important. It gets the message across of our complimentary design service. That is a great differentiation. Quality and craftsmanship.
Very importantly, our environmental and social responsibility. We want to get that. We have done it not because this is the fashion of the day. We've been doing it for the last, I would say, 86 years since the company got started. We do it because it's the right thing to do. We also are launching some initiatives to get newer people started with Ethan Allen. In fact, we just launched this in November. This says, "Get started with the best." We've taken a number of our items, let people know great offers, great savings, because we want them to know that Ethan Allen's quality is great value, and we want them to get started with it. Our direct mail is important. We last years mailed out close to 18 million copies of our direct mail. It's targeted.
It's a proven revenue generator, its prospects are conversions of higher average order value. It gets the message across. Our email blasts are important in getting, again, the messages about our interior design service, about our products, about our services, about our values. Today, digital mediums are important. Display ads, banners, all of those are where we have been investing as we move forward. Paid social, in addition to the social that our grassroots folks do, we also invest in social mediums. I mentioned the New Mover Program. Important. These are folks who just moved to their new homes. We reach them through different mediums, including direct mail. Shelter magazines. We also are in these magazines. You will see our advertising in some of the major magazines, shelter magazines around the country. We also participate in what you call designer showrooms in many parts of the country.
Our message gets across in the fact of what Ethan Allen can do today. A lot of this is done by our interior designers in the field. They then send the work that they have done. We really literally get hundreds, if not thousands, of work that they do. They share it. In fact, last week when they were all here, they even get some recognitions for the work that they do. Technology is critical. Today, combining personal service and technology, tremendous focus in all areas, whether it's in manufacturing. Our manufacturing today uses technology to make us not only produce great products, but to make it more efficiently.
Our retail, from an augmented reality to 3D Room Planner, to retail systems, all of that is critically important because we are a vertically integrated company from a concept of an idea to engineering, to design, to marketing, to retail and logistics. May I mention, this is our website. The message is getting across of who we are, what we do. Augmented reality is important, and we have been spending a great deal. In fact, a lot of our products are now available so that our designers can work in the design centers. In fact, 600 of them are chatting online, so they can help. Just to give you a little perspective, a little brief video. An important differentiation about our augmented reality is done to scale so that people can see it in scale.
Because a lot of that is not on scale, what's available outside. 3D Room Planner. We have 2D, 3D. We got whole teams working on it. We have about maybe 70% complete, and in the next few months, we are almost 100% complete. All of that can be utilized by our designers. Just give you a little bit of a brief video to show how this works. All right. Thanks, Corey. As I said, including technology and personal service is our great competitive advantage, and you're going to see more and more of us utilizing it, our designers using it. In fact, last week when we had our convention here, we had a great focus on this in sharing ideas of where we are and what we need to do.
In addition to our North America, where, of course, most of our business is done, we have about over 100 locations. These are all operated by licensees. While in the North America, most of them, 70%, are operated by the company. Of course, China has been the most important. In fact, almost 70%-80% of the product is shipped by North America to China. Internationally, they project our brand very well, whether it is in Doha, Qatar, or Korea, Kuwait, or Philippines. In fact, we are today in the process of opening one in Cambodia. Last year, we were awarded a contract by the U.S. Department of State, which is a very, very important one. We just got started, and this contract enables all American diplomats to utilize Ethan Allen furnishings. This year, we expect this to continue to grow.
We're also working with the U.S. military, U.S. Department of Defense. In fact, we just received a contract to furnish one of the fairly large complex that the military is building in South Korea. We're in the process of furnishing that big complex. We're also looking at other opportunities. Last year, we made an agreement with Margaritaville, and their first major project was in Orlando, which is about 1,000 vacation homes and a hotel, and we are in the process. We are furnishing the whole hotel and also furnishing most of the vacation homes as they are being built. With this company, we're discussing other markets around the country. I mentioned briefly about our environmental and social policies. As I've said, we've done it because it's the right thing to do.
If you also go to our website, you'll get information about the work that we have done for the last 86 years. We are in manufacturing in the Northeast, Vermont. We run a sawmill. We go to the forest. All those from there to our design centers is important. If you go to it, you can see that all the work we have done. For instance, we have reduced recently, in just the 34% carbon footprint has been reduced. Electrical usage has been reduced. Recycling has been increased. Water usage is reduced. All important aspects, whether it's a landfill or greenhouse gases. We also take this across the world. We have a compliance department that we work, for instance, with all over the world. Every company that has to deal with us has to meet certain standards, safety standards, environmental standards, no child labor.
That's tremendously important. All of that has impacted our business, our culture, and the way that we do business. Safe processes are important because we are in manufacturing, we are in retail, we are in logistics, and we've got over 5,000 people working in these areas. Keeping them safe is critical. I mentioned about environmental initiatives. Many initiatives. For instance, we used to burn thousands of gallons of oil in Vermont. Now we're at zero. We use sawdust. We use it for heat. We even create electricity with steam engines. All of that gets across that recycling is important at every element of our business. As I said, we do it as it is also helpful to our business, but also the right thing to do. Giving back, we also, wherever it makes sense, we do.
Habitat is something important that we've been associated with for some time, and we've so far given about $19 million to Habitat. We are one of their larger supporters in the country. In corporate governance, as you know, we fortunately have, first of all, a great board. We also take a look at all the things that we need to do because we don't want to do things that we're trying to shield anything. As new ideas come up, we incorporate them because we believe that's the right thing to do. We have also continued to look at stockholder returns. Since we took the company private, we have continued to pay dividends. Our total dividends we have paid is over $400 million. It's a constant. Last year also, we paid strong dividends as we paid special dividends or regular dividends.
We believe it's good to take care of our stockholders from that perspective, because if you generate cash, that's a good way of using cash. On that, we have to make sure that we also look at other things. Look at we have purchased almost 43% of our company back. We invested $600 million in buying our shares. We have also capital expenditures. These are actually more critical than paying dividends and buying shares. These are the more important things. We invested $800 million in capital expenditures continuously. As I mentioned, we had to invest in manufacturing and logistics, in our retail network, in technology. We have been fortunate that we are in good shape in those areas. Again, as I mentioned, this is about dividends. We increased by 47. We continuously look at it. What's the best way of returning share to our stockholders?
We don't want to do crazy stuff. It's got to make sense. It's got to be prudent. Now you folks have also looked at, and we have reviewed over the years, opportunities. We do have an opportunity. Just keep in mind, before the Great Recession, we did over a billion and one in sales. We had an operating income of almost close to 14%. Different times. Now we're $800 million. Just think of the operating leverage we have. At $900 million, we believe that we can take our operating income to 10.9%, close to 11%, or a billion to 12%. The operating leverage of our manufacturing, of our retail is great. On the other hand, if business is slow, it has a negative impact across the board.
We are very much aware of the fact that we have positioned ourselves well, and I believe that we have an opportunity of having operating income between 10% and 12% because of the operating leverage that we have. It also reflects the fact that, of course, even from 2006, before the Great Recession, we also reduced. We had about 34 million shares outstanding. Now it is less than 27 million. That has also affected. We have to be careful that we don't reduce it too much. We have a good base right now, and that we intend to keep it at that level. With that, again, very briefly, we are positioned well. We have made a lot of work, especially in the last year, to expand our offerings, to get the message across.
In fact, as I said, we are the world's leading in interior design. That message is going to get even more stronger and more clear as we go forward. We're leveraging our vertical integration in terms of managing great quality, managing inventories, and also differentiating ourselves. We're going to increase our marketing as we have been doing, and even more so. Especially today, of course, the new mediums of marketing have to be utilized. Technology with personal services are a great focus, and we'll continue to expand in other areas and continue with our social responsibility. With that, I would like to now invite Eric. In fact, what we'll do is after Eric Koster is our General Counsel and Secretary. After he has given an overview, later on I'll come back.
If there are any questions or comments, I'd be happy to address them. Eric?
Thank you, Farooq. Hello, everyone. Welcome to our 2018 annual meeting of shareholders. Please refer to the rules of conduct that were distributed when you arrived. Your cooperation in observing these rules is very important, will be greatly appreciated. It'll provide an opportunity for everyone to participate. To highlight a few of the rules as we get going. All questions and comments should be directed to the chairman. No stockholder may address the meeting until he or she has been recognized by the chairman. If you wish to ask a question or make a comment, please raise your hand and a microphone will be brought to you. When recognized, please stand, state your name, and the fact that you are a stockholder. If you are acting as a proxy on behalf of a stockholder, please so state and name the stockholder you are representing.
Only stockholders of record as of the close of business on our record date, which was September 17, 2018, or their duly appointed proxies, are entitled to address the meeting and to vote. Be as brief as possible with your questions and comments. Questions and comments must be within a time limit of two minutes. Today's procedure and the order of business is, first of all, if there is anyone here who has not yet submitted his proxy and wishes to do so, please give it to the two inspectors of election who are seated at the inspectors table to my left. We will proceed with the initial formal business of the meeting, after which Mr. Kathwari has explained there will be an opportunity for you to ask questions and make comments.
Now, as secretary of the meeting, I can report that the notice of this meeting was duly given on or about October 2, 2018. The list of stockholders entitled to vote at the meeting has been available for examination by any stockholder at the company's offices in Danbury for the past 10 days and will remain open for inspection during the meeting. Pending confirmation upon tabulation of the ballots after the voting, we are operating on the assumption that a quorum is present. In fact, as of this morning's tabulation of proxies that have been received, we have more than the 13,264,648 shares present. That's our number for the quorum. The inspectors of election for this meeting are Peter W. Descovich of IVS Associates, Inc., and Christopher M. Hayden of Georgeson LLC, both of whom have signed the judge's oath, which will be filed with the records of this meeting.
Once the final votes are tallied, the inspectors of election will certify the final results of the meeting, that final result will be filed with the records of the meeting as well as with the SEC pursuant to the rules of that commission. Before we begin the consideration of the three proposals to be submitted to a vote at this meeting, I would like to note that ballots will not be distributed until after the presentation of all proposals and stockholders will have an opportunity to comment on each before the polls are closed. During the formal business of the meeting, we ask that you limit your questions and comments to the business at hand. After the formal business, there will be an opportunity to ask questions of a more general nature. The three proposals to be voted at this meeting are as follows.
One, the election of seven directors of the company. The board of directors has nominated M. Farooq Kathwari, James B. Carlson, John J. Dooner, Jr., Domenick J. Esposito, Mary Garrett, James W. Schmotter, and Tara I. Stacom for election to the board of directors. There have been no other additional timely nominations to the foregoing seven nominees, therefore, they are the only individuals to be considered for election at this meeting. The second proposal is to approve by a non-binding advisory vote on the executive compensation for the company's named executive officers. The third and last of the proposals is to ratify the appointment of KPMG LLP as our independent public accounting firm for the 2019 fiscal year. Okay. We are not aware of any other business to be conducted at this meeting.
Before we proceed to vote for the above proposals, I would like to ask if any stockholder is aware of any other formal business to come before this meeting. Okay. Now that all proposals have been submitted for consideration, I would like to ask if any stockholder has any questions they would like to ask or comment that they would like to make with regard to the proposals. If so, please raise your hand and a microphone will be given to you. Good. I note there are no questions. Okay. It is now 10:32 A.M. As the designee of the chairman of the company, I declare that the polls are open, we will proceed to vote. Persons who have sent in their proxies do not need to vote by ballot unless they wish to change their vote at this time.
If anybody would like to change his vote, please raise your hand, and we will furnish you with the necessary ballot, and that will be substituted for the proxy that you submitted previously. After you vote, please return your ballots to the judges at the table. Okay. Does anybody wish a paper ballot? No. Thank you. Okay. I ask, have the judges been able to tabulate the votes based upon the proxies received as of this morning? Yes. Excuse me. Okay. All persons desiring to vote have done so. I declare the polls to be closed at 10:34 A.M. The judges have reported that 26,529,294 shares of common stock are entitled to vote at this meeting. The holders of 24,972,097 shares are present in person or by proxy, and that constitutes 94.13% of the shares. Based on that report, I declare that M. Farooq Kathwari, James B. Carlson, John J.
Dooner Jr., Domenick Esposito, Mary Garrett, James W. Schmotter, and Tara I. Stacom have been elected as directors of the company for a term of one year. I further declare that the proposal to approve by a non-binding advisory vote the executive compensation of the company's named executive officers has been approved, and the proposal to ratify the appointment of KPMG LLP as our independent public accounting firm for the 2019 fiscal year has been approved. The report of the inspectors of election will be filed with the minutes of this meeting. That concludes the formal business to come before the meeting. I would like to turn the meeting back to Mr. Kathwari.
Thank you, Eric. Congratulations to our board for being elected. Eric, I'm going to send you to Florida to conduct voting there.
Yeah.
We are always very pleased. We have been now here having these meetings for the last 25 years, and great to have the opportunity of having extremely strong support from our shareholders for the election of our directors and the other proposals that we have. With this, any comments or questions? Yes. Please could identify yourself, and you're getting a microphone.
Good morning, Mr. Kathwari. My name is Jim White, a shareholder. Congratulations to you and the team, and Eric and Corey. I think on a qualitative basis, you've positioned our company extremely well with the WOW experience, as well as the One Price delivery method, which I think is tremendous, and the white glove treatment. That, I think, is going to be excellent quality moving us forward. I think from the standpoint of the way that you have repositioned your stores, knowing that you've repositioned, relocated about 68% of them over the last 15 years. You're also taking that smaller, more lifestyle, less than 10,000 square foot store approach, which I think is going to be much more nimble, much more welcoming, and I think much more effective in the marketplace.
On the quantitative side, thank you, as I mentioned to you earlier, for your reduction in debt over the last three years. It's been a busy three years, and you've done great work to bring debt down from $41 million to $1.6 million and to bring dividends up for we shareholders from $16 million to $29 million. Thank you very much for great results, and God bless you. Keep up the good work. Thank you.
Thank you very much. Very kind of you. I'm sure with all the comments you made, you are also a customer of Ethan Allen. You have visited our design centers, which is good. As we mentioned that Any other questions or comments? If not, we are well-positioned. We have worked extremely hard to position ourselves in a fast-changing environment. The world is changing from manufacturing, to retailing, to technology. We have to make sure that we are relevant. One of the biggest assets we have is we have a very dedicated team of people who take a lot of pride in what they do. It was actually also, just to mention it, that we benefited from this tax reduction, and we decided that we'll use part of that to help reduce the medical cost of our employees.
I think it's important for us to make sure that we balance it, because they're all stakeholders. On one hand, we have a strong program in dividends, and we also want to make sure that whenever, as it makes sense, we take care of our associates. That's why, for instance, in many places, we have medical facilities. Like in a place like Mexico, when we went there, we said we are going to follow similar environmental and safety, and Honduras too, as we have in the U.S. Not required. It was the right thing to do. Today, the benefit is that after 12 years, we've got people with lowest turnover, dedicated people, and that, I can say, is across the board. We are well-positioned, and I want to again thank all of our team members at Ethan Allen for the positioning that we have done.
I believe very strongly that we have an opportunity to continue to grow our sales, our profits, and also do it the right way. Again, thanks to our Board of Directors who are very knowledgeable, strong part of the system, and together with our team of very strong leaders. Thank you very much. All right.
Okay. The business of the meeting having been concluded, I call for a motion to adjourn the meeting.
Moved.
Second it? In favor?
Aye.
Good. Thank you. I declare the meeting to be adjourned at 10:40 A.M. Thank you all.