From the CEO: Rumors and other interesting stuff.

Recently there have been a lot of postings and rumors regarding DWR and our future here on planet Earth. I am always surprised to see how many people have a passionate opinion about our little company and feel so strongly about us. I have read many of these postings, fielded many calls and, within the limits of what can be said, attempted to explain our current status to all who have asked. However the level of interest has risen to such a crescendo that I can no longer address them one at a time and still have hours left in the day to devote to the task of steering the company successfully. So I am going to try to address the questions and concerns here and hopefully provide a base of clear information for everyone who is interested. So here goes: 

1. What’s up with hiring an investment banker? We received an unsolicited offer in late December from a private equity firm to acquire the business, which we presented to our Board of Directors for review. The Board advised us that it would be in the shareholders’ best interests, as well as a part of our fiduciary responsibility, to consider the offer. We hired Thomas Weisel Partners as our investment banker to help us analyze the offer and determine whether there might be other parties interested in making offers, possibly at higher prices. We then issued a press release to let the general public, and all interested parties, know that we did receive an offer, it is being considered and other interested parties may submit competing offers. Once the bids are received and reviewed, the Board will again review them and determine if any would be in the shareholders’ best interest to accept. Or, they may reject all of them if they are not deemed to offer the shareholders an acceptable price for the company. 
2. How are we doing? Well, thanks for asking. The management team and all 400 of our people continent-wide 

are doing everything they can to insure we remain a viable and healthy business, in spite of the turmoil in the larger economic environment. We have certainly seen our sales affected by the general economic downturn. However we have reduced our expenses from last year, stepped up our promotional activity and now believe that we are generally prepared for a long winter. We believe our sales forecasts are realistic and our expenses are in line with those expectations. As such, we believe we can maintain a positive cash position, be able to operate through this period and emerge potentially stronger than when it started. You see, we went through a rough patch in 2006, which prepared us better than we otherwise might have been to deal with this abrupt economic disruption. We had already trimmed expenses, reduced waste and become more efficient operationally. We also moved much of our sourcing to North America in 2007. This was initially done to improve quality, be more mindful of our impact on the environment globally and eliminate currency fluctuations as a factor in our costs. 
Quality was a mandate that we applied to all sourcing changes. It had to be better – not cheaper, better. We knew we would achieve cost savings from the shipping and currency changes, so that we could put more into the manufacturing and still have a lower finished (delivered) cost. By shipping directly from the factory in America to your home (instead of from Italy to France to New Jersey to Kentucky to your home), we were able to reduce our carbon footprint dramatically, as well as our costs. By eliminating the need to pay in Euros, we dropped the cost of currency premium. These changes were all completed in 2008 and in place for 2009. And finally, during 2008, we implemented three brand extensions for launch in 2009. DWR: Tools for Living launched in November 2008, DWR: Kitchen will launch officially in April of this year and DWR: Bath will follow in May. So we also have three new businesses completely developed and launching – putting most of the start-up costs for those initiatives behind us, and the potential benefit in front of us. All of these events combine to place us in a rather favorable position to deal with the curve ball that was thrown at us in September ’08. 
So while no one can say with certainty that they will not face unforeseen problems, our current plans, results and assessment of the world around us indicate to the DWR team that we should be here to try and beautify America in our own small way. Personally I believe that DWR will have the same potential for success and longevity as many of the iconic pieces we offer, but that’s just my opinion. 
So I hope this provides a basis for forming your own opinion with some facts versus Photoshopped pictures of our stores (I think that person may have worked for a tabloid prior – at least the work looked a lot like those pictures of Elvis and Bat Boy in a UFO that you see at the supermarket checkout, but again – just my opinion). 
I suppose it is a sign of our times as well as a normal human trait – when there is little good news we look for more things to drag down. Fortunately I do believe this is a trait that the majority of the species abhors and I believe we are generally an optimistic and caring bunch here on planet Earth. I prefer to believe that. I am confident that our economy will right itself, that our current leadership will find the right path and that we will be here long after this is all in the history books – again, just my opinion – but I prefer that to Chicken Little. 
Hopefully I have addressed your questions and provided a little background for you. 
Thanks, 
Ray Brunner, CEO
P.S. Of course, optimism can never be fully separated from doubt. Please see below for cautionary statements that must always accompany forward-looking statements we make. 
This letter includes forward-looking statements that involve risks and uncertainties as of the date of this release. Factors that could cause our actual results to differ materially from these forward-looking statements including the following: We have recently revised our corporate strategy and our new strategy may not be successful; if we fail to offer merchandise that our customers find attractive, the demand for our products may be limited; our business depends, in part, on factors affecting consumer spending that are not within our control; recent turmoil in the credit markets and the financial services industry may negatively impact our business, results of operations, financial condition, liquidity or market price of our common stock; we are subject to various risks and uncertainties that might affect our ability to procure quality merchandise from our vendors or receive favorable payment terms from our vendors; we rely on catalog-based marketing, which could have significant cost increases and could have unpredictable results; we have made and will continue to make certain systems changes that might disrupt our supply chain operations and delay financial results; we may need additional financing and may not be able to obtain it on favorable terms or at all; we may not manage our inventory levels successfully; changes in the value of the U.S. dollar relative to foreign currencies and any failure by us to adopt and implement an effective hedging strategy could adversely affect our operating results; we face intense competition, and if we are unable to compete effectively, we may not be able to achieve and maintain profitability; and other risks detailed in our reports and filings with the Securities and Exchange Commission, including our latest Annual Report on Form 10-K and Quarterly Report on Form 10-Q, which are available at the SEC's website at www.sec.gov.
Posted by Ray Brunner, CEO, Design Within Reach