LA-Z-BOY
INCORPORATED
|
(Exact
name of registrant as specified in its
charter)
|
MICHIGAN
|
38-0751137
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification
No.)
|
1284
North Telegraph Road, Monroe, Michigan
|
48162-3390
|
(Address
of principal executive offices)
|
(Zip
Code)
|
None
|
(Former
name, former address and former fiscal year, if changed since last
report.)
|
Class
|
Outstanding at February 9,
2010
|
|
Common
Shares, $1.00 par value
|
51,546,239
|
Page
Number(s)
|
||||
PART
I Financial Information (Unaudited)
|
||||
Item
1.
|
Financial
Statements
|
|||
Consolidated
Statement of Operations
|
3-4
|
|||
Consolidated
Balance Sheet
|
5
|
|||
Consolidated
Statement of Cash Flows
|
6
|
|||
Consolidated
Statement of Changes in Equity
|
7
|
|||
Notes
to Consolidated Financial Statements
|
||||
Note
1. Basis of Presentation
|
8-9
|
|||
Note
2. Interim Results
|
9
|
|||
Note
3. Reclassification
|
9
|
|||
Note
4. Restricted Cash
|
9
|
|||
Note
5. Inventories
|
9
|
|||
Note
6. Pension Plans
|
10
|
|||
Note
7. Financial Guarantees and Product Warranties
|
10-11
|
|||
Note
8. Stock-Based Compensation
|
11
|
|||
Note
9. Total Comprehensive Income (Loss)
|
11
|
|||
Note
10. Segment Information
|
11-12
|
|||
Note
11. Restructuring
|
13-14
|
|||
Note
12. Income Taxes
|
14-15
|
|||
Note
13. Variable Interest Entities
|
15-16
|
|||
Note
14. Income from Continued Dumping and Subsidy Offset Act
|
16
|
|||
Note
15. Earnings per Share
|
16-17
|
|||
Note
16. Fair Value Measurements
|
17-18
|
|||
Note
17. Hedging Activities
|
18
|
|||
Note
18. Recent Accounting Pronouncements
|
19-20
|
|||
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
|
||
Cautionary
Statement Concerning Forward-Looking Statements
|
21
|
|||
Introduction
|
21-22
|
|||
Results
of Operations
|
23-34
|
|||
Liquidity
and Capital Resources
|
34-36
|
|||
Restructuring
|
37-38
|
|||
Critical
Accounting Policies
|
38
|
|||
Regulatory
Developments
|
39
|
|||
Recent
Accounting Pronouncements
|
39
|
|||
Business
Outlook
|
39
|
|||
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
39
|
||
Item
4.
|
Controls
and Procedures
|
40
|
||
PART
II Other Information
|
||||
Item 1A.
|
Risk
Factors
|
40
|
||
Item
6.
|
Exhibits
|
40
|
||
Signature
Page
|
41
|
Third Quarter Ended
|
||||||||
(Unaudited, amounts in thousands, except per share data)
|
01/23/10
|
01/24/09
|
||||||
Sales
|
$ | 305,094 | $ | 288,576 | ||||
Cost
of sales
|
||||||||
Cost
of goods sold
|
206,895 | 207,809 | ||||||
Restructuring
|
392 | 1,664 | ||||||
Total
cost of sales
|
207,287 | 209,473 | ||||||
Gross
profit
|
97,807 | 79,103 | ||||||
Selling,
general and administrative
|
83,527 | 93,501 | ||||||
Restructuring
|
201 | 741 | ||||||
Write-down
of long-lived assets
|
— | 7,036 | ||||||
Write-down
of trade names
|
— | 5,541 | ||||||
Write-down
of goodwill
|
— | 40,436 | ||||||
Operating
income (loss)
|
14,079 | (68,152 | ) | |||||
Interest
expense
|
577 | 1,386 | ||||||
Interest
income
|
140 | 323 | ||||||
Income
from Continued Dumping and Subsidy Offset Act, net
|
4,436 | 8,124 | ||||||
Other
income (expense), net
|
(593 | ) | (7,433 | ) | ||||
Earnings
(loss) before income taxes
|
17,485 | (68,524 | ) | |||||
Income
tax (benefit) expense
|
6,547 | (4,263 | ) | |||||
Net
income (loss)
|
10,938 | (64,261 | ) | |||||
Net
(income) loss attributable to noncontrolling interests
|
38 | (287 | ) | |||||
Net
income (loss) attributable to La-Z-Boy Incorporated
|
$ | 10,976 | $ | (64,548 | ) | |||
Basic
average shares
|
51,546 | 51,475 | ||||||
Basic
net income (loss) attributable to La-Z-Boy Incorporated per
share
|
$ | 0.21 | $ | (1.25 | ) | |||
Diluted
average shares
|
51,845 | 51,475 | ||||||
Diluted
net income (loss) attributable to La-Z-Boy Incorporated per
share
|
$ | 0.21 | $ | (1.25 | ) | |||
Dividends
paid per share
|
$ | — | $ | 0.02 |
Nine Months Ended
|
||||||||
(Unaudited, amounts in thousands, except per share data)
|
01/23/10
|
01/24/09
|
||||||
Sales
|
$ | 868,472 | $ | 942,176 | ||||
Cost
of sales
|
||||||||
Cost
of goods sold
|
593,406 | 686,494 | ||||||
Restructuring
|
1,791 | 9,696 | ||||||
Total
cost of sales
|
595,197 | 696,190 | ||||||
Gross
profit
|
273,275 | 245,986 | ||||||
Selling,
general and administrative
|
246,011 | 286,603 | ||||||
Restructuring
|
1,022 | 2,208 | ||||||
Write-down
of long-lived assets
|
— | 7,036 | ||||||
Write-down
of trade names
|
— | 5,541 | ||||||
Write-down
of goodwill
|
— | 42,136 | ||||||
Operating
income (loss)
|
26,242 | (97,538 | ) | |||||
Interest
expense
|
2,387 | 4,532 | ||||||
Interest
income
|
615 | 1,885 | ||||||
Income
from Continued Dumping and Subsidy Offset Act, net
|
4,436 | 8,124 | ||||||
Other
income (expense), net
|
352 | (7,974 | ) | |||||
Earnings
(loss) before income taxes
|
29,258 | (100,035 | ) | |||||
Income
tax expense
|
10,747 | 27,388 | ||||||
Net
income (loss)
|
18,511 | (127,423 | ) | |||||
Net
(income) loss attributable to noncontrolling interests
|
355 | (407 | ) | |||||
Net
income (loss) attributable to La-Z-Boy Incorporated
|
$ | 18,866 | $ | (127,830 | ) | |||
Basic
average shares
|
51,517 | 51,454 | ||||||
Basic
net income (loss) attributable to La-Z-Boy Incorporated per
share
|
$ | 0.36 | $ | (2.49 | ) | |||
Diluted
average shares
|
51,595 | 51,454 | ||||||
Diluted
net income (loss) attributable to La-Z-Boy Incorporated per
share
|
$ | 0.36 | $ | (2.49 | ) | |||
Dividends
paid per share
|
$ | — | $ | 0.10 |
(Unaudited, amounts in thousands)
|
01/23/10
|
04/25/09
|
||||||
Current
assets
|
||||||||
Cash
and equivalents
|
$ | 79,511 | $ | 17,364 | ||||
Restricted
cash
|
— | 18,713 | ||||||
Receivables,
net of allowance of $25,547 at 01/23/10 and $28,385 at
04/25/09
|
158,656 | 147,858 | ||||||
Inventories,
net
|
145,045 | 140,178 | ||||||
Deferred
income taxes—current
|
795 | 795 | ||||||
Other
current assets
|
16,435 | 22,872 | ||||||
Total
current assets
|
400,442 | 347,780 | ||||||
Property,
plant and equipment, net
|
135,928 | 146,896 | ||||||
Trade
names
|
3,100 | 3,100 | ||||||
Other
long-term assets
|
47,595 | 51,431 | ||||||
Total
assets
|
$ | 587,065 | $ | 549,207 | ||||
Current
liabilities
|
||||||||
Current
portion of long-term debt
|
$ | 1,848 | $ | 8,724 | ||||
Accounts
payable
|
48,247 | 41,571 | ||||||
Accrued
expenses and other current liabilities
|
88,635 | 75,733 | ||||||
Total
current liabilities
|
138,730 | 126,028 | ||||||
Long-term
debt
|
46,679 | 52,148 | ||||||
Deferred
income taxes
|
736 | 724 | ||||||
Other
long-term liabilities
|
68,958 | 63,875 | ||||||
Contingencies
and commitments
|
— | — | ||||||
Equity
|
||||||||
La-Z-Boy
Incorporated shareholders’ equity:
|
||||||||
Common
shares, $1 par value
|
51,546 | 51,478 | ||||||
Capital
in excess of par value
|
201,093 | 205,945 | ||||||
Retained
earnings
|
94,925 | 67,431 | ||||||
Accumulated
other comprehensive loss
|
(19,807 | ) | (22,698 | ) | ||||
Total
La-Z-Boy Incorporated shareholders' equity
|
327,757 | 302,156 | ||||||
Noncontrolling
interests
|
4,205 | 4,276 | ||||||
Total
equity
|
331,962 | 306,432 | ||||||
Total
liabilities and equity
|
$ | 587,065 | $ | 549,207 |
Third Quarter Ended
|
Nine Months Ended
|
|||||||||||||||
(Unaudited, amounts in thousands)
|
01/23/10
|
01/24/09
|
01/23/10
|
01/24/09
|
||||||||||||
Cash
flows from operating activities
|
||||||||||||||||
Net
income (loss)
|
$ | 10,938 | $ | (64,261 | ) | $ | 18,511 | $ | (127,423 | ) | ||||||
Adjustments
to reconcile net income (loss) to cash provided by operating
activities
|
||||||||||||||||
(Gain) loss
on sale of assets
|
38 | (37 | ) | (50 | ) | (2,707 | ) | |||||||||
Write-down
of long-lived assets
|
— | 7,036 | — | 7,036 | ||||||||||||
Write-down
of trade names
|
— | 5,541 | — | 5,541 | ||||||||||||
Write-down
of goodwill
|
— | 40,436 | — | 42,136 | ||||||||||||
Write-down
of investments
|
— | 5,140 | — | 5,140 | ||||||||||||
Restructuring
|
593 | 2,405 | 2,813 | 11,904 | ||||||||||||
Provision
for doubtful accounts
|
1,079 | 9,439 | 5,593 | 18,439 | ||||||||||||
Depreciation
and amortization
|
6,611 | 5,993 | 19,186 | 18,267 | ||||||||||||
Stock-based
compensation expense
|
1,454 | 1,012 | 4,082 | 2,867 | ||||||||||||
Change
in receivables
|
3,413 | 31,405 | (14,173 | ) | 23,314 | |||||||||||
Change
in inventories
|
(6,098 | ) | (3,463 | ) | (4,867 | ) | 7,380 | |||||||||
Change
in other assets
|
332 | 2,865 | 6,971 | 1,954 | ||||||||||||
Change
in payables
|
1,929 | (8,351 | ) | 6,676 | (6,424 | ) | ||||||||||
Change
in other liabilities
|
2,707 | (2,512 | ) | 14,258 | (28,245 | ) | ||||||||||
Change
in deferred taxes
|
(301 | ) | (4,658 | ) | (301 | ) | 38,842 | |||||||||
Total
adjustments
|
11,757 | 92,251 | 40,188 | 145,444 | ||||||||||||
Net
cash provided by operating activities
|
22,695 | 27,990 | 58,699 | 18,021 | ||||||||||||
Cash
flows from investing activities
|
||||||||||||||||
Proceeds
from disposals of assets
|
9 | 45 | 1,925 | 7,831 | ||||||||||||
Capital
expenditures
|
(2,929 | ) | (4,089 | ) | (5,708 | ) | (14,079 | ) | ||||||||
Purchases
of investments
|
(1,397 | ) | (1,630 | ) | (3,934 | ) | (10,595 | ) | ||||||||
Proceeds
from sales of investments
|
1,684 | 10,854 | 5,793 | 21,881 | ||||||||||||
Change
in restricted cash
|
500 | (4,709 | ) | 17,507 | (7,664 | ) | ||||||||||
Change
in other long-term assets
|
115 | (575 | ) | 129 | (346 | ) | ||||||||||
Net
cash provided by (used for) investing activities
|
(2,018 | ) | (104 | ) | 15,712 | (2,972 | ) | |||||||||
Cash
flows from financing activities
|
||||||||||||||||
Proceeds
from debt
|
10,718 | 15,992 | 31,391 | 55,458 | ||||||||||||
Payments
on debt
|
(11,169 | ) | (43,752 | ) | (43,736 | ) | (69,039 | ) | ||||||||
Dividends
paid
|
— | (1,037 | ) | — | (5,188 | ) | ||||||||||
Net
cash used for financing activities
|
(451 | ) | (28,797 | ) | (12,345 | ) | (18,769 | ) | ||||||||
Effect
of exchange rate changes on cash and equivalents
|
248 | (228 | ) | 81 | (871 | ) | ||||||||||
Change
in cash and equivalents
|
20,474 | (1,139 | ) | 62,147 | (4,591 | ) | ||||||||||
Cash
acquired from consolidation of VIEs
|
— | 631 | — | 631 | ||||||||||||
Cash
and equivalents at beginning of period
|
59,037 | 11,024 | 17,364 | 14,476 | ||||||||||||
Cash
and equivalents at end of period
|
$ | 79,511 | $ | 10,516 | $ | 79,511 | $ | 10,516 | ||||||||
Cash
paid (net of refunds) during period – income taxes
|
$ | 5,429 | $ | (660 | ) | $ | (7,653 | ) | $ | (456 | ) | |||||
Cash
paid during period - interest
|
$ | 557 | $ | 1,337 | $ | 1,845 | $ | 3,750 |
(Unaudited, amounts in thousands)
|
Common
Shares
|
Capital in
Excess of Par
Value
|
Retained
Earnings
|
Accumulated
Other
Compre-
hensive Loss
|
Non-
Controlling
Interests
|
Total
|
||||||||||||||||||
At
April 26, 2008
|
$ | 51,428 | $ | 209,388 | $ | 188,203 | $ | (227 | ) | $ | 2,582 | $ | 451,374 | |||||||||||
Comprehensive
loss
|
||||||||||||||||||||||||
Net
income (loss)
|
(122,673 | ) | 121 | |||||||||||||||||||||
Unrealized
loss on marketable securities arising during the period (net of tax of
$0.4 million)
|
(4,332 | ) | ||||||||||||||||||||||
Reclassification
adjustment for loss on marketable securities included in net
loss
|
5,180 | |||||||||||||||||||||||
Translation
adjustment
|
(622 | ) | 447 | |||||||||||||||||||||
Change
in fair value of cash flow hedge
|
(723 | ) | ||||||||||||||||||||||
Net
actuarial loss
|
(21,974 | ) | ||||||||||||||||||||||
Total
comprehensive loss
|
(144,576 | ) | ||||||||||||||||||||||
Stock
issued for stock and employee benefit plans, net of
cancellations
|
50 | (7,262 | ) | 7,078 | (134 | ) | ||||||||||||||||||
Stock
option, restricted stock and performance based stock
expense
|
3,819 | 3,819 | ||||||||||||||||||||||
Change
in noncontrolling interest upon consolidation of VIE and other changes in
noncontrolling interests
|
1,126 | 1,126 | ||||||||||||||||||||||
Dividends
paid
|
(5,177 | ) | (5,177 | ) | ||||||||||||||||||||
At
April 25, 2009
|
51,478 | 205,945 | 67,431 | (22,698 | ) | 4,276 | 306,432 | |||||||||||||||||
Comprehensive
income
|
||||||||||||||||||||||||
Net
income (loss)
|
18,866 | (355 | ) | |||||||||||||||||||||
Unrealized
gain on marketable securities arising during the period
|
1,832 | |||||||||||||||||||||||
Reclassification
adjustment for gain on marketable securities included in net
income
|
304 | |||||||||||||||||||||||
Translation
adjustment
|
(840 | ) | 194 | |||||||||||||||||||||
Net
pension amortization
|
1,582 | |||||||||||||||||||||||
Change
in fair value of cash flow hedge
|
13 | |||||||||||||||||||||||
Total
comprehensive income
|
21,596 | |||||||||||||||||||||||
Change
in noncontrolling interest
|
90 | 90 | ||||||||||||||||||||||
Stock
issued for stock and employee benefit plans, net of
cancellations
|
68 | (8,922 | ) | 8,628 | (226 | ) | ||||||||||||||||||
Stock
option, restricted stock and performance based stock
expense
|
4,070 | 4,070 | ||||||||||||||||||||||
At
January 23, 2010
|
$ | 51,546 | $ | 201,093 | $ | 94,925 | $ | (19,807 | ) | $ | 4,205 | $ | 331,962 |
Quarter
Ended 01/24/09
|
||||||||||||
(Unaudited, amounts in thousands, except
per share data)
|
01/24/09
(as
previously reported)
|
Adjustments
|
01/24/09
(as
adjusted)
|
|||||||||
Net
loss attributable to La-Z-Boy Incorporated
|
$ | (64,382 | ) | $ | (166 | ) | $ | (64,548 | ) | |||
Diluted
net loss attributable to La-Z-Boy Incorporated per share
|
$ | (1.25 | ) | $ | — | $ | (1.25 | ) |
Nine
Months Ended 01/24/09
|
||||||||||||
(Unaudited, amounts in thousands, except
per share data)
|
01/24/09
(as
previously reported)
|
Adjustments
|
01/24/09
(as
adjusted)
|
|||||||||
Net
loss attributable to La-Z-Boy Incorporated
|
$ | (126,670 | ) | $ | (1,160 | ) | $ | (127,830 | ) | |||
Diluted
net loss attributable to La-Z-Boy Incorporated per share
|
$ | (2.46 | ) | $ | (0.03 | ) | $ | (2.49 | ) |
As
of 04/25/09
|
||||||||||||
(Unaudited, amounts in
thousands)
|
04/25/09
(as
previously reported)
|
Adjustments
|
04/25/09
(as
adjusted)
|
|||||||||
Property,
plant and equipment, net
|
$ | 150,234 | $ | (3,338 | ) | $ | 146,896 | |||||
Retained
earnings
|
$ | 70,769 | $ | (3,338 | ) | $ | 67,431 |
(Unaudited, amounts in thousands)
|
01/23/10
|
04/25/09
|
||||||
Raw
materials
|
$ | 67,122 | $ | 53,498 | ||||
Work
in process
|
12,129 | 11,281 | ||||||
Finished
goods
|
91,542 | 101,147 | ||||||
FIFO
inventories
|
170,793 | 165,926 | ||||||
Excess
of FIFO over LIFO
|
(25,748 | ) | (25,748 | ) | ||||
Inventories,
net
|
$ | 145,045 | $ | 140,178 |
Third Quarter Ended
|
Nine Months Ended
|
|||||||||||||||
(Unaudited, amounts in thousands)
|
01/23/10
|
01/24/09
|
01/23/10
|
01/24/09
|
||||||||||||
Service
cost
|
$ | 261 | $ | 328 | $ | 783 | $ | 984 | ||||||||
Interest
cost
|
1,400 | 1,359 | 4,200 | 4,077 | ||||||||||||
Expected
return on plan assets
|
(1,206 | ) | (1,728 | ) | (3,618 | ) | (5,184 | ) | ||||||||
Net
amortization
|
527 | — | 1,581 | — | ||||||||||||
Net
periodic pension cost (benefit)
|
$ | 982 | $ | (41 | ) | $ | 2,946 | $ | (123 | ) |
Third Quarter Ended
|
Nine Months Ended
|
|||||||||||||||
(Unaudited, amounts in thousands)
|
01/23/10
|
01/24/09
|
01/23/10
|
01/24/09
|
||||||||||||
Balance
as of the beginning of the period
|
$ | 14,293 | $ | 14,437 | $ | 14,394 | $ | 14,334 | ||||||||
Accruals
during the period
|
3,663 | 3,491 | 10,383 | 11,588 | ||||||||||||
Settlements
during the period
|
(3,484 | ) | (3,496 | ) | (10,305 | ) | (11,490 | ) | ||||||||
Balance
as of the end of the period
|
$ | 14,472 | $ | 14,432 | $ | 14,472 | $ | 14,432 |
Third Quarter Ended
|
Nine Months Ended
|
|||||||||||||||
(Unaudited, amounts in thousands)
|
01/23/10
|
01/24/09
|
01/23/10
|
01/24/09
|
||||||||||||
Net
income (loss)
|
$ | 10,938 | $ | (64,261 | ) | $ | 18,511 | $ | (127,423 | ) | ||||||
Other
comprehensive income (loss):
|
||||||||||||||||
Currency
translation adjustment
|
49 | (265 | ) | (646 | ) | (356 | ) | |||||||||
Change
in fair value of cash flow hedge
|
12 | (583 | ) | 13 | (807 | ) | ||||||||||
Net
unrealized gains on marketable securities arising during the
period
|
598 | 4,840 | 2,136 | 60 | ||||||||||||
Net
pension amortization
|
528 | — | 1,582 | — | ||||||||||||
Total
other comprehensive income (loss)
|
1,187 | 3,992 | 3,085 | (1,103 | ) | |||||||||||
Total
comprehensive income (loss) before allocation to noncontrolling
interest
|
12,125 | (60,269 | ) | 21,596 | (128,526 | ) | ||||||||||
Comprehensive
(income) loss attributable to noncontrolling interest
|
(1 | ) | 297 | 161 | (1,034 | ) | ||||||||||
Comprehensive
income (loss) attributable to La-Z-Boy Incorporated
|
$ | 12,124 | $ | (59,972 | ) | $ | 21,757 | $ | (129,560 | ) |
Third Quarter Ended
|
Nine Months Ended
|
|||||||||||||||
(Unaudited, amounts in thousands)
|
01/23/10
(13 weeks)
|
01/24/09
(13 weeks)
|
01/23/10
(39 weeks)
|
01/24/09
(39 weeks)
|
||||||||||||
Sales
|
||||||||||||||||
Upholstery
Group
|
$ | 234,262 | $ | 199,200 | $ | 663,734 | $ | 684,252 | ||||||||
Casegoods
Group
|
36,029 | 42,116 | 109,196 | 138,710 | ||||||||||||
Retail
Group
|
40,411 | 40,497 | 114,387 | 122,408 | ||||||||||||
VIEs
|
15,629 | 13,430 | 39,616 | 39,301 | ||||||||||||
Corporate
and Other
|
603 | 1,084 | 4,143 | 3,362 | ||||||||||||
Eliminations
|
(21,840 | ) | (7,751 | ) | (62,604 | ) | (45,857 | ) | ||||||||
Consolidated
|
$ | 305,094 | $ | 288,576 | $ | 868,472 | $ | 942,176 | ||||||||
Operating
income (loss)
|
||||||||||||||||
Upholstery
Group
|
$ | 26,102 | $ | (1,652 | ) | $ | 67,751 | $ | 16,542 | |||||||
Casegoods
Group
|
292 | (313 | ) | (13 | ) | 1,819 | ||||||||||
Retail
Group
|
(4,135 | ) | (7,108 | ) | (15,104 | ) | (27,509 | ) | ||||||||
VIEs
|
350 | (1,381 | ) | (118 | ) | (5,422 | ) | |||||||||
Corporate
and Other
|
(7,937 | ) | (2,280 | ) | (23,461 | ) | (16,351 | ) | ||||||||
Long-lived
asset write-down
|
— | (7,036 | ) | — | (7,036 | ) | ||||||||||
Goodwill
write-down
|
— | (40,436 | ) | — | (42,136 | ) | ||||||||||
Trade
name write-down
|
— | (5,541 | ) | — | (5,541 | ) | ||||||||||
Restructuring
|
(593 | ) | (2,405 | ) | (2,813 | ) | (11,904 | ) | ||||||||
Consolidated
|
$ | 14,079 | $ | (68,152 | ) | $ | 26,242 | $ | (97,538 | ) |
Fiscal 2010
|
||||||||||||||||
(Unaudited, amounts in thousands)
|
04/25/09
Balance
|
Charges to
Expense *
|
Cash
Payments
or Asset
Write-Offs
|
01/23/10
Balance
|
||||||||||||
Severance
and benefit-related costs
|
$ | 2,022 | $ | (202 | ) | $ | (816 | ) | $ | 1,004 | ||||||
Contract
termination costs
|
530 | 1,022 | (1,175 | ) | 377 | |||||||||||
Other
|
— | 1,993 | (1,993 | ) | — | |||||||||||
Total
restructuring
|
$ | 2,552 | $ | 2,813 | $ | (3,984 | ) | $ | 1,381 | |||||||
*
Charges to expense include $0.2 million of non-cash charges for contract
termination costs.
|
Fiscal 2009
|
||||||||||||||||
(Unaudited, amounts in thousands)
|
04/26/08
Balance
|
Charges to
Expense **
|
Cash
Payments
or Asset
Write-Offs
|
04/25/09
Balance
|
||||||||||||
Severance
and benefit-related costs
|
$ | 2,842 | $ | 4,149 | $ | (4,969 | ) | $ | 2,022 | |||||||
Fixed
asset write-downs, net of gains
|
— | 512 | (512 | ) | — | |||||||||||
Contract
termination costs
|
939 | 1,528 | (1,937 | ) | 530 | |||||||||||
Other
|
— | 6,271 | (6,271 | ) | — | |||||||||||
Total
restructuring
|
$ | 3,781 | $ | 12,460 | $ | (13,689 | ) | $ | 2,552 |
**
|
Charges
to expense include $1.8 million of non-cash charges for contract
termination costs, fixed asset and inventory write-downs. Inventory
write-downs of $1.2 million are included in
“Other.”
|
As of
|
||||||||
(Unaudited, amounts in thousands)
|
01/23/10
|
04/25/09
|
||||||
Current
assets
|
$ | 18,447 | $ | 16,220 | ||||
Other
long-term assets
|
9,040 | 9,794 | ||||||
Total
assets
|
$ | 27,487 | $ | 26,014 | ||||
Current
liabilities
|
$ | 8,180 | $ | 5,983 | ||||
Other
long-term liabilities
|
3,012 | 3,085 | ||||||
Total
liabilities
|
$ | 11,192 | $ | 9,068 |
Third Quarter Ended
|
Nine Months Ended
|
|||||||||||||||
(Unaudited, amounts in thousands )
|
01/23/10
|
01/24/09
|
01/23/10
|
01/24/09
|
||||||||||||
Net
sales, net of inter-company eliminations
|
$ | 15,629 | $ | 13,430 | $ | 39,616 | $ | 39,301 | ||||||||
Net
loss
|
$ | (381 | ) | $ | (4,098 | ) | $ | (1,122 | ) | $ | (8,594 | ) |
Third Quarter Ended
|
Nine Months Ended
|
|||||||||||||||
(Unaudited, amounts in thousands)
|
01/23/10
|
01/24/09
|
01/23/10
|
01/24/09
|
||||||||||||
Numerator
(basic and diluted):
|
||||||||||||||||
Net
income (loss) attributable to La-Z-Boy Incorporated
|
$ | 10,976 | $ | (64,548 | ) | $ | 18,866 | $ | (127,830 | ) | ||||||
Income
allocated to participating securities
|
(222 | ) | — | (351 | ) | — | ||||||||||
Dividends
on participating securities
|
— | (15 | ) | — | (69 | ) | ||||||||||
Net
income (loss) available to common shareholders
|
$ | 10,754 | $ | (64,563 | ) | $ | 18,515 | $ | (127,899 | ) |
Third Quarter Ended
|
Nine Months Ended
|
|||||||||||||||
(Unaudited, amounts in thousands)
|
01/23/10
|
01/24/09
|
01/23/10
|
01/24/09
|
||||||||||||
Denominator:
|
||||||||||||||||
Basic
common shares (based upon weighted average)
|
51,546 | 51,475 | 51,517 | 51,454 | ||||||||||||
Add:
|
||||||||||||||||
Stock
option dilution
|
299 | — | 78 | — | ||||||||||||
Diluted
common shares
|
51,845 | 51,475 | 51,595 | 51,454 |
|
·
|
Level 1 —
Financial assets and liabilities whose values are based on unadjusted
quoted market prices for identical assets and liabilities in an active
market that we have the ability to
access.
|
·
|
Level 2 —
Financial assets and liabilities whose values are based on quoted prices
in markets that are not active or model inputs that are observable for
substantially the full term of the asset or
liability.
|
|
·
|
Level 3 —
Financial assets and liabilities whose values are based on prices or
valuation techniques that require inputs that are both unobservable and
significant to the overall fair value
measurement.
|
Fair Value Measurements
|
||||||||||||
(Unaudited, amounts in thousands)
|
Level 1
|
Level 2
|
Level 3
|
|||||||||
Assets
|
||||||||||||
Available-for-sale
securities
|
$ | 7,935 | $ | 2,394 | $ | — | ||||||
Liabilities
|
||||||||||||
Interest
rate swap
|
— | (710 | ) | — | ||||||||
Total
|
$ | 7,935 | $ | 1,684 | $ | — |
future
income, margins and cash flows
|
future
economic performance
|
future
growth
|
industry
and importing trends
|
adequacy
and cost of financial resources
|
management
plans
|
Quarter Ended
|
||||||||||||
(Unaudited, amounts in thousands, except per share amounts and percentages)
|
01/23/10
|
01/24/09
|
Percent
change
|
|||||||||
Upholstery
sales
|
$ | 234,262 | $ | 199,200 | 17.6 | % | ||||||
Casegoods
sales
|
36,029 | 42,116 | (14.5 | )% | ||||||||
Retail
sales
|
40,411 | 40,497 | (0.2 | )% | ||||||||
VIE
sales
|
15,629 | 13,430 | 16.4 | % | ||||||||
Corporate
and Other sales
|
603 | 1,084 | (44.4 | )% | ||||||||
Eliminations
|
(21,840 | ) | (7,751 | ) | (181.8 | )% | ||||||
Consolidated
sales
|
$ | 305,094 | $ | 288,576 | 5.7 | % | ||||||
Consolidated
gross profit
|
$ | 97,807 | $ | 79,103 | 23.6 | % | ||||||
Consolidated
gross margin
|
32.1 | % | 27.4 | % | ||||||||
Consolidated
S,G&A
|
$ | 83,527 | $ | 93,501 | (10.7 | )% | ||||||
S,G&A
as a percent of sales
|
27.4 | % | 32.4 | % | ||||||||
Upholstery
operating income (loss)
|
$ | 26,102 | $ | (1,652 | ) | N/M | ||||||
Casegoods
operating income (loss)
|
292 | (313 | ) | 193.3 | % | |||||||
Retail
operating loss
|
(4,135 | ) | (7,108 | ) | 41.8 | % | ||||||
VIE
operating income (loss)
|
350 | (1,381 | ) | 125.3 | % | |||||||
Corporate
and other
|
(7,937 | ) | (2,280 | ) | (248.1 | )% | ||||||
Restructuring
|
(593 | ) | (2,405 | ) | 75.3 | % | ||||||
Long-lived
asset write-down
|
— | (7,036 | ) | 100.0 | % | |||||||
Trade
name write-down
|
— | (5,541 | ) | 100.0 | % | |||||||
Goodwill
write-down
|
— | (40,436 | ) | 100.0 | % | |||||||
Consolidated
operating income (loss)
|
$ | 14,079 | $ | (68,152 | ) | 120.7 | % | |||||
Upholstery
operating margin
|
11.1 | % | (0.8 | )% | ||||||||
Casegoods
operating margin
|
0.8 | % | (0.7 | )% | ||||||||
Retail
operating margin
|
(10.2 | )% | (17.6 | )% | ||||||||
Consolidated
operating margin
|
4.6 | % | (23.6 | )% | ||||||||
Net
income (loss) attributable to La-Z-Boy Incorporated
|
$ | 10,976 | $ | (64,548 | ) | |||||||
Net
income (loss) per share attributable to La-Z-Boy
Incorporated
|
$ | 0.21 | $ | (1.25 | ) | |||||||
N/M
– not meaningful
|
|
·
|
Efficiencies
realized in our domestic upholstery manufacturing facilities resulted in
an increase in our gross margin of 2.6 percentage points. Our conversion
to cellular manufacturing and our various restructurings completed in
recent years resulted in more efficient capacity
utilization. These restructurings eliminated redundant costs by
closing plants and reducing our workforce to enable our operations to run
more efficiently.
|
|
·
|
Raw
material costs decreases resulted in a 2.1 percentage point increase in
our gross margin.
|
|
·
|
Restructuring
charges included in gross profit decreased by $1.3 million resulting in a
0.5 percentage point increase in our gross
margin.
|
|
·
|
A
decrease in bad debt expense for our Upholstery Group resulted in a 4.2
percentage point improvement in our operating
margin.
|
|
·
|
Efficiencies realized in our domestic upholstery manufacturing facilities resulted in an increase in our operating margin of 2.9 percentage points. Our conversion to cellular manufacturing and our various restructurings completed in recent years resulted in more efficient capacity utilization. These restructurings eliminated redundant costs by closing plants and reducing our workforce to enable our operations to run more efficiently. |
|
·
|
A
decrease in raw material costs for our Upholstery Group resulted in a 2.7
percentage point improvement in our operating
margin.
|
|
·
|
Our
Upholstery Group operating income was reduced by $3.3 million in the third
quarter of fiscal 2009 due to the one-time adjustment for the
inter-company profit as a result of the previously mentioned change in
reporting of the retail warehouse operations from the Retail Group to the
Upholstery Group. This adjustment did not affect our
consolidated operating results.
|
|
·
|
An
increase in our Casegoods Group gross margin resulted in a 1.7 percentage
point increase in our Casegoods Group operating
margin.
|
|
·
|
A decrease in bad debt expense for our Casegoods Group resulted in a 1.0 percentage point improvement in our operating margin. |
|
·
|
A
decrease in commissions and salaries and benefits expense resulted in a
5.3 percentage point increase in our Retail Group’s operating
margin. This decrease was a result of changes made to our
selling structure, as well as a decrease in
commissions.
|
|
·
|
A
decrease in occupancy costs for our Retail Group resulted in a 2.7
percentage point improvement in our Retail Group’s operating
margin. This was a result of energy savings and decreases in
common area and store maintenance
charges.
|
|
·
|
An
increase in our Retail Group’s gross margin resulted in a 2.1 percentage
point increase in our Retail Group’s operating
margin.
|
Nine Months Ended
|
||||||||||||
(Unaudited,
amounts in thousands, except per share amounts and percentages)
|
01/23/10
|
01/24/09
|
Percent
change
|
|||||||||
Upholstery
sales
|
$ | 663,734 | $ | 684,252 | (3.0 | )% | ||||||
Casegoods
sales
|
109,196 | 138,710 | (21.3 | )% | ||||||||
Retail
sales
|
114,387 | 122,408 | (6.6 | )% | ||||||||
VIE
sales
|
39,616 | 39,301 | 0.8 | % | ||||||||
Corporate
and Other sales
|
4,143 | 3,362 | 23.2 | % | ||||||||
Eliminations
|
(62,604 | ) | (45,857 | ) | (36.5 | )% | ||||||
Consolidated
sales
|
$ | 868,472 | $ | 942,176 | (7.8 | )% | ||||||
Consolidated
gross profit
|
$ | 273,275 | $ | 245,986 | 11.1 | % | ||||||
Consolidated
gross margin
|
31.5 | % | 26.1 | % | ||||||||
Consolidated
S,G&A
|
$ | 246,011 | $ | 286,603 | (14.2 | )% | ||||||
S,G&A
as a percent of sales
|
28.3 | % | 30.4 | % | ||||||||
Upholstery
operating income
|
$ | 67,751 | $ | 16,542 | 309.6 | % | ||||||
Casegoods
operating income (loss)
|
(13 | ) | 1,819 | (100.7 | )% | |||||||
Retail
operating loss
|
(15,104 | ) | (27,509 | ) | 45.1 | % | ||||||
VIEs
operating loss
|
(118 | ) | (5,422 | ) | 97.8 | % | ||||||
Corporate
and other
|
(23,461 | ) | (16,351 | ) | (43.5 | )% | ||||||
Restructuring
|
(2,813 | ) | (11,904 | ) | 76.4 | % | ||||||
Long-lived
asset write-down
|
— | (7,036 | ) | 100.0 | % | |||||||
Trade
name write-down
|
— | (5,541 | ) | 100.0 | % | |||||||
Goodwill
write-down
|
— | (42,136 | ) | 100.0 | % | |||||||
Consolidated
operating income (loss)
|
$ | 26,242 | $ | (97,538 | ) | 126.9 | % | |||||
Upholstery
operating margin
|
10.2 | % | 2.4 | % | ||||||||
Casegoods
operating margin
|
0.0 | % | 1.3 | % | ||||||||
Retail
operating margin
|
(13.2 | )% | (22.5 | )% | ||||||||
Consolidated
operating margin
|
3.0 | % | (10.4 | )% | ||||||||
Net
income (loss) attributable to La-Z-Boy Incorporated
|
$ | 18,866 | $ | (127,830 | ) | |||||||
Net
income (loss) per share attributable to La-Z-Boy
Incorporated
|
$ | 0.36 | $ | (2.49 | ) |
|
·
|
Efficiencies realized in our domestic upholstery manufacturing facilities resulted in an increase in our gross margin of 2.8 percentage points. Our conversion to cellular manufacturing and our various restructurings completed in recent years resulted in more efficient capacity utilization. These restructurings eliminated redundant costs by closing plants and reducing our workforce to enable our operations to run more efficiently. |
|
·
|
Raw
material cost decreases resulted in a 2.3 percentage point increase in our
gross margin.
|
|
·
|
Restructuring
charges included in gross profit decreased by $7.9 million resulting in a
0.8 percentage point increase in our gross
margin.
|
|
·
|
Efficiencies
realized in our domestic upholstery manufacturing facilities resulted in
an increase in our operating margin of 3.3 percentage points. Our
conversion to cellular manufacturing and our various restructurings
completed in recent years resulted in more efficient capacity
utilization. These restructurings eliminated redundant costs by
closing plants and reducing our workforce to enable our operations to run
more efficiently.
|
|
·
|
A decrease in raw material costs for our Upholstery Group resulted in a 3.1 percentage point improvement in our operating margin. |
|
·
|
A
decrease in bad debt expense for our Upholstery Group resulted in a 1.7
percentage point improvement in our operating
margin.
|
|
·
|
Our
Upholstery Group’s operating profit increased by $1.5 million as a result
of the change in third party freight carrier contracts as noted previously
in our sales discussion.
|
|
·
|
A
decrease in commissions and salaries and benefits expense resulted in a
5.5 percentage point improvement in our Retail Group’s operating
margin. This decrease was a result of changes made to our
selling structure, as well as a decrease in
commissions.
|
|
·
|
A
decrease in advertising expense for our Retail Group resulted in a 1.0
percentage point improvement in our Retail Group’s operating margin, as we
continued to focus on cost effectiveness of our advertising
expenses.
|
Cash Flows Provided By (Used For)
|
Nine Months Ended
|
|||||||
(Unaudited, amounts in thousands)
|
01/23/10
|
01/24/09
|
||||||
Operating
activities
|
||||||||
Net
income (loss)
|
$ | 18,511 | $ | (127,423 | ) | |||
Non-cash
add backs and changes in deferred taxes
|
28,510 | 135,561 | ||||||
Restructuring
|
2,813 | 11,904 | ||||||
Working
capital
|
8,865 | (2,021 | ) | |||||
Cash
provided by operating activities
|
58,699 | 18,021 | ||||||
Investing
activities
|
15,712 | (2,972 | ) | |||||
Financing
activities
|
||||||||
Net
decrease in debt
|
(12,345 | ) | (13,581 | ) | ||||
Other
financing activities, mainly dividends
|
— | (5,188 | ) | |||||
Cash
used for financing activities
|
(12,345 | ) | (18,769 | ) | ||||
Exchange
rate changes
|
81 | (871 | ) | |||||
Net
increase (decrease) in cash and equivalents
|
$ | 62,147 | $ | (4,591 | ) |
Fiscal 2010
|
||||||||||||||||
(Unaudited, amounts in thousands)
|
04/25/09
Balance
|
Charges to
Expense *
|
Cash
Payments
or Asset
Write-Offs
|
01/23/10
Balance
|
||||||||||||
Severance
and benefit-related costs
|
$ | 2,022 | $ | (202 | ) | $ | (816 | ) | $ | 1,004 | ||||||
Contract
termination costs
|
530 | 1,022 | (1,175 | ) | 377 | |||||||||||
Other
|
— | 1,993 | (1,993 | ) | — | |||||||||||
Total
restructuring
|
$ | 2,552 | $ | 2,813 | $ | (3,984 | ) | $ | 1,381 | |||||||
*
Charges to expense include $0.2 million of non-cash charges for contract
termination costs.
|
Fiscal 2009
|
||||||||||||||||
(Unaudited, amounts in thousands)
|
04/26/08
Balance
|
Charges to
Expense **
|
Cash
Payments
or Asset
Write-Offs
|
04/25/09
Balance
|
||||||||||||
Severance
and benefit-related costs
|
$ | 2,842 | $ | 4,149 | $ | (4,969 | ) | $ | 2,022 | |||||||
Fixed
asset write-downs, net of gains
|
— | 512 | (512 | ) | — | |||||||||||
Contract
termination costs
|
939 | 1,528 | (1,937 | ) | 530 | |||||||||||
Other
|
— | 6,271 | (6,271 | ) | — | |||||||||||
Total
restructuring
|
$ | 3,781 | $ | 12,460 | $ | (13,689 | ) | $ | 2,552 |
**
|
Charges
to expense include $1.8 million of non-cash charges for contract
termination costs, fixed asset and inventory write-downs. Inventory
write-downs of $1.2 million are included in
“Other.”
|
Exhibit
Number
|
Description
|
|
(31.1)
|
Certifications
of Chief Executive Officer pursuant to Rule 13a-14(a)
|
|
(31.2)
|
Certifications
of Chief Financial Officer pursuant to Rule 13a-14(a)
|
|
(32)
|
Certifications
of Executive Officers pursuant to 18 U.S.C. Section
1350(b)
|
LA-Z-BOY
INCORPORATED
|
||
(Registrant)
|
BY:
/s/ Margaret L. Mueller
|
||
Margaret
L. Mueller
|
||
Corporate
Controller
|
||
On
behalf of the registrant and as
|
||
Chief
Accounting
Officer
|