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)
|
Class
|
Outstanding at February 8,
2011
|
|
Common
Shares, $1.00 par value
|
|
51,864,806
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Page
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Third Quarter Ended
|
||||||||
(Unaudited, amounts in thousands, except per share
data)
|
01/22/11
|
01/23/10
|
||||||
Sales
|
$ | 291,943 | $ | 305,094 | ||||
Cost
of sales
|
||||||||
Cost
of goods sold
|
203,662 | 206,930 | ||||||
Restructuring
|
(65 | ) | 392 | |||||
Total
cost of sales
|
203,597 | 207,322 | ||||||
Gross
profit
|
88,346 | 97,772 | ||||||
Selling,
general and administrative
|
78,057 | 83,811 | ||||||
Restructuring
|
297 | 201 | ||||||
Operating
income
|
9,992 | 13,760 | ||||||
Interest
expense
|
561 | 577 | ||||||
Interest
income
|
250 | 140 | ||||||
Income
from Continued Dumping and Subsidy Offset Act, net
|
903 | 4,436 | ||||||
Other
income (expense), net
|
251 | (593 | ) | |||||
Earnings
before income taxes
|
10,835 | 17,166 | ||||||
Income
tax expense
|
2,451 | 6,502 | ||||||
Net
income
|
8,384 | 10,664 | ||||||
Net
loss attributable to noncontrolling interests
|
1,626 | 489 | ||||||
Net
income attributable to La-Z-Boy Incorporated
|
$ | 10,010 | $ | 11,153 | ||||
Basic
average shares
|
51,865 | 51,546 | ||||||
Basic
net income attributable to La-Z-Boy Incorporated per share
|
$ | 0.19 | $ | 0.21 | ||||
Diluted
average shares
|
52,270 | 51,845 | ||||||
Diluted
net income attributable to La-Z-Boy Incorporated per share
|
$ | 0.19 | $ | 0.21 |
Nine Months Ended
|
||||||||
(Unaudited, amounts in thousands, except per share
data)
|
01/22/11
|
01/23/10
|
||||||
Sales
|
$ | 848,239 | $ | 868,472 | ||||
Cost
of sales
|
||||||||
Cost
of goods sold
|
602,101 | 594,645 | ||||||
Restructuring
|
(148 | ) | 1,791 | |||||
Total
cost of sales
|
601,953 | 596,436 | ||||||
Gross
profit
|
246,286 | 272,036 | ||||||
Selling,
general and administrative
|
232,033 | 246,346 | ||||||
Restructuring
|
572 | 1,022 | ||||||
Operating
income
|
13,681 | 24,668 | ||||||
Interest
expense
|
1,743 | 2,387 | ||||||
Interest
income
|
716 | 615 | ||||||
Income
from Continued Dumping and Subsidy Offset Act, net
|
903 | 4,436 | ||||||
Other
income (expense), net
|
182 | 242 | ||||||
Earnings
before income taxes
|
13,739 | 27,574 | ||||||
Income
tax expense
|
3,126 | 10,027 | ||||||
Net
income
|
10,613 | 17,547 | ||||||
Net
loss attributable to noncontrolling interests
|
3,126 | 1,149 | ||||||
Net
income attributable to La-Z-Boy Incorporated
|
$ | 13,739 | $ | 18,696 | ||||
Basic
average shares
|
51,835 | 51,517 | ||||||
Basic
net income attributable to La-Z-Boy Incorporated per share
|
$ | 0.26 | $ | 0.36 | ||||
Diluted
average shares
|
52,242 | 51,595 | ||||||
Diluted
net income attributable to La-Z-Boy Incorporated per share
|
$ | 0.26 | $ | 0.36 |
(Unaudited, amounts in
thousands)
|
01/22/11
|
04/24/10
|
||||||
Current
assets
|
||||||||
Cash
and equivalents
|
$ | 109,632 | $ | 108,427 | ||||
Receivables,
net of allowance of $23,318 at 01/22/11 and $20,258 at
04/24/10
|
154,277 | 165,001 | ||||||
Inventories,
net
|
142,051 | 132,480 | ||||||
Deferred
income taxes – current
|
2,314 | 2,305 | ||||||
Other
current assets
|
19,443 | 18,862 | ||||||
Total
current assets
|
427,717 | 427,075 | ||||||
Property,
plant and equipment, net
|
128,310 | 138,857 | ||||||
Trade
names
|
3,100 | 3,100 | ||||||
Deferred
income taxes – long-term
|
458 | 458 | ||||||
Other
long-term assets
|
36,357 | 38,293 | ||||||
Total
assets
|
$ | 595,942 | $ | 607,783 | ||||
Current
liabilities
|
||||||||
Current
portion of long-term debt
|
$ | 5,099 | $ | 1,066 | ||||
Accounts
payable
|
50,734 | 54,718 | ||||||
Accrued
expenses and other current liabilities
|
77,061 | 91,523 | ||||||
Total
current liabilities
|
132,894 | 147,307 | ||||||
Long-term
debt
|
40,030 | 46,917 | ||||||
Other
long-term liabilities
|
66,557 | 70,445 | ||||||
Contingencies
and commitments
|
— | — | ||||||
Equity
|
||||||||
La-Z-Boy
Incorporated shareholders’ equity:
|
||||||||
Common
shares, $1 par value
|
51,865 | 51,770 | ||||||
Capital
in excess of par value
|
201,544 | 201,873 | ||||||
Retained
earnings
|
124,138 | 106,466 | ||||||
Accumulated
other comprehensive loss
|
(18,753 | ) | (20,284 | ) | ||||
Total
La-Z-Boy Incorporated shareholders' equity
|
358,794 | 339,825 | ||||||
Noncontrolling
interests
|
(2,333 | ) | 3,289 | |||||
Total
equity
|
356,461 | 343,114 | ||||||
Total
liabilities and equity
|
$ | 595,942 | $ | 607,783 |
Nine Months Ended
|
||||||||
(Unaudited, amounts in
thousands)
|
01/22/11
|
01/23/10
|
||||||
Cash
flows from operating activities
|
||||||||
Net
income
|
$ | 10,613 | $ | 17,547 | ||||
Adjustments
to reconcile net income to cash provided by operating
activities
|
||||||||
(Gain)
loss on sale of assets
|
112 | (50 | ) | |||||
Restructuring
|
424 | 2,813 | ||||||
Provision
for doubtful accounts
|
3,739 | 5,593 | ||||||
Depreciation
and amortization
|
17,745 | 19,186 | ||||||
Stock-based
compensation expense
|
3,043 | 4,082 | ||||||
Pension
plan contributions
|
(2,500 | ) | — | |||||
Change
in receivables
|
10,995 | (14,101 | ) | |||||
Change
in inventories
|
(14,138 | ) | (4,192 | ) | ||||
Change
in other assets
|
(3,120 | ) | 6,224 | |||||
Change
in payables
|
(3,232 | ) | 6,676 | |||||
Change
in other liabilities
|
(12,976 | ) | 15,222 | |||||
Change
in deferred taxes
|
11 | (301 | ) | |||||
Total
adjustments
|
103 | 41,152 | ||||||
Net
cash provided by operating activities
|
10,716 | 58,699 | ||||||
Cash
flows from investing activities
|
||||||||
Proceeds
from disposals of assets
|
423 | 1,925 | ||||||
Capital
expenditures
|
(8,169 | ) | (5,708 | ) | ||||
Purchases
of investments
|
(8,290 | ) | (3,934 | ) | ||||
Proceeds
from sales of investments
|
8,013 | 5,793 | ||||||
Change
in restricted cash
|
— | 17,507 | ||||||
Other
|
(51 | ) | 129 | |||||
Net
cash provided by (used for) investing activities
|
(8,074 | ) | 15,712 | |||||
Cash
flows from financing activities
|
||||||||
Proceeds
from debt
|
30,488 | 31,391 | ||||||
Payments
on debt
|
(31,450 | ) | (43,736 | ) | ||||
Stock
issued from stock plans
|
58 | — | ||||||
Net
cash used for financing activities
|
(904 | ) | (12,345 | ) | ||||
Effect
of exchange rate changes on cash and equivalents
|
99 | 81 | ||||||
Change
in cash and equivalents
|
1,837 | 62,147 | ||||||
Cash
reduction upon deconsolidation of VIE
|
(632 | ) | — | |||||
Cash
and equivalents at beginning of period
|
108,427 | 17,370 | ||||||
Cash
and equivalents at end of period
|
$ | 109,632 | $ | 79,517 |
(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 25, 2009 (previously reported)
|
$ | 51,478 | $ | 205,945 | $ | 67,431 | $ | (22,559 | ) | $ | 4,137 | $ | 306,432 | |||||||||||
Cumulative
effect of accounting corrections
|
(2,404 | ) | (609 | ) | (3,013 | ) | ||||||||||||||||||
Comprehensive
income
|
||||||||||||||||||||||||
Net
income (loss)
|
32,701 | (1,341 | ) | |||||||||||||||||||||
Unrealized
gain on marketable securities arising during the period
|
2,685 | |||||||||||||||||||||||
Reclassification
adjustment for gain on marketable securities included in net
income
|
(97 | ) | ||||||||||||||||||||||
Translation
adjustment
|
(190 | ) | 403 | |||||||||||||||||||||
Change
in fair value of cash flow hedge
|
146 | |||||||||||||||||||||||
Net
pension amortization and net actuarial loss
|
340 | |||||||||||||||||||||||
Total
comprehensive income
|
34,647 | |||||||||||||||||||||||
Stock
issued for stock and employee benefit plans, net of
cancellations
|
292 | (9,294 | ) | 8,738 | (264 | ) | ||||||||||||||||||
Stock
option, restricted stock and performance based stock
expense
|
5,222 | 5,222 | ||||||||||||||||||||||
Change
in noncontrolling interest
|
90 | 90 | ||||||||||||||||||||||
At
April 24, 2010
|
51,770 | 201,873 | 106,466 | (20,284 | ) | 3,289 | 343,114 | |||||||||||||||||
Comprehensive
income
|
||||||||||||||||||||||||
Net
income (loss)
|
13,739 | (3,126 | ) | |||||||||||||||||||||
Unrealized
loss on marketable securities arising during the period
|
499 | |||||||||||||||||||||||
Reclassification
adjustment for gain on marketable securities included in net
income
|
(471 | ) | ||||||||||||||||||||||
Translation
adjustment
|
(186 | ) | 221 | |||||||||||||||||||||
Net
pension amortization
|
1,305 | |||||||||||||||||||||||
Change
in fair value of cash flow hedge
|
384 | |||||||||||||||||||||||
Total
comprehensive income
|
12,365 | |||||||||||||||||||||||
Stock
issued for stock and employee benefit plans, net of
cancellations
|
95 | (3,372 | ) | 3,008 | (269 | ) | ||||||||||||||||||
Stock
option and restricted stock expense
|
3,043 | 3,043 | ||||||||||||||||||||||
Cumulative
effect of change in accounting for equity and noncontrolling
interest
|
925 | (2,717 | ) | (1,792 | ) | |||||||||||||||||||
At
January 22, 2011
|
$ | 51,865 | $ | 201,544 | $ | 124,138 | $ | (18,753 | ) | $ | (2,333 | ) | $ | 356,461 |
Quarter Ended 01/23/10
|
||||||||||||
(Unaudited, amounts in thousands, except per share data)
|
01/23/10
(as previously
reported)
|
Adjustments
|
01/23/10
(as adjusted)
|
|||||||||
Net
income attributable to La-Z-Boy Incorporated
|
$ | 10,976 | $ | 177 | $ | 11,153 | ||||||
Diluted
net income attributable to La-Z-Boy Incorporated per share
|
$ | 0.21 | $ | — | $ | 0.21 |
Nine Months Ended 01/23/10
|
||||||||||||
(Unaudited, amounts in thousands, except per share data)
|
01/23/10
(as previously
reported)
|
Adjustments
|
01/23/10
(as adjusted)
|
|||||||||
Net
income attributable to La-Z-Boy Incorporated
|
$ | 18,866 | $ | (170 | ) | $ | 18,696 | |||||
Diluted
net income attributable to La-Z-Boy Incorporated per share
|
$ | 0.36 | $ | — | $ | 0.36 |
As of 04/24/10
|
||||||||||||
(Unaudited, amounts in thousands)
|
04/24/10
(as previously
reported)
|
Adjustments
|
04/24/10
(as adjusted)
|
|||||||||
Inventories,
net
|
$ | 134,187 | $ | (1,707 | ) | $ | 132,480 | |||||
Other
current assets
|
$ | 18,159 | $ | 703 | $ | 18,862 | ||||||
Other
long-term liabilities
|
$ | 68,381 | $ | 2,064 | $ | 70,445 | ||||||
Retained
earnings
|
$ | 108,707 | $ | (2,241 | ) | $ | 106,466 | |||||
Accumulated
other comprehensive income
|
$ | (20,251 | ) | $ | (33 | ) | $ | (20,284 | ) | |||
Noncontrolling
interests
|
$ | 4,141 | $ | (852 | ) | $ | 3,289 |
04/24/10
|
||||||||
(Unaudited, amounts in thousands)
|
01/22/11
|
(as adjusted)
|
||||||
Raw
materials
|
$ | 66,661 | $ | 60,913 | ||||
Work
in process
|
12,026 | 11,018 | ||||||
Finished
goods
|
88,071 | 85,256 | ||||||
FIFO
inventories
|
166,758 | 157,187 | ||||||
Excess
of FIFO over LIFO
|
(24,707 | ) | (24,707 | ) | ||||
Inventories,
net
|
$ | 142,051 | $ | 132,480 |
Third Quarter Ended
|
Nine Months Ended
|
|||||||||||||||
(Unaudited, amounts in thousands)
|
01/22/11
|
01/23/10
|
01/22/11
|
01/23/10
|
||||||||||||
Service
cost
|
$ | 291 | $ | 261 | $ | 873 | $ | 783 | ||||||||
Interest
cost
|
1,356 | 1,400 | 4,068 | 4,200 | ||||||||||||
Expected
return on plan assets
|
(1,478 | ) | (1,206 | ) | (4,434 | ) | (3,618 | ) | ||||||||
Net
amortization
|
435 | 527 | 1,305 | 1,581 | ||||||||||||
Net
periodic pension cost
|
$ | 604 | $ | 982 | $ | 1,812 | $ | 2,946 |
Third Quarter Ended
|
Nine Months Ended
|
|||||||||||||||
(Unaudited, amounts in
thousands)
|
01/22/11
|
01/23/10
|
01/22/11
|
01/23/10
|
||||||||||||
Balance
as of the beginning of the period
|
$ | 14,859 | $ | 14,293 | $ | 14,773 | $ | 14,394 | ||||||||
Accruals
during the period
|
3,436 | 3,658 | 10,146 | 10,378 | ||||||||||||
Accrual
adjustments
|
(1,115 | ) | — | (1,115 | ) | — | ||||||||||
Settlements
during the period
|
(3,372 | ) | (3,479 | ) | (9,996 | ) | (10,300 | ) | ||||||||
Balance
as of the end of the period
|
$ | 13,808 | $ | 14,472 | $ | 13,808 | $ | 14,472 |
Third Quarter Ended
|
Nine Months Ended
|
|||||||||||||||
(Unaudited, amounts in thousands)
|
01/22/11
|
01/23/10
|
01/22/11
|
01/23/10
|
||||||||||||
Net
income
|
$ | 8,384 | $ | 10,664 | $ | 10,613 | $ | 17,547 | ||||||||
Other
comprehensive income (loss):
|
||||||||||||||||
Currency
translation adjustment
|
(484 | ) | 50 | 35 | (48 | ) | ||||||||||
Change
in fair value of cash flow hedge
|
148 | 11 | 384 | 13 | ||||||||||||
Net
unrealized gains (losses) on marketable securities arising during the
period
|
293 | 598 | 28 | 2,136 | ||||||||||||
Net
pension amortization
|
435 | 527 | 1,305 | 1,582 | ||||||||||||
Total
other comprehensive income
|
392 | 1,186 | 1,752 | 3,683 | ||||||||||||
Total
comprehensive income before allocation to noncontrolling
interest
|
8,776 | 11,850 | 12,365 | 21,230 | ||||||||||||
Comprehensive
loss attributable to noncontrolling interest
|
1,767 | 449 | 2,905 | 956 | ||||||||||||
Comprehensive
income attributable to La-Z-Boy Incorporated
|
$ | 10,543 | $ | 12,299 | $ | 15,270 | $ | 22,186 |
Third Quarter Ended
|
Nine Months Ended
|
|||||||||||||||
(Unaudited, amounts in thousands)
|
01/22/11
|
01/23/10
|
01/22/11
|
01/23/10
|
||||||||||||
Sales
|
||||||||||||||||
Upholstery
Group
|
$ | 225,213 | $ | 234,262 | $ | 652,025 | $ | 663,734 | ||||||||
Casegoods
Group
|
35,426 | 36,029 | 111,785 | 109,196 | ||||||||||||
Retail
Group
|
44,146 | 40,411 | 118,699 | 114,387 | ||||||||||||
VIEs
|
10,173 | 15,629 | 25,459 | 39,616 | ||||||||||||
Corporate
and Other
|
612 | 603 | 1,438 | 4,143 | ||||||||||||
Eliminations
|
(23,627 | ) | (21,840 | ) | (61,167 | ) | (62,604 | ) | ||||||||
Consolidated
Sales
|
$ | 291,943 | $ | 305,094 | $ | 848,239 | $ | 868,472 | ||||||||
Operating
Income (Loss)
|
||||||||||||||||
Upholstery
Group
|
$ | 18,468 | $ | 26,071 | $ | 45,580 | $ | 67,122 | ||||||||
Casegoods
Group
|
1,648 | 292 | 4,599 | (13 | ) | |||||||||||
Retail
Group
|
(2,759 | ) | (4,135 | ) | (12,043 | ) | (15,104 | ) | ||||||||
VIEs
|
(1,130 | ) | 62 | (3,842 | ) | (1,063 | ) | |||||||||
Corporate
and Other
|
(6,003 | ) | (7,937 | ) | (20,189 | ) | (23,461 | ) | ||||||||
Restructuring
|
(232 | ) | (593 | ) | (424 | ) | (2,813 | ) | ||||||||
Consolidated
Operating Income
|
$ | 9,992 | $ | 13,760 | $ | 13,681 | $ | 24,668 |
Fiscal 2011
|
||||||||||||||||
(Unaudited, amounts in thousands)
|
04/24/10
Balance
|
Charges to
Expense *
|
Cash
Payments
or Asset
Write-Downs
|
01/22/11
Balance
|
||||||||||||
Severance
and benefit-related costs
|
$ | 492 | $ | (148 | ) | $ | (249 | ) | $ | 95 | ||||||
Contract
termination costs
|
292 | 572 | (710 | ) | 154 | |||||||||||
Total
restructuring
|
$ | 784 | $ | 424 | $ | (959 | ) | $ | 249 |
As of
|
||||||||
(Unaudited, amounts in thousands)
|
01/22/11
|
04/24/10
(as adjusted)
|
||||||
Cash
and equivalents
|
$ | 1,140 | $ | 2,075 | ||||
Receivables,
net
|
226 | 114 | ||||||
Inventories,
net
|
5,379 | 11,884 | ||||||
Other
current assets
|
996 | 1,745 | ||||||
Property,
plant and equipment, net
|
3,193 | 8,940 | ||||||
Other
long-term assets, net
|
382 | 148 | ||||||
Total
assets
|
$ | 11,316 | $ | 24,906 | ||||
Current
portion of long-term debt
|
$ | — | $ | 128 | ||||
Accounts
payable
|
333 | 1,048 | ||||||
Accrued
expenses and other current liabilities
|
5,107 | 7,776 | ||||||
Long-term
debt
|
— | 1,770 | ||||||
Other
long-term liabilities
|
2,729 | 2,852 | ||||||
Total
liabilities
|
$ | 8,169 | $ | 13,574 |
Third Quarter Ended
|
Nine Months Ended
|
|||||||||||||||
(Unaudited, amounts in thousands)
|
01/22/11
|
01/23/10
|
01/22/11
|
01/23/10
|
||||||||||||
Numerator
(basic and diluted):
|
||||||||||||||||
Net
income attributable to La-Z-Boy Incorporated
|
$ | 10,010 | $ | 11,153 | $ | 13,739 | $ | 18,696 | ||||||||
Income
allocated to participating securities
|
(200 | ) | (226 | ) | (269 | ) | (348 | ) | ||||||||
Net
income available to common shareholders
|
$ | 9,810 | $ | 10,927 | $ | 13,470 | $ | 18,348 |
Third Quarter Ended
|
Nine Months Ended
|
|||||||||||||||
(Unaudited, amounts in thousands)
|
01/22/11
|
01/23/10
|
01/22/11
|
01/23/10
|
||||||||||||
Denominator:
|
||||||||||||||||
Basic
common shares (based upon weighted average)
|
51,865 | 51,546 | 51,835 | 51,517 | ||||||||||||
Add:
|
||||||||||||||||
Stock
option dilution
|
405 | 299 | 407 | 78 | ||||||||||||
Diluted
common shares
|
52,270 | 51,845 | 52,242 | 51,595 |
|
·
|
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
|
$ | 8,287 | $ | 2,542 | $ | — | ||||||
Liabilities
|
||||||||||||
Interest
rate swap
|
— | (193 | ) | — | ||||||||
Total
|
$ | 8,287 | $ | 2,349 | $ | — |
future
income, margins and cash flows
|
future
economic performance
|
|
future
growth
|
industry
and importing trends
|
|
adequacy
and cost of financial resources
|
|
management
plans
|
|
·
|
Upholstery Group.
In terms of revenue, our largest segment is the Upholstery Group, which
includes La-Z-Boy, our largest operating unit, as well as the Bauhaus and
England operating units. The Upholstery Group primarily
manufactures and sells upholstered furniture such as recliners and motion
furniture, sofas, loveseats, chairs, ottomans and sleeper sofas to
furniture retailers and proprietary stores. It sells mainly to
La-Z-Boy Furniture Galleries® stores, operators of Comfort Studios®,
general dealers and department
stores.
|
|
·
|
Casegoods Group.
Our Casegoods Group is primarily an importer, marketer and distributor of
casegoods (wood) furniture such as bedroom sets, dining room sets,
entertainment centers, and accent pieces, as well as some coordinated
upholstered furniture. The operating units in the Casegoods Group
consist of two subgroups: one consisting of American Drew, Lea, and
Hammary, and the second being
Kincaid.
|
|
·
|
Retail Group. Our
Retail Group consists of the 68 company-owned La-Z-Boy Furniture
Galleries® stores located in eight markets ranging from the Midwest to the
east coast of the United States and also including southeastern
Florida. The Retail Group primarily sells upholstered furniture, as
well as some casegoods and other accessories, to end consumers through the
retail network.
|
(Unaudited, amounts in thousands, except percentages)
|
01/22/11
|
01/23/10
|
Percent
change
|
|||||||||
Consolidated
sales
|
$ | 291,943 | $ | 305,094 | (4.3 | )% | ||||||
Consolidated
operating income
|
9,992 | 13,760 | (27.4 | )% | ||||||||
Consolidated
operating margin
|
3.4 | % | 4.5 | % |
|
·
|
Our
gross margin decreased 1.7 percentage points in the third quarter of
fiscal 2011 compared to the third quarter of fiscal
2010.
|
|
o
|
Increases
in raw material costs resulted in a 1.3 percentage point decrease in our
consolidated gross margin.
|
|
o
|
Changes
in our product mix resulted in a 0.9 percentage point decrease in gross
margin as demand shifted to more promotional products and impacted our
average selling price.
|
|
o
|
Offsetting
the raw material and changes in the product mix were benefits from ongoing
cost reductions.
|
|
·
|
Increases
in advertising expense, as a result of the focus on our brand platform
resulted in a 0.5 percentage point decrease in our operating
margin.
|
|
·
|
Decreases
in occupancy related expenses as a percent of sales, mainly as a result of
our Retail Group’s increased sales resulted in a 0.6 percentage point
increase in our operating margin.
|
|
·
|
Decreases
in warranty expense as a result of our reduction in warranty accruals due
to redesigning a mechanism that had historically experienced high claims
activity resulted in a 0.3 percentage point increase in our operating
margin.
|
(Unaudited, amounts in thousands, except percentages)
|
01/22/11
|
01/23/10
|
Percent
change
|
|||||||||
Sales
|
$ | 225,213 | $ | 234,262 | (3.9 | )% | ||||||
Operating
income
|
18,468 | 26,071 | (29.2 | )% | ||||||||
Operating
margin
|
8.2 | % | 11.1 | % |
|
·
|
The
segment’s gross margin decreased 1.7 percentage points during the third
quarter of fiscal 2011 compared to the third quarter of fiscal 2010 due to
increased raw material costs and the decrease in sales volume which
impacted our absorption of overhead
costs.
|
|
·
|
Decreases
in sales pricing and changes in the product mix of this segment resulted
in a 1.1 percentage point decrease in the segment’s operating
margin.
|
|
·
|
Increased
advertising expense as a result of the focus on our brand platform
resulted in a 0.9 percentage point decrease in the segment’s operating
margin.
|
|
·
|
Increases
in our warehousing expense resulted in a 0.4 percentage point decrease in
the segment’s operating margin. This increase was the result of
the addition of our new regional distribution center opened at the end of
fiscal 2010.
|
|
·
|
An
increase in bad debt resulted in a 0.4 percentage point decrease in the
segment’s operating margin due to one significant bankruptcy during the
quarter.
|
·
|
Somewhat offsetting the negative impacts to this
segment’s operating margin mentioned above were ongoing cost reductions
and a decrease in warranty expense, which resulted in 1.3 and 0.5
percentage point increases, respectively, in the segment’s operating
margin.
|
(Unaudited, amounts in thousands, except percentages)
|
01/22/11
|
01/23/10
|
Percent
change
|
|||||||||
Sales
|
$ | 35,426 | $ | 36,029 | (1.7 | )% | ||||||
Operating
income (loss)
|
1,648 | 292 | 464.4 | % | ||||||||
Operating
margin
|
4.7 | % | 0.8 | % |
|
·
|
The
segment’s gross margin increased 1.9 percentage points in the third
quarter of fiscal 2011 compared to the third quarter of fiscal 2010 mainly
due to our decision to vacate a leased warehouse and convert an owned
facility to a warehouse, as well as efficiencies realized from the
consolidation of our manufacturing plants completed at the end of fiscal
2010.
|
|
·
|
A
decrease in employee expenses for this segment resulted in a 1.2
percentage point increase in operating margin. The combining of
our Hammary operations with our American Drew/Lea operations resulted in a
reduction in headcount and elimination of duplicate selling, general and
administrative functions.
|
(Unaudited, amounts in thousands, except percentages)
|
01/22/11
|
01/23/10
|
Percent
change
|
|||||||||
Sales
|
$ | 44,146 | $ | 40,411 | 9.2 | % | ||||||
Operating
loss
|
(2,759 | ) | (4,135 | ) | 33.3 | % | ||||||
Operating
margin
|
(6.2 | )% | (10.2 | )% |
|
·
|
The
segment’s gross margin during the third quarter of fiscal 2011 decreased
0.4 percentage points compared to the third quarter of fiscal 2010 due to
an increase in wholesale prices which more than offset a slight increase
in selling price.
|
|
·
|
The
improved operating margin for this segment was primarily a result of the
increased sales volume on essentially no change in operating
expenses.
|
(Unaudited, amounts in thousands, except percentages)
|
01/22/11
|
01/23/10
|
Percent
change
|
|||||||||
Consolidated
sales
|
$ | 848,239 | $ | 868,472 | (2.3 | )% | ||||||
Consolidated
operating income
|
13,681 | 24,668 | (44.5 | )% | ||||||||
Consolidated
operating margin
|
1.6 | % | 2.8 | % |
|
·
|
Our
gross margin decreased by 2.3 percentage points during the first nine
months of fiscal 2011 compared to the first nine months of fiscal
2010.
|
|
o
|
Increases
in raw material costs resulted in a 1.8 percentage point decrease in our
consolidated gross margin.
|
|
o
|
Changes
in our product mix resulted in a 0.8 percentage point decrease in gross
margin.
|
|
o
|
Cost
reductions partially offset the raw material and product mix
changes.
|
|
·
|
Decreases
in employee incentive compensation expenses as a result of our lower
operating performance during the first nine months of fiscal 2011 compared
to the first nine months of fiscal 2010 resulted in a 0.6 percentage point
improvement in our operating
margin.
|
|
·
|
Decreases
in occupancy related expenses as percent of sales, mainly a result of our
Retail Group’s increased sales, resulted in a 0.5 percentage point
increase in our operating margin.
|
(Unaudited, amounts in thousands, except percentages)
|
01/22/11
|
01/23/10
|
Percent
change
|
|||||||||
Sales
|
$ | 652,025 | $ | 663,734 | (1.8 | )% | ||||||
Operating
income
|
45,580 | 67,122 | (32.1 | )% | ||||||||
Operating
margin
|
7.0 | % | 10.1 | % |
|
·
|
The
segment’s gross margin decreased by 2.7 percentage points during the first
nine months of fiscal 2011 compared to the first nine months of fiscal
2010 due to increased raw material costs, decreasing our margin by 2.4
percentage points, and the decrease in sales volume which impacted our
absorption of overhead costs.
|
|
·
|
Decreases
in selling prices and changes in the product mix of this segment resulted
in a 1.2 percentage point decrease in the segment’s operating
margin.
|
|
·
|
Increases
in our warehousing expense resulted in a 0.5 percentage point decrease in
the segment’s operating margin. This increase was the result of
the addition of our new regional distribution center opened at the end of
fiscal 2010.
|
|
·
|
Increased
advertising expense as a result of the focus on our brand platform
resulted in a 0.3 percentage point decrease in the segment’s operating
margin.
|
|
·
|
Somewhat
offsetting the negative impacts to this segment’s operating margin
mentioned above were ongoing cost reductions, as well as a decrease in the
segment’s bad debt expense which resulted in 1.3 and 0.5 percentage point
increases in the segment’s operating
margin.
|
(Unaudited,
amounts in thousands, except percentages)
|
01/22/11
|
01/23/10
|
Percent
change
|
|||||||||
Sales
|
$ | 111,785 | $ | 109,196 | 2.4 | % | ||||||
Operating
income (loss)
|
4,599 | (13 | ) | N/M | ||||||||
Operating
margin
|
4.1 | % | 0.0 | % | ||||||||
N/M
– not meaningful
|
|
·
|
The
segment’s gross margin increased 2.6 percentage points in the first nine
months of fiscal 2011 compared to the first nine months of fiscal 2010
mainly due to our decision to vacate a leased warehouse and convert an
owned facility to a warehouse, as well as efficiencies realized in its
manufacturing facility due to the changes completed at the end of fiscal
2010.
|
|
·
|
A
decrease in employee expenses for this segment resulted in a 1.1
percentage point increase in operating margin. The combining of
our Hammary operations with our American Drew/Lea operations resulted in a
reduction in headcount and elimination of duplicate selling, general and
administrative functions.
|
(Unaudited, amounts in thousands, except percentages)
|
01/22/11
|
01/23/10
|
Percent
change
|
|||||||||
Sales
|
$ | 118,699 | $ | 114,387 | 3.8 | % | ||||||
Operating
loss
|
(12,043 | ) | (15,104 | ) | 20.3 | % | ||||||
Operating
margin
|
(10.1 | )% | (13.2 | )% |
|
·
|
The
segment experienced a 1.2 percentage point improvement in gross margin
during the first nine months of fiscal 2011 compared to the first nine
months of fiscal 2010 due to changes in the segment’s sales initiatives
and merchandising.
|
|
·
|
The
improved operating margin for this segment was primarily a result of the
increased sales volume on essentially no change in operating
expenses.
|
Cash Flows Provided By (Used For)
|
Nine Months Ended
|
|||||||
(Unaudited, amounts in
thousands)
|
01/22/11
|
01/23/10
|
||||||
Operating
activities
|
||||||||
Net
income
|
$ | 10,613 | $ | 17,547 | ||||
Non-cash
add backs and changes in deferred taxes
|
24,650 | 28,510 | ||||||
Restructuring
|
424 | 2,813 | ||||||
Working
capital
|
(24,971 | ) | 9,829 | |||||
Cash
provided by operating activities
|
10,716 | 58,699 | ||||||
Cash
provided by (used for) investing activities
|
(8,074 | ) | 15,712 | |||||
Financing
activities
|
||||||||
Net
decrease in debt
|
(962 | ) | (12,345 | ) | ||||
Stock
issued from stock plans
|
58 | — | ||||||
Cash
used for financing activities
|
(904 | ) | (12,345 | ) | ||||
Exchange
rate changes
|
99 | 81 | ||||||
Net
increase in cash and equivalents
|
$ | 1,837 | $ | 62,147 |
|
·
|
Decrease
in accounts receivable of $11.0
million.
|
|
·
|
Increase
in inventory levels of $14.1 million due to our focus on being in a better
service position for our customers.
|
|
·
|
Decrease
in other liabilities of $13.0 million due to payments of accrued benefits
and decreases in our estimated income tax
liability.
|
|
·
|
Increase
in accounts receivable of $14.1 million due to our improved sales
volume.
|
|
·
|
Increase
in inventory levels of $4.2 million due to our expected increase in sales
volume.
|
|
·
|
Decrease
in other assets of $6.2 million primarily due to a refund of income
taxes.
|
|
·
|
Increase
in accounts payable of $6.7
million.
|
|
·
|
Increase
in other liabilities of $15.2 million primarily due to an increase in
accrued benefit payments and customer
deposits.
|
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)
|
||
Date:
February 15, 2011
|
||
BY: /s/ Margaret L.
Mueller
|
||
Margaret
L. Mueller
|
||
Corporate
Controller
|
||
On
behalf of the Registrant and as
|
||
Chief
Accounting Officer
|