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 November 17,
2010
|
|
Common
Shares, $1.00 par value
|
51,864,806
|
Page
Number(s)
|
|||
|
|||
|
|||
|
|||
|
|||
|
|
Second Quarter Ended
|
||||||||
(Unaudited, amounts in thousands, except per share
data)
|
10/23/10
|
10/24/09
|
||||||
Sales
|
$ | 292,982 | $ | 300,707 | ||||
Cost
of sales
|
||||||||
Cost
of goods sold
|
207,938 | 205,602 | ||||||
Restructuring
|
(62 | ) | 663 | |||||
Total
cost of sales
|
207,876 | 206,265 | ||||||
Gross
profit
|
85,106 | 94,442 | ||||||
Selling,
general and administrative
|
79,657 | 84,619 | ||||||
Restructuring
|
110 | 520 | ||||||
Operating
income
|
5,339 | 9,303 | ||||||
Interest
expense
|
592 | 831 | ||||||
Interest
income
|
223 | 199 | ||||||
Other
income (expense), net
|
(418 | ) | 236 | |||||
Earnings
before income taxes
|
4,552 | 8,907 | ||||||
Income
tax expense
|
1,381 | 3,529 | ||||||
Net
income
|
3,171 | 5,378 | ||||||
Net
loss attributable to noncontrolling interests
|
774 | 588 | ||||||
Net
income attributable to La-Z-Boy Incorporated
|
$ | 3,945 | $ | 5,966 | ||||
Basic
average shares
|
51,855 | 51,527 | ||||||
Basic
net income attributable to La-Z-Boy Incorporated per share
|
$ | 0.07 | $ | 0.11 | ||||
Diluted
average shares
|
52,214 | 51,755 | ||||||
Diluted
net income attributable to La-Z-Boy Incorporated per share
|
$ | 0.07 | $ | 0.11 |
Six Months Ended
|
||||||||
(Unaudited, amounts in thousands, except per share
data)
|
10/23/10
|
10/24/09
|
||||||
Sales
|
$ | 556,296 | $ | 563,378 | ||||
Cost
of sales
|
||||||||
Cost
of goods sold
|
398,439 | 387,715 | ||||||
Restructuring
|
(83 | ) | 1,399 | |||||
Total
cost of sales
|
398,356 | 389,114 | ||||||
Gross
profit
|
157,940 | 174,264 | ||||||
Selling,
general and administrative
|
153,976 | 162,535 | ||||||
Restructuring
|
275 | 821 | ||||||
Operating
income
|
3,689 | 10,908 | ||||||
Interest
expense
|
1,182 | 1,811 | ||||||
Interest
income
|
466 | 475 | ||||||
Other
income (expense), net
|
(69 | ) | 837 | |||||
Earnings
before income taxes
|
2,904 | 10,409 | ||||||
Income
tax expense
|
675 | 3,526 | ||||||
Net
income
|
2,229 | 6,883 | ||||||
Net
loss attributable to noncontrolling interests
|
1,500 | 660 | ||||||
Net
income attributable to La-Z-Boy Incorporated
|
$ | 3,729 | $ | 7,543 | ||||
Basic
average shares
|
51,820 | 51,503 | ||||||
Basic
net income attributable to La-Z-Boy Incorporated per share
|
$ | 0.07 | $ | 0.14 | ||||
Diluted
average shares
|
52,228 | 51,551 | ||||||
Diluted
net income attributable to La-Z-Boy Incorporated per share
|
$ | 0.07 | $ | 0.14 |
(Unaudited, amounts in
thousands)
|
10/23/10
|
04/24/10
|
||||||
Current
assets
|
||||||||
Cash
and equivalents
|
$ | 83,656 | $ | 108,427 | ||||
Receivables,
net of allowance of $22,596 at 10/23/10 and $20,258 at
04/24/10
|
168,974 | 165,001 | ||||||
Inventories,
net
|
140,703 | 132,480 | ||||||
Deferred
income taxes – current
|
2,305 | 2,305 | ||||||
Other
current assets
|
20,807 | 18,862 | ||||||
Total
current assets
|
416,445 | 427,075 | ||||||
Property,
plant and equipment, net
|
131,070 | 138,857 | ||||||
Trade
names
|
3,100 | 3,100 | ||||||
Deferred
income taxes – long-term
|
464 | 458 | ||||||
Other
long-term assets
|
35,442 | 38,293 | ||||||
Total
assets
|
$ | 586,521 | $ | 607,783 | ||||
Current
liabilities
|
||||||||
Current
portion of long-term debt
|
$ | 5,143 | $ | 1,066 | ||||
Accounts
payable
|
46,773 | 54,718 | ||||||
Accrued
expenses and other current liabilities
|
77,626 | 91,523 | ||||||
Total
current liabilities
|
129,542 | 147,307 | ||||||
Long-term
debt
|
40,522 | 46,917 | ||||||
Other
long-term liabilities
|
69,518 | 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
|
200,772 | 201,873 | ||||||
Retained
earnings
|
114,213 | 106,466 | ||||||
Accumulated
other comprehensive loss
|
(19,285 | ) | (20,284 | ) | ||||
Total
La-Z-Boy Incorporated shareholders' equity
|
347,565 | 339,825 | ||||||
Noncontrolling
interests
|
(626 | ) | 3,289 | |||||
Total
equity
|
346,939 | 343,114 | ||||||
Total
liabilities and equity
|
$ | 586,521 | $ | 607,783 |
Second Quarter Ended
|
Six Months Ended
|
|||||||||||||||
(Unaudited, amounts in
thousands)
|
10/23/10
|
10/24/09
|
10/23/10
|
10/24/09
|
||||||||||||
Cash
flows from operating activities
|
||||||||||||||||
Net
income
|
$ | 3,171 | $ | 5,378 | $ | 2,229 | $ | 6,883 | ||||||||
Adjustments
to reconcile net income to cash provided by (used for) operating
activities
|
||||||||||||||||
(Gain)
loss on sale of assets
|
127 | (75 | ) | 154 | (88 | ) | ||||||||||
Restructuring
|
48 | 1,183 | 192 | 2,220 | ||||||||||||
Provision
for doubtful accounts
|
974 | 2,152 | 1,888 | 4,514 | ||||||||||||
Depreciation
and amortization
|
5,658 | 6,300 | 11,464 | 12,575 | ||||||||||||
Stock-based
compensation expense
|
1,329 | 1,621 | 2,356 | 2,628 | ||||||||||||
Change
in receivables
|
(18,983 | ) | (26,460 | ) | (2,034 | ) | (17,538 | ) | ||||||||
Change
in inventories
|
(3,783 | ) | 3,956 | (12,790 | ) | 2,075 | ||||||||||
Change
in other assets
|
(3,232 | ) | 11,075 | (3,528 | ) | 6,045 | ||||||||||
Change
in payables
|
3,474 | 7,073 | (7,193 | ) | 4,747 | |||||||||||
Change
in other liabilities
|
4,486 | 10,025 | (11,558 | ) | 11,944 | |||||||||||
Change
in deferred taxes
|
(30 | ) | (8 | ) | 7 | — | ||||||||||
Total
adjustments
|
(9,932 | ) | 16,842 | (21,042 | ) | 29,122 | ||||||||||
Net
cash provided by (used for) operating activities
|
(6,761 | ) | 22,220 | (18,813 | ) | 36,005 | ||||||||||
Cash
flows from investing activities
|
||||||||||||||||
Proceeds
from disposals of assets
|
282 | 230 | 304 | 1,916 | ||||||||||||
Capital
expenditures
|
(2,552 | ) | (1,340 | ) | (4,987 | ) | (2,779 | ) | ||||||||
Purchases
of investments
|
(2,297 | ) | (1,338 | ) | (6,630 | ) | (2,537 | ) | ||||||||
Proceeds
from sales of investments
|
1,768 | 1,445 | 6,121 | 4,109 | ||||||||||||
Change
in restricted cash
|
— | — | — | 17,007 | ||||||||||||
Other
|
(31 | ) | 29 | (43 | ) | 14 | ||||||||||
Net
cash provided by (used for) investing activities
|
(2,830 | ) | (974 | ) | (5,235 | ) | 17,730 | |||||||||
Cash
flows from financing activities
|
||||||||||||||||
Proceeds
from debt
|
10,218 | 10,213 | 20,456 | 20,673 | ||||||||||||
Payments
on debt
|
(10,316 | ) | (10,408 | ) | (20,882 | ) | (32,567 | ) | ||||||||
Stock
issued from stock plans
|
34 | — | 58 | — | ||||||||||||
Net
cash used for financing activities
|
(64 | ) | (195 | ) | (368 | ) | (11,894 | ) | ||||||||
Effect
of exchange rate changes on cash and equivalents
|
310 | (347 | ) | 277 | (168 | ) | ||||||||||
Change
in cash and equivalents
|
(9,345 | ) | 20,704 | (24,139 | ) | 41,673 | ||||||||||
Cash
reduction upon deconsolidation of VIE
|
— | — | (632 | ) | — | |||||||||||
Cash
and equivalents at beginning of period
|
93,001 | 38,339 | 108,427 | 17,370 | ||||||||||||
Cash
and equivalents at end of period
|
$ | 83,656 | $ | 59,043 | $ | 83,656 | $ | 59,043 | ||||||||
Cash
paid (net of refunds) during period – income taxes
|
$ | 3,395 | $ | (13,348 | ) | $ | 5,856 | $ | (13,082 | ) | ||||||
Cash
paid during period – interest
|
$ | 538 | $ | 563 | $ | 1,075 | $ | 1,288 |
(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
|
$ | 51,478 | $ | 205,945 | $ | 65,027 | $ | (23,168 | ) | $ | 4,138 | $ | 303,420 | |||||||||||
Comprehensive
income
|
||||||||||||||||||||||||
Net
income (loss)
|
32,701 | (1,342 | ) | |||||||||||||||||||||
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
|
34,646 | |||||||||||||||||||||||
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)
|
3,729 | (1,500 | ) | |||||||||||||||||||||
Unrealized
loss on marketable securities arising during the period
|
(84 | ) | ||||||||||||||||||||||
Reclassification
adjustment for gain on marketable securities included in net
income
|
(181 | ) | ||||||||||||||||||||||
Translation
adjustment
|
158 | 362 | ||||||||||||||||||||||
Net
pension amortization
|
870 | |||||||||||||||||||||||
Change
in fair value of cash flow hedge
|
236 | |||||||||||||||||||||||
Total
comprehensive income
|
3,590 | |||||||||||||||||||||||
Stock
issued for stock and employee benefit plans, net of
cancellations
|
95 | (3,457 | ) | 3,093 | (269 | ) | ||||||||||||||||||
Stock
option and restricted stock expense
|
2,356 | 2,356 | ||||||||||||||||||||||
Changes
in equity and noncontrolling interest upon deconsolidation of a
VIE
|
925 | (2,777 | ) | (1,852 | ) | |||||||||||||||||||
At
October 23, 2010
|
$ | 51,865 | $ | 200,772 | $ | 114,213 | $ | (19,285 | ) | $ | (626 | ) | $ | 346,939 |
Quarter Ended 10/24/09
|
||||||||||||
(Unaudited, amounts in thousands, except per share data)
|
10/24/09
(as previously
reported)
|
Adjustments
|
10/24/09
(as adjusted)
|
|||||||||
Net
income attributable to La-Z-Boy Incorporated
|
$ | 5,907 | $ | 59 | $ | 5,966 | ||||||
Diluted
net income attributable to La-Z-Boy Incorporated per share
|
$ | 0.11 | $ | — | $ | 0.11 |
Six Months Ended 10/24/09
|
||||||||||||
(Unaudited, amounts in thousands, except per share data)
|
10/24/09
(as previously
reported)
|
Adjustments
|
10/24/09
(as adjusted)
|
|||||||||
Net
income attributable to La-Z-Boy Incorporated
|
$ | 7,890 | $ | (347 | ) | $ | 7,543 | |||||
Diluted
net income attributable to La-Z-Boy Incorporated per share
|
$ | 0.15 | $ | (0.01 | ) | $ | 0.14 |
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 | |||||
Noncontrolling
interests
|
$ | 4,141 | $ | (852 | ) | $ | 3,289 |
(Unaudited, amounts in
thousands)
|
10/23/10
|
04/24/10
|
||||||
Raw
materials
|
$ | 64,860 | $ | 60,913 | ||||
Work
in process
|
11,475 | 11,018 | ||||||
Finished
goods
|
89,075 | 85,256 | ||||||
FIFO
inventories
|
165,410 | 157,187 | ||||||
Excess
of FIFO over LIFO
|
(24,707 | ) | (24,707 | ) | ||||
Inventories,
net
|
$ | 140,703 | $ | 132,480 |
Second Quarter Ended
|
Six Months Ended
|
|||||||||||||||
(Unaudited, amounts in
thousands)
|
10/23/10
|
10/24/09
|
10/23/10
|
10/24/09
|
||||||||||||
Service
cost
|
$ | 291 | $ | 261 | $ | 582 | $ | 522 | ||||||||
Interest
cost
|
1,356 | 1,400 | 2,712 | 2,800 | ||||||||||||
Expected
return on plan assets
|
(1,478 | ) | (1,206 | ) | (2,956 | ) | (2,412 | ) | ||||||||
Net
amortization
|
435 | 527 | 870 | 1,054 | ||||||||||||
Net
periodic pension cost
|
$ | 604 | $ | 982 | $ | 1,208 | $ | 1,964 |
Second Quarter Ended
|
Six Months Ended
|
|||||||||||||||
(Unaudited, amounts in
thousands)
|
10/23/10
|
10/24/09
|
10/23/10
|
10/24/09
|
||||||||||||
Balance
as of the beginning of the period
|
$ | 14,715 | $ | 14,297 | $ | 14,773 | $ | 14,394 | ||||||||
Accruals
during the period
|
3,499 | 3,367 | 6,710 | 6,704 | ||||||||||||
Settlements
during the period
|
(3,355 | ) | (3,371 | ) | (6,624 | ) | (6,805 | ) | ||||||||
Balance
as of the end of the period
|
$ | 14,859 | $ | 14,293 | $ | 14,859 | $ | 14,293 |
(Unaudited)
|
10/23/10
|
|||
Risk-free
interest rate
|
0.75 | % | ||
Dividend
rate
|
— | |||
Expected
life in years
|
3.0 | |||
Stock
price volatility
|
86.6 | % | ||
Turnover
rate
|
3.0 | % | ||
Fair
value per share
|
$ | 4.27 |
Second Quarter Ended
|
Six Months Ended
|
|||||||||||||||
(Unaudited, amounts in
thousands)
|
10/23/10
|
10/24/09
|
10/23/10
|
10/24/09
|
||||||||||||
Net
income
|
$ | 3,171 | $ | 5,378 | $ | 2,229 | $ | 6,883 | ||||||||
Other
comprehensive income (loss):
|
||||||||||||||||
Currency
translation adjustment
|
649 | (105 | ) | 520 | (98 | ) | ||||||||||
Change
in fair value of cash flow hedge
|
123 | 15 | 236 | 1 | ||||||||||||
Net
unrealized gains (losses) on marketable securities arising during the
period
|
493 | 692 | (265 | ) | 1,538 | |||||||||||
Net
pension amortization
|
435 | 527 | 870 | 1,054 | ||||||||||||
Total
other comprehensive income
|
1,700 | 1,129 | 1,361 | 2,495 | ||||||||||||
Total
comprehensive income before allocation to noncontrolling
interest
|
4,871 | 6,507 | 3,590 | 9,378 | ||||||||||||
Comprehensive
loss attributable to noncontrolling interest
|
408 | 548 | 1,138 | 507 | ||||||||||||
Comprehensive
income attributable to La-Z-Boy Incorporated
|
$ | 5,279 | $ | 7,055 | $ | 4,728 | $ | 9,885 |
Second Quarter Ended
|
Six Months Ended
|
|||||||||||||||
(Unaudited, amounts in
thousands)
|
10/23/10
|
10/24/09
|
10/23/10
|
10/24/09
|
||||||||||||
Sales
|
||||||||||||||||
Upholstery
Group
|
$ | 224,878 | $ | 232,780 | $ | 426,812 | $ | 429,472 | ||||||||
Casegoods
Group
|
39,509 | 37,302 | 76,359 | 73,167 | ||||||||||||
Retail
Group
|
39,246 | 38,014 | 74,553 | 73,976 | ||||||||||||
VIEs
|
7,744 | 12,248 | 15,286 | 23,987 | ||||||||||||
Corporate
and Other
|
449 | 1,679 | 826 | 3,540 | ||||||||||||
Eliminations
|
(18,844 | ) | (21,316 | ) | (37,540 | ) | (40,764 | ) | ||||||||
Consolidated
Sales
|
$ | 292,982 | $ | 300,707 | $ | 556,296 | $ | 563,378 | ||||||||
Operating
Income (Loss)
|
||||||||||||||||
Upholstery
Group
|
$ | 17,055 | $ | 25,328 | $ | 27,112 | $ | 41,051 | ||||||||
Casegoods
Group
|
1,376 | (184 | ) | 2,951 | (305 | ) | ||||||||||
Retail
Group
|
(4,360 | ) | (5,301 | ) | (9,284 | ) | (10,969 | ) | ||||||||
VIEs
|
(1,104 | ) | (933 | ) | (2,712 | ) | (1,126 | ) | ||||||||
Corporate
and Other
|
(7,580 | ) | (8,424 | ) | (14,186 | ) | (15,523 | ) | ||||||||
Restructuring
|
(48 | ) | (1,183 | ) | (192 | ) | (2,220 | ) | ||||||||
Consolidated
Operating Income
|
$ | 5,339 | $ | 9,303 | $ | 3,689 | $ | 10,908 |
Fiscal 2011
|
||||||||||||||||
(Unaudited, amounts in
thousands)
|
04/24/10
Balance
|
Charges to
Expense *
|
Cash
Payments
or Asset
Write-Downs
|
10/23/10
Balance
|
||||||||||||
Severance
and benefit-related costs
|
$ | 492 | $ | (83 | ) | $ | (222 | ) | $ | 187 | ||||||
Contract
termination costs
|
292 | 275 | (401 | ) | 166 | |||||||||||
Total
restructuring
|
$ | 784 | $ | 192 | $ | (623 | ) | $ | 353 |
As of
|
||||||||
(Unaudited, amounts in
thousands)
|
10/23/10
|
04/24/10
|
||||||
Cash
and equivalents
|
$ | 1,253 | $ | 2,075 | ||||
Receivables,
net
|
103 | 114 | ||||||
Inventories,
net
|
5,565 | 11,884 | ||||||
Other
current assets
|
612 | 1,745 | ||||||
Property,
plant and equipment, net
|
3,410 | 8,940 | ||||||
Other
long-term assets, net
|
163 | 148 | ||||||
Total
assets
|
$ | 11,106 | $ | 24,906 | ||||
Current
portion of long-term debt
|
$ | — | $ | 128 | ||||
Accounts
payable
|
465 | 1,048 | ||||||
Accrued
expenses and other current liabilities
|
4,700 | 7,776 | ||||||
Long-term
debt
|
2 | 1,770 | ||||||
Other
long-term liabilities
|
2,777 | 2,852 | ||||||
Total
liabilities
|
$ | 7,944 | $ | 13,574 |
Second Quarter
Ended
|
Six Months
Ended
|
|||||||||||||||
(Unaudited, amounts in thousands)
|
10/23/10
|
10/24/09
|
10/23/10
|
10/24/09
|
||||||||||||
Numerator
(basic and diluted):
|
||||||||||||||||
Net
income attributable to La-Z-Boy Incorporated
|
$ | 3,945 | $ | 5,966 | $ | 3,729 | $ | 7,543 | ||||||||
Income
allocated to participating securities
|
(77 | ) | (123 | ) | (72 | ) | (134 | ) | ||||||||
Net
income available to common shareholders
|
$ | 3,868 | $ | 5,843 | $ | 3,657 | $ | 7,409 |
Second Quarter
Ended
|
Six Months
Ended
|
|||||||||||||||
(Unaudited, amounts in thousands)
|
10/23/10
|
10/24/09
|
10/23/10
|
10/24/09
|
||||||||||||
Denominator:
|
||||||||||||||||
Basic
common shares (based upon weighted average)
|
51,855 | 51,527 | 51,820 | 51,503 | ||||||||||||
Add:
|
||||||||||||||||
Stock
option dilution
|
359 | 228 | 408 | 48 | ||||||||||||
Diluted
common shares
|
52,214 | 51,755 | 52,228 | 51,551 |
|
·
|
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
|
$ | 8,313 | $ | 2,153 | $ | — | ||||||
Liabilities
|
||||||||||||
Interest
rate swap
|
— | (341 | ) | — | ||||||||
Total
|
$ | 8,313 | $ | 1,812 | $ | — |
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)
|
10/23/10
|
10/24/09
|
Percent
change
|
|||||||||
Consolidated
sales
|
$ | 292,982 | $ | 300,707 | (2.6 | )% | ||||||
Consolidated
operating income
|
5,339 | 9,303 | (42.6 | )% | ||||||||
Consolidated
operating margin
|
1.8 | % | 3.1 | % |
|
·
|
Our
gross margin decreased 2.4 percentage points in the second quarter of
fiscal 2011 compared to the second quarter of fiscal
2010.
|
|
o
|
Increases
in raw material costs resulted in a 2.1 percentage point decrease in our
consolidated gross margin.
|
|
o
|
Decreases
in sales pricing and changes in the product mix resulted in a 0.9
percentage point decrease in gross
margin.
|
|
o
|
Offsetting
the raw material, sales pricing and changes in the product mix were
ongoing cost reductions.
|
|
·
|
Decreases
in incentive compensation expenses during the second quarter of fiscal
2011 compared to the second quarter of fiscal 2010 resulted in a 0.9
percentage point increase in our operating
margin.
|
(Unaudited, amounts in thousands,
except percentages)
|
10/23/10
|
10/24/09
|
Percent
Change
|
|||||||||
Sales
|
$ | 224,878 | $ | 232,780 | (3.4 | )% | ||||||
Operating
income
|
17,055 | 25,328 | (32.7 | )% | ||||||||
Operating
margin
|
7.6 | % | 10.9 | % |
|
·
|
The
segment’s gross margin decreased 2.7 percentage points during the second
quarter of fiscal 2011 compared to the second quarter of fiscal 2010 due
to increased raw material 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.
|
|
·
|
Offsetting
the raw material, sales pricing and product mix changes mentioned above
were ongoing cost reductions, as well as decreases in the segment’s
employee incentive compensation
expenses.
|
(Unaudited, amounts in thousands,
except percentages)
|
10/23/10
|
10/24/09
|
Percent
change
|
|||||||||
Sales
|
$ | 39,509 | $ | 37,302 | 5.9 | % | ||||||
Operating
income (loss)
|
1,376 | (184 | ) | 847.8 | % | |||||||
Operating
margin
|
3.5 | % | (0.5 | )% |
|
·
|
The
segment’s gross margin increased 2.0 percentage points in the second
quarter of fiscal 2011 compared to the second quarter of fiscal 2010
mainly due to efficiencies realized in its manufacturing facility and
warehousing operations as a result of the restructuring plan completed at
the end of fiscal 2010.
|
|
·
|
A
decrease in employee expenses and incentive compensation expenses for this
segment resulted in a 1.2 percentage point increase in operating
margin. The consolidation of our Hammary operations with our
American Drew/Lea operations positively impacted this segment’s operating
margin due to the reduction in headcount and elimination of duplicate
selling, general and administrative
functions.
|
|
·
|
In
the second quarter of fiscal 2010 our Hammary operating unit recorded a
reserve related to a product recall at that time. A portion of this
reserve was reversed during the second quarter of fiscal 2011, positively
impacting this segment’s operating
margin.
|
(Unaudited, amounts in thousands,
except percentages)
|
10/23/10
|
10/24/09
|
Percent
change
|
|||||||||
Sales
|
$ | 39,246 | $ | 38,014 | 3.2 | % | ||||||
Operating
loss
|
(4,360 | ) | (5,301 | ) | 17.8 | % | ||||||
Operating
margin
|
(11.1 | )% | (13.9 | )% |
|
·
|
The
segment experienced a 0.4 percentage point improvement in gross margin
during the second quarter of fiscal 2011 compared to the second quarter of
fiscal 2010 due to changes in the segment’s sales initiatives and
merchandising.
|
|
·
|
A
decrease in employee incentive compensation expenses for this segment
resulted in a 1.0 percentage point increase in operating
margin.
|
|
·
|
The
remainder of the improvement in our Retail Group’s operating margin was a
result of the overall decrease in selling, general and administrative
expenses coupled with the increase in sales for this
segment.
|
(Unaudited, amounts in thousands,
except percentages)
|
10/23/10
|
10/24/09
|
Percent
change
|
|||||||||
Consolidated
sales
|
$ | 556,296 | $ | 563,378 | (1.3 | )% | ||||||
Consolidated
operating income
|
3,689 | 10,908 | (66.2 | )% | ||||||||
Consolidated
operating margin
|
0.7 | % | 1.9 | % |
|
·
|
Our
gross margin decreased by 2.5 percentage points during the first six
months of fiscal 2011 compared to the first six months of fiscal
2010.
|
|
o
|
Increases
in raw material costs resulted in a 2.1 percentage point decrease in our
consolidated gross margin.
|
|
o
|
Decreases
in sales pricing and changes in the product mix resulted in a 0.6
percentage point decrease in gross
margin.
|
|
o
|
Offsetting
the raw material, sales pricing and product mix changes were ongoing costs
reductions.
|
|
·
|
Decreases
in incentive compensation expenses during the first six months of fiscal
2011 compared to the first six months of fiscal 2010 resulted in a 0.6
percentage point improvement in our operating
margin.
|
(Unaudited, amounts in thousands,
except percentages)
|
10/23/10
|
10/24/09
|
Percent
change
|
|||||||||
Sales
|
$ | 426,812 | $ | 429,472 | (0.6 | )% | ||||||
Operating
income
|
27,112 | 41,051 | (34.0 | )% | ||||||||
Operating
margin
|
6.4 | % | 9.6 | % |
|
·
|
The
segment’s gross margin decreased by 3.2 percentage points during the first
six months of fiscal 2011 compared to the first six months of fiscal 2010,
mainly due to increased raw material costs. Raw material price
increases caused a 2.8 percentage point decrease in the segment’s
operating margin.
|
|
·
|
Decreases
in sales pricing 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 0.6 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.
|
|
·
|
Offsetting
the raw material, sales pricing and product mix changes mentioned above
were ongoing cost reductions, as well as decreases in the segment’s
employee incentive compensation
costs.
|
(Unaudited, amounts in thousands,
except percentages)
|
10/23/10
|
10/24/09
|
Percent
change
|
|||||||||
Sales
|
$ | 76,359 | $ | 73,167 | 4.4 | % | ||||||
Operating
income (loss)
|
2,951 | (305 | ) | N/M | ||||||||
Operating
margin
|
3.9 | % | (0.4 | )% |
|
·
|
The
segment’s gross margin increased 2.9 percentage points in the first six
months of fiscal 2011 compared to the first six months of fiscal 2010
mainly due to efficiencies realized in its manufacturing facility and
warehousing operations as a result of the restructuring plan completed at
the end of fiscal 2010.
|
|
·
|
A
decrease in employee expenses and incentive compensation expenses for this
segment resulted in a 1.0 percentage point increase in operating
margin. The consolidation of our Hammary operations with our
American Drew/Lea operations positively impacted this segment’s operating
margin due to the reduction in headcount and elimination of duplicate
selling, general and administrative
functions.
|
|
·
|
In
the first six months of fiscal 2010 our Hammary operating unit recorded a
reserve related to a product recall at that time. A portion of this
reserve was reversed during the first six months of fiscal 2011,
positively impacting this segment’s operating
margin.
|
(Unaudited, amounts in thousands,
except percentages)
|
10/23/10
|
10/24/09
|
Percent
change
|
|||||||||
Sales
|
$ | 74,553 | $ | 73,976 | 0.8 | % | ||||||
Operating
loss
|
(9,284 | ) | (10,969 | ) | 15.4 | % | ||||||
Operating
margin
|
(12.5 | )% | (14.8 | )% |
|
·
|
The
segment experienced a 2.0 percentage point improvement in gross margin
during the first six months of fiscal 2011 compared to the first six
months of fiscal 2010 due to changes in the segment’s sales initiatives
and merchandising.
|
|
·
|
Increased
advertising expense caused a 0.5 percentage point decrease in the
segment’s operating margin as we continue to focus on driving additional
traffic into our stores.
|
|
·
|
This
segment’s operating margin improved due to decreases in their overall
administrative expenses as we continue to focus on reducing
costs.
|
Cash
Flows Provided By (Used For)
|
Six Months Ended
|
|||||||
(Unaudited, amounts in
thousands)
|
10/23/10
|
10/24/09
|
||||||
Operating
activities
|
||||||||
Net
income
|
$ | 2,229 | $ | 6,883 | ||||
Non-cash
add backs and changes in deferred taxes
|
15,869 | 19,629 | ||||||
Restructuring
|
192 | 2,220 | ||||||
Working
capital
|
(37,103 | ) | 7,273 | |||||
Cash
provided by (used for) operating activities
|
(18,813 | ) | 36,005 | |||||
Investing
activities
|
(5,235 | ) | 17,730 | |||||
Financing
activities
|
||||||||
Net
decrease in debt
|
(426 | ) | (11,894 | ) | ||||
Stock
issued from stock plans
|
58 | — | ||||||
Cash
used for financing activities
|
(368 | ) | (11,894 | ) | ||||
Exchange
rate changes
|
277 | (168 |