SECURITIES AND EXCHANGE COMMISSION
Current Report Pursuant
to Section 13 or 15(d)of
the Securities Exchange Act of 1934
June 7, 2005
(Date of Report (Date of Earliest Event Reported))
LA-Z-BOY INCORPORATED
(Exact
name of registrant as specified in its charter)
MICHIGAN |
38-0751137 | ||||
---|---|---|---|---|---|
(State or other jurisdiction of | (I.R.S. Employer Identification Number) | ||||
incorporation or organization) |
1284 North Telegraph Road, Monroe, Michigan |
48162-3390 | ||||
---|---|---|---|---|---|
(Address of principal executive offices) | Zip Code |
Registrant's telephone number, including area code (734) 241-4074
None
(Former name, former address and former fiscal year, if changed since last report.)
Item 2.02 Results of Operations and Financial Condition.
On June 7, 2005, La-Z-Boy Incorporated issued a press release to report the companys financial results for the quarter and fiscal year ended April 30, 2005. A copy of the press release is attached to this current report on Form 8-K as Exhibit 99.1. Exhibit 99.2 contains unaudited quarterly financial data for the last eight quarters. |
The information shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 (the Exchange Act) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits
(c) The following exhibits are furnished as part of this report:
Description |
Page # | |||||||
---|---|---|---|---|---|---|---|---|
99 | .1 | Press Release Dated June 7, 2005 | 4 | |||||
99 | .2 | Supplemental Financial Information | 11 |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
LA-Z-BOY
INCORPORATED (Registrant) |
Date: June 7, 2005
BY: /S/ Louis M. Riccio, Jr. Louis M. Riccio, Jr. Corporate Controller On behalf of the registrant and as Chief Accounting Officer |
Exhibit 99.1
NEWS RELEASE
Contact: Mark Stegeman | (734) 241-4418 | mark.stegeman@la-z-boy.com |
MONROE, MI. June 7, 2005 La-Z-Boy Incorporated (NYSE, PCX: LZB) today reported operating results for the fourth fiscal quarter and full year ending April 30, 2005. Net sales for the quarter were $566 million, up $33 million or 6.3% compared to a year earlier. This years fourth quarter included 14 weeks of sales versus 13 weeks last year. Quarterly earnings were $21 million or $0.40 per share, which included an after-tax loss of $0.04 per share related to the consolidation of certain VIEs. Income from continuing operations for the fourth quarter was $18 million or $0.35 per share. The quarter includes a number of special items:
o | a change in estimate for workers compensation resulting in a pre-tax charge included in cost of goods sold of $5.9 million ($3.6 million net of tax) or $0.07 per share; |
o | a reduction in the allowance for doubtful accounts included in SG&A of $5.5 million ($3.4 million net of tax) or $0.07 per share; |
o | a net pre-tax gain on restructuring of $3.1 million ($1.9 million net of tax) or $0.04 per share, resulting primarily from gains on the sale of previously idled property and equipment; |
o | an extraordinary pre-tax gain of $2.2 million ($1.4 million net of tax) or $0.03 per share from the recoveries of accounts receivables through the acquisition of certain Variable Interest Entities (VIEs); |
o | pre-tax income of $1.7 million ($1.0 million net of tax) or $0.02 per share, comprised of pre-tax income of $0.6 million relating to discontinued operations for the fiscal fourth quarter and a pre-tax gain on the sale of the La-Z-Boy Contract® unit of $1.1 million. |
This quarters per share earnings compare against a loss per share before the cumulative effect of change in accounting principle of $0.64 reported in fiscal 2004s fourth quarter. The 2004 fourth quarter results included a non-cash charge of $1.07 per share or $71.9 million before tax, $55.9 million after-tax, to reflect the impairment of certain intangible assets. Also included in the 2004 fourth quarter was a $0.01 per share after-tax restructuring charge related to casegoods restructuring. Additionally, the company adopted a new accounting standard in 2004s fiscal fourth quarter, FASB Interpretation No. 46 Consolidation of Variable Interest Entities (FIN 46), resulting in a cumulative effect non-cash charge of $8.3 million net of tax, or $0.16 per share.
For the year ended April 30, 2005 net sales were $2.048 billion, an increase of $96 million or 4.9% from the year earlier sales of $1.952 billion. This years sales included 53 weeks of sales versus 52 weeks last year. Earnings for the year totaled $37 million or $0.71 per share, which included an after-tax loss of $0.11 per share related to the consolidation of certain VIEs. Income from continuing operations for the year was $33 million or $0.63 per share. The full years results include several special items in addition to the amounts recorded for the change in estimate for workers compensation and the reduction in the allowance for doubtful accounts:
o | a full year pre-tax restructuring charge of $10.3 million ($6.4 million net of tax) or $0.12 per share, which is net of gains from the sale of property and equipment in the fourth quarter; |
o | a full year pre-tax extraordinary gain of $3.4 million ($2.1 million net of tax) or $0.04 per share from the recoveries of accounts receivables of certain VIEs; |
o | pre-tax income of $3.2 million ($2.0 million net of tax) or $0.04 per share, comprised of pre-tax income of $2.1 million relating to discontinued operations for the full fiscal year and a pre-tax gain on the sale of the La-Z-Boy Contract® Group of $1.1 million which was recorded in the fourth quarter. |
This compares to earnings before the cumulative effect of the accounting change for fiscal 2004 of $0.05 per share, and a loss after the cumulative effect of $0.11 from the adoption of VIE consolidation accounting standard. Fiscal 2004 results also included a $0.12 per share charge for casegoods restructuring and $1.04 per share for the write-down of intangibles.
Operating margin for the fourth quarter was 5.8%, up from a negative 6.6% a year earlier, which included a write-down of intangible assets and restructuring charges amounting to 13.7% of net sales. This quarters operating margin of 5.8% continued an improving trend in sequential operating profit margins from 2005s third quarters 3.9%, the second quarters 2.9% and first quarters negative 0.9%. This years fiscal fourth quarter included a gain on restructuring amounting to 0.5% of net sales versus a restructuring charge amounting to 0.2% last year. The effect on operating margin in the fourth quarter of fiscal 2005 for a change in estimate for workers compensation was a charge of 1.0% of net sales. The effect of the reduction in the allowance for doubtful accounts was a positive impact of 1.0% of net sales. The change in estimate for determining our unpaid workers compensation claims involved adopting an actuarial methodology which will more accurately reflect our future expected costs. The reduction in our allowance for doubtful accounts occurred as a result of the acquisition of a major dealer and the reassessment of our credit position of a significant dealer upon obtaining additional credit related information.
The full year operating margin was 3.1% compared to 1.4% in the same period of fiscal 2004. The fiscal 2005 full year operating margin included 0.5% of net sales for restructuring charges, a change in estimate for workers compensation amounting to a charge of 0.3% of net sales and a positive impact from the reduction of the allowance for doubtful accounts of 0.3% of net sales. Last year included restructuring and the write-down of intangible assets amounting to 4.2% of net sales.
La-Z-Boy Incorporated President and CEO Kurt L. Darrow said, We continue to make progress in the growth of our top line and with our operating margins. The significant changes we are driving are beginning to deliver the improvements we anticipated, specifically the change to an import model in our casegoods business. During our fourth quarter we moved decisively by taking actions to obtain higher market penetration levels in major markets by repositioning underperforming dealers. We also sold our contract office seating operation and accelerated the sale of previously idled manufacturing facilities and equipment. We are now prepared to enter our new fiscal year with a clearer focus on our core business. These changes are continuing to better align us with the three core elements of our business model, which are remaining the leading marketer, manufacturer and distributor of upholstered furniture; being a marketer, distributor and importer of casegoods furniture, and being the leading proprietary retailer of furniture. We believe this business model combined with the continued growth in the power of the La-Z-Boy brand will enable us to achieve our financial objectives.
Upholstery segment sales for the fourth quarter of fiscal 2005 increased 3.5% from a year earlier and were up 3.6% for the full fiscal year. This years quarter and year included an extra week of sales. Darrow said, Our La-Z-Boy branded business continues to outperform our non-branded upholstery companies, though we had good feedback to our product introductions at the recent April Market across all business units. This year we were pleased that we continued the consistent growth of our La-Z-Boy Furniture Galleries® store retail network, both in total sales and store count. We have also made good progress in expanding our presence with major retailers across North America and added many new customers to our distribution portfolio.
The upholstery segment operating margin for the quarter was 7.9% compared to 10.0% for last years fourth quarter. The quarters margin was impacted by higher raw material prices for steel, poly and plywood, but at a declining pace. This year the quarters operating margin was also effected by the change in estimate for workers compensation amounting to a charge of 1.1% of the upholstery segments net sales and a positive impact from the reduction of bad debt reserves of 1.3% of its net sales.
Operating margins for the year were 6.3% versus 8.6% in fiscal 2004s full year. This years margin decline resulted largely from raw material prices for steel, poly and plywood rising at unprecedented levels. The change in estimate for workers compensation for the year amounted to a charge of 0.3% of the upholstery segments net sales and a positive impact from the reduction of bad debt reserves of 0.4% of its net sales.
Darrow mentioned, This fiscal year we further drove the growth of our proprietary distribution network of mostly independently operated La-Z-Boy Furniture Galleries® stores by opening 17 new stores and converting or relocating 24 existing stores to the New Generation format, bringing the total to 109 in this new format. These new format stores are continuing to generate increased traffic levels, higher average sales per square foot and greater total sales volumes than our older format stores. In the fourth quarter our network opened seven of these new format stores and four stores were remodeled to the new design. Seven non-productive stores were closed during the fiscal year. We enter into fiscal 2006 as North Americas largest single-source store network with 334 stand-alone stores, of which 61 are company-owned. Plans are to open 45-50 of these updated format stores during our 2006 fiscal year, with over 20 of those being new stores and the remainder being store remodels or relocations. This year we made great strides in improving the quality and focus of the companys proprietary store program with our independent dealers.
Darrow continued, In seven of the top 25 markets the company now has an ownership role, acquiring three markets this quarter; Chicago, Pittsburgh and Connecticut, consisting of 21 stores. Two of these markets were previously consolidated as VIEs and will require considerable effort to enhance their performance. During the fiscal year we opened three new stores in our existing corporate markets and converted three stores to the new format. In fiscal 2006 we expect to open five to six company-owned stores and convert or relocate another ten plus stores.
System-wide, the mostly independently owned La-Z-Boy Furniture Galleries® stores April calendar year to date same store written sales were up 0.1% and total sales, which includes new stores, increased 3.2%. Darrow noted, Our same store sales comparisons for the first four months of the calendar year were essentially flat, but were uneven throughout that period. The month of May appears to continue this trend in inconsistent sales patterns at retail and we expect continued flat to slightly up trends as we enter into the seasonally slower summer months for furniture retailing.
Darrow commented, As previously announced, during the quarter we completed the sale of our contract seating furniture unit, La-Z-Boy Contract, as we continue to refocus the company to capitalize on our core strengths in residential furniture. This unit was included in our upholstery segment and sales from this discontinued operation were $48.7 million and $46.9 million for the fiscal years 2005 and 2004, respectively, and have been eliminated from consolidated sales for the year. Pre-tax operating profits from the unit were $0.6 million ($0.3 million net of tax) for the fiscal fourth quarter and $2.1 million ($1.3 million net of tax) for the full year. The net sale price of $11.7 million resulted in a pre-tax gain of $1.1 million ($0.7 million net of tax) in the fourth quarter and the cash generated was primarily utilized to pay down floating rate debt.
Casegoods sales increased 10.2% from a year earlier for the fourth quarter, and were down just 0.2% for the fiscal year including an extra week of sales during the fourth quarter. Darrow commented, The quarter sales increase in addition to the extra week was aided by the continuing positive trends in our hospitality business and the rebound in sales on the residential side of our business resulting from the execution of our strategy shift to a marketer, distributor and importer of casegoods product. This is the second consecutive quarter of year-over-year sales improvement.
The operating margin for the casegoods segment in the April 2005 fiscal quarter was 2.1% compared to 0.2% last year. This year the quarters operating margin was impacted by the change in estimate for workers compensation amounting to a charge of 1.1% of the casegoods segments net sales. For the year the segments operating margin was 1.2%, up compared with last years 0.7%. The change in estimate for workers compensation for the year amounted to a charge of 0.3% of the segments net sales.
He added, Margins continued to improve this fiscal quarter, but were still adversely affected by greater than anticipated transition costs associated with our change to the Pennsylvania House import model. This was somewhat offset by margin benefits of recent pricing initiatives in our hospitality business that we now are beginning to realize. During the fourth quarter, the casegoods distribution center which will support the logistics needs of American Drew, Lea and Pennsylvania House became operational. Although the start-up cost had a negative effect on fourth quarter earnings, this modern facility will enable us to better serve the customers of these three companies.
As previously announced, we began the closure of several facilities during our second fiscal quarter of 2005 and production was phased out at the last facility during the third fiscal quarter. During the fourth quarter a net after-tax gain on restructuring of $0.04 per share or $1.9 million was realized, which included an after-tax gain of $2.9 million from the sale of property and equipment net of after-tax charges of $1 million incurred resulting from costs associated with the restructuring plan. For the year restructuring charges amounted to a net after-tax loss on restructuring of $0.12 per share or $6.4 million which is net of the after-tax gain from the sale of property and equipment. Darrow stated, We continue to make steady progress in the liquidation and the disposal of the plants and equipment, many of which are in areas which are now economically depressed by the closure of a number of other manufacturing plants. As we have noted previously, in our casegoods segment, where the bulk of our restructuring has occurred, we now have three manufacturing facilities operating today, each of which is focused on a specific product category.
In April of 2004, we began consolidating certain of our independent dealers as Variable Interest Entities (VIEs) which are included in our corporate and other segment. During the year, the equity owner of one of our VIEs contributed $2 million of capital to its business which was recorded as income to reflect a recovery of previously recorded losses. Additionally, for the quarter and the year, an after-tax extraordinary gain of $1.4 million and $2.1 million, respectively, resulted from the recoveries of accounts receivable previously written off relating to the acquisition of previously consolidated VIEs. Darrow commented, This year the VIEs lost $0.04 per share in the fourth quarter and $0.11 per share for the year. During our fiscal year we took actions to transition the ownership of two of our four under performing VIEs to new independent ownership and acquired the other two operations in the fourth quarter. These actions addressed our negatively performing VIEs. Although we will continue to have some VIEs, we do not expect to have any of these operations significantly detract from our long-term financial performance on an annualized basis.
During the quarter we generated positive cash flow from operations of $32.1 million and $46.0 million for the year. Cash of $11 million was generated from the sale of La-Z-Boy Contract and $5.6 million was also generated from the continued liquidation of property, plant and equipment primarily from closed facilities during the quarter. Total debt at quarter end was $226 million, down $17 million from last quarter. The debt-to-capitalization ratio was 30.0% at year end, down from third quarters 31.6%. Darrow stated, We continue to make consistent progress in moving our debt-to-capitalization ratio toward our targeted range of the mid-twenties. Although we are not yet within our targeted range of leverage, with the concurrence of our board of directors the company plans to reenter the open market on a moderate basis to begin repurchasing its shares. This action is being taken in light of the low market price of our stock and the belief in the company's future prospects. At year end, 6.7 million shares remained available under the companys existing stock repurchase authorization.
Commenting on the business outlook, Darrow said, We are pleased with the continuing improvement in our operations and with the progress we have made in the transition of our business model. From a macro economic perspective, we remain cautiously optimistic about the industrys growth prospects for the coming year, though we are concerned that Mays recent consumer confidence improvements could be challenged by a number of factors. These factors include continued high energy prices, rising short-term interest rates and general geopolitical uncertainty, which continue to overshadow the economic expansion which appeared to be underway.
Darrow continued, Our first quarter is historically our seasonally weakest and with the continued inconsistent trends at retail we expect our first quarter sales to be up in the low single digit range compared to last years first quarter sales of $455 million, as reclassified to reflect our discontinued operations. Reported earnings for the first quarter are forecasted to be in the range of $0.10 $0.14 per share. This compares to a loss of $0.07 per share in fiscal 2005s first quarter, which included an after-tax restructuring charge of $0.12 per share.
Any forward-looking statements contained in this news release are based on current information and assumptions and represent managements best judgment at the present time. Actual results could differ materially from those anticipated or projected due to a number of factors. These factors include, but are not limited to: changes in consumer sentiment or demand, changes in demographics, changes in housing sales, the impact of terrorism or war, energy price changes, the impact of logistics on imports, the impact of interest rate changes, the effects of the ruling on tariffs by the U.S. Department of Commerce and potential disruptions of Chinese imports, the availability and cost of capital, the impact of imports as it relates to continued domestic production, raw material price changes, changes in currency rates, competitive factors, operating factors, such as supply, labor, or distribution disruptions including changes in operating conditions or costs, effects of restructuring actions, changes in the domestic or international regulatory environment, not fully realizing cost reductions through restructurings, ability to implement global sourcing organization strategies, the future financial performance and condition of independently owned dealers that we are required to consolidate into our financial statements or changes requiring us to consolidate additional independently owned dealers, the impact of new manufacturing technologies, the impact of adopting new accounting principles, fair value changes to our intangible assets due to actual results differing from projected, factors relating to acquisitions and other factors identified from time to time in the companys reports filed with the Securities and Exchange Commission. The company undertakes no obligation to update or revise any forward-looking statements, either to reflect new developments, or for any other reason.
This news release is just one part of La-Z-Boys financial disclosures and should be read in conjunction with other information filed with the Securities and Exchange Commission, which is available at http://www.la-z-boy.com/about/investorRelations/sec_filings.aspx . Investors and others wishing to be notified of future La-Z-Boy news releases, SEC filings and quarterly investor conference calls may sign up at:
http://www.la-z-boy.com/about/investorRelations/IR_email_alerts.aspx.With annual sales of over $2 billion, La-Z-Boy Incorporated is one of the worlds leading residential furniture producers, marketing furniture for every room of the home and office, as well as for the hospitality, health care and assisted-living industries. The La-Z-Boy Upholstery Group companies are Bauhaus, Centurion, Clayton Marcus, England, La-Z-Boy, and Sam Moore. The La-Z-Boy Casegoods Group companies are American Drew, American of Martinsville, Hammary, Kincaid, Lea and Pennsylvania House.
The corporations vast proprietary distribution network is dedicated exclusively to selling La-Z-Boy Incorporated products and brands, and includes 334 stand-alone La-Z-Boy Furniture Galleries® stores and 334 La-Z-Boy In-Store Gallerys, in addition to in-store gallery programs at the companys Kincaid, Pennsylvania House, Clayton Marcus, England and Lea operating units. According to industry trade publication Furniture/Today, the La-Z-Boy Furniture Galleries retail network by itself represents the industrys sixth largest U.S. furniture retailer and the largest single source furniture retailer in North America. Additional information is available at http://www.la-z-boy.com/ .
LA-Z-BOY INCORPORATED
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Unaudited For the Quarter Ended |
Unaudited For the Year Ended | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Amounts in thousands, except per share data) |
4/30/05 (14 weeks) |
4/24/04 (13 weeks) |
4/30/05 (53 weeks) |
4/24/04 (52 weeks) | ||||||||||
Sales | $ | 565,555 | $ | 532,203 | $ | 2,048,381 | $ | 1,951,997 | ||||||
Cost of sales | ||||||||||||||
Cost of goods sold | 434,941 | 406,376 | 1,572,844 | 1,509,864 | ||||||||||
Restructuring | (3,107 | ) | 948 | 10,294 | 10,441 | |||||||||
Total cost of sales | 431,834 | 407,324 | 1,583,138 | 1,520,305 | ||||||||||
Gross profit | 133,721 | 124,879 | 465,243 | 431,692 | ||||||||||
Selling, general and administrative | 101,053 | 88,235 | 401,592 | 331,620 | ||||||||||
Write-down of intangibles | -- | 71,943 | -- | 71,943 | ||||||||||
Operating income (loss) | 32,668 | (35,299 | ) | 63,651 | 28,129 | |||||||||
Interest expense | 2,942 | 2,317 | 10,442 | 11,253 | ||||||||||
Other income (expense), net | (122 | ) | 1,381 | 170 | 4,364 | |||||||||
Income (loss) from continuing operations before income taxes | 29,604 | (36,235 | ) | 53,379 | 21,240 | |||||||||
Income tax expense (benefit) | 11,249 | (2,479 | ) | 20,284 | 19,362 | |||||||||
Income (loss) from continuing operations | 18,355 | (33,756 | ) | 33,095 | 1,878 | |||||||||
Income from discontinued operations (net of tax) | 1,009 | 25 | 1,996 | 650 | ||||||||||
Extraordinary gains (net of tax) | 1,392 | -- | 2,094 | -- | ||||||||||
Cumulative effect of accounting change (net of tax) | -- | (8,324 | ) | -- | (8,324 | ) | ||||||||
Net income (loss) | $ | 20,756 | $ | (42,055 | ) | $ | 37,185 | $ | (5,796 | ) | ||||
Basic average shares outstanding | 52,192 | 52,318 | 52,082 | 53,508 | ||||||||||
Basic net income (loss) per share: | ||||||||||||||
Income (loss) from continuing operations | $ | 0.35 | $ | (0.64 | ) | $ | 0.63 | $ | 0.04 | |||||
Income from discontinued operations (net of tax) | 0.02 | -- | 0.04 | 0.01 | ||||||||||
Extraordinary gains (net of tax) | 0.03 | -- | 0.04 | -- | ||||||||||
Cumulative effect of accounting change (net of tax) | -- | (0.16 | ) | -- | (0.16 | ) | ||||||||
Net income (loss) per basic share | $ | 0.40 | $ | (0.80 | ) | $ | 0.71 | $ | (0.11 | ) | ||||
Diluted weighted average shares outstanding | 52,262 | 52,318 | 52,138 | 53,679 | ||||||||||
Diluted net income (loss) per share: | ||||||||||||||
Income (loss) from continuing operations | $ | 0.35 | $ | (0.64 | ) | $ | 0.63 | $ | 0.04 | |||||
Income from discontinued operations (net of tax) | 0.02 | -- | 0.04 | 0.01 | ||||||||||
Extraordinary gains (net of tax) | 0.03 | -- | 0.04 | -- | ||||||||||
Cumulative effect of accounting change (net of tax) | -- | (0.16 | ) | -- | (0.16 | ) | ||||||||
Net income (loss) per diluted share | $ | 0.40 | $ | (0.80 | ) | $ | 0.71 | $ | (0.11 | ) | ||||
Dividends paid per share | $ | 0.11 | $ | 0.10 | $ | 0.44 | $ | 0.40 |
LA-Z-BOY INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEET
Unaudited | ||||||||
---|---|---|---|---|---|---|---|---|
(Amounts in thousands) |
4/30/05 |
4/24/04 | ||||||
Current assets | ||||||||
Cash and equivalents | $ | 37,705 | $ | 33,882 | ||||
Receivables, net | 283,915 | 299,801 | ||||||
Inventories, net | 260,556 | 250,568 | ||||||
Deferred income taxes | 22,779 | 31,387 | ||||||
Other current assets | 33,410 | 31,454 | ||||||
Total current assets | 638,365 | 647,092 | ||||||
Property, plant and equipment, net | 210,565 | 212,739 | ||||||
Intangibles | 100,846 | 96,005 | ||||||
Other long-term assets, net | 76,581 | 85,078 | ||||||
Total assets | $ | 1,026,357 | $ | 1,040,914 | ||||
Current liabilities | ||||||||
Short-term borrowings | $ | 9,700 | $ | 37,219 | ||||
Current portion of long-term debt | ||||||||
and capital leases | 3,060 | 5,344 | ||||||
Accounts payable | 82,792 | 93,298 | ||||||
Other current liabilities | 133,172 | 147,460 | ||||||
Total current liabilities | 228,724 | 283,321 | ||||||
Long-term debt and capital leases | 213,549 | 181,807 | ||||||
Deferred income taxes | 5,389 | 13,637 | ||||||
Other long-term liabilities | 51,409 | 39,821 | ||||||
Shareholders' equity | 527,286 | 522,328 | ||||||
Total liabilities and shareholders' equity | $ | 1,026,357 | $ | 1,040,914 | ||||
LA-Z-BOY INCORPORATED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Quarter Ended |
Unaudited Year Ended | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Amounts in thousands) |
4/30/05 |
4/24/04 |
4/30/05 |
4/24/04 | ||||||||||
Cash flows from operating activities | ||||||||||||||
Net income (loss) | $ | 20,756 | $ | (42,055 | ) | $ | 37,185 | $ | (5,796 | ) | ||||
Adjustments to reconcile net income (loss) to | ||||||||||||||
cash provided by operating activities | ||||||||||||||
Write-down of intangibles | -- | 71,943 | -- | 71,943 | ||||||||||
Cumulative effect of accounting change (net of tax) | -- | 8,324 | -- | 8,324 | ||||||||||
Extraordinary gains (net of tax) | (1,392 | ) | -- | (2,094 | ) | -- | ||||||||
Gain on sale of discontinued operations (net of tax) | (668 | ) | -- | (668 | ) | -- | ||||||||
Restructuring | (3,107 | ) | 948 | 10,294 | 10,441 | |||||||||
Depreciation and amortization | 7,175 | 7,282 | 28,329 | 29,112 | ||||||||||
Change in allowance for doubtful accounts | (3,639 | ) | (1,510 | ) | (3,189 | ) | (1,201 | ) | ||||||
Change in working capital | 435 | (11,926 | ) | (35,524 | ) | 31,922 | ||||||||
Change in deferred taxes | 12,514 | (14,906 | ) | 11,632 | (11,843 | ) | ||||||||
Total adjustments | 11,318 | 60,155 | 8,780 | 138,698 | ||||||||||
Net cash provided by operating activities | 32,074 | 18,100 | 45,965 | 132,902 | ||||||||||
Cash flows from investing activities | ||||||||||||||
Proceeds from disposals of assets | 5,621 | 199 | 11,226 | 2,167 | ||||||||||
Proceeds from sales of discontinued operation | 10,985 | -- | 10,985 | -- | ||||||||||
Capital expenditures | (7,759 | ) | (10,558 | ) | (34,771 | ) | (31,593 | ) | ||||||
Acquisitions, net of cash acquired | (6,806 | ) | (9,189 | ) | (6,806 | ) | (9,189 | ) | ||||||
Change in other long-term assets | 529 | 4,185 | (4,621 | ) | 3,453 | |||||||||
Net cash provided by (used for) investing activities | 2,570 | (15,363 | ) | (23,987 | ) | (35,162 | ) | |||||||
Cash flows from financing activities | ||||||||||||||
Net changes in debt | (17,124 | ) | 20,110 | 1,939 | (10,085 | ) | ||||||||
Stock transactions | 692 | (12,675 | ) | 2,097 | (65,795 | ) | ||||||||
Dividends paid | (5,753 | ) | (5,248 | ) | (22,868 | ) | (21,514 | ) | ||||||
Net cash provided by (used for) financing activities | (22,185 | ) | 2,187 | (18,832 | ) | (97,394 | ) | |||||||
Effect of exchange rate changes on cash and equivalents | (748 | ) | (760 | ) | 677 | 775 | ||||||||
Change in cash and equivalents | 11,711 | 4,164 | 3,823 | 1,121 | ||||||||||
Cash acquired from consolidation of VIEs | -- | 3,944 | -- | 3,944 | ||||||||||
Cash and equivalents at beginning of period | 25,994 | 25,774 | 33,882 | 28,817 | ||||||||||
Cash and equivalents at end of period | $ | 37,705 | $ | 33,882 | $ | 37,705 | $ | 33,882 | ||||||
LA-Z-BOY INCORPORATED
Segment Information
Unaudited For the Quarter Ended |
Unaudited For the Year Ended | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Amounts in thousands) |
4/30/05 (14 weeks) |
4/24/04 (13 weeks) |
4/30/05 (53 weeks) |
4/24/04 (52 weeks) | ||||||||||
Sales | ||||||||||||||
Upholstery Group | $ | 436,190 | $ | 421,587 | $ | 1,554,087 | $ | 1,500,724 | ||||||
Casegoods Group | 123,542 | 112,061 | 455,343 | 456,090 | ||||||||||
VIEs/Eliminations | 5,823 | (1,445 | ) | 38,951 | (4,817 | ) | ||||||||
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Consolidated | $ | 565,555 | $ | 532,203 | $ | 2,048,381 | $ | 1,951,997 | ||||||
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Operating income (loss) | ||||||||||||||
Upholstery Group | $ | 34,484 | $ | 42,364 | $ | 98,099 | $ | 129,327 | ||||||
Casegoods Group | 2,638 | 274 | 5,370 | 2,991 | ||||||||||
Restructuring | 3,107 | (948 | ) | (10,294 | ) | (10,441 | ) | |||||||
Intangible Writedown | -- | (71,943 | ) | -- | (71,943 | ) | ||||||||
Corporate and other | (7,561 | ) | (5,046 | ) | (29,524 | ) | (21,805 | ) | ||||||
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Consolidated | $ | 32,668 | $ | (35,299 | ) | $ | 63,651 | $ | 28,129 | |||||
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LA-Z-BOY INCORPORATED
Impact of FIN 46 on Consolidation
Financial Accounting Standards Board Interpretation No. 46R, "Consolidation of Variable Interest Entities" ("FIN 46"), which was issued in December 2003, requires the "primary beneficiary" of a variable interest entity ("VIE") to include the VIE's assets, liabilities and operating results in its consolidated financial statements. In general, a VIE is a corporation, partnership, limited-liability corporation, trust or any other legal structure used to conduct activities or hold assets that either (i) has an insufficient amount of equity to carry out its principal activities without additional subordinated financial support, (ii) has a group of equity owners that are unable to make significant decisions about its activities, or (iii) has a group of equity owners that do not have the obligation to absorb losses or the right to receive returns generated by its operations.
La-Z-Boy Furniture Galleries® stores that are not operated by us are operated by independent dealers. These stores sell La-Z-Boy manufactured product as well as various accessories purchased from approved La-Z-Boy vendors. In some cases we have extended credit beyond normal trade terms to the independent dealers, made direct loans and/or guaranteed certain loans or leases. Most of these independent dealers have sufficient equity to carry out their principal operating activities without subordinated financial support, however, there are certain independent dealers that we have determined may not have sufficient equity. Based on the criteria for consolidation of VIEs, we have determined that several dealers are VIEs of which, under FIN 46, we are deemed the primary beneficiary.
Since some of our VIEs have either negative or no equity in their business, we are required to absorb their losses in our consolidated statement of operations. During the third fiscal quarter, one of the equity owners of our VIEs contributed $2.0 million of capital to their business. Current accounting standards required us to record the capital contribution as income in the third quarter of fiscal 2005 to offset previously recorded losses. The operating results of the consolidated VIEs impacted our diluted earnings per share by ($0.04) and ($0.11) for the fourth quarter and full year of fiscal 2005, respectively. The extraordinary gains of $2.2 million ($1.4 million net of tax) and $3.4 million ($2.1 million net of tax) for the fourth quarter and full year, respectively, are the results of the application of purchase accounting relating to the acquisition of previously consolidated VIEs. Additionally, there are certain independent dealers that qualify as VIEs; however, we are not the primary beneficiary. Our interest in these dealers is comprised of accounts and notes receivable of $20.1 million.
In prior years, we have evaluated the collectibility of our trade accounts receivable from our independent dealers and we have provided an appropriate reserve relating to the collectibility of our receivables with these dealers or the contingent payout under any guarantees. There are no VIEs consolidated into our consolidated statement of operations in the fourth quarter and full year of our fiscal 2004, however their balance sheets are included in the April 24, 2004 condensed consolidated balance sheet. The tables below show the impact of this standard on our condensed consolidated balance sheet and consolidated statement of operations as of April 30, 2005. The amounts reflected in the tables include the elimination of related payables, receivables, sales, cost of sales, and interest as well as profit in inventory.
LA-Z-BOY INCORPORATED
Impact of FIN 46 on Condensed Consolidated Balance Sheet
Unaudited
4/30/05 |
Unaudited
4/24/04 |
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---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Amounts in thousands) |
VIEs |
Consolidated |
VIEs |
Consolidated | ||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents | $ | 1,699 | $ | 37,705 | $ | 3,944 | $ | 33,882 | ||||||||
Accounts receivable, net | (9,131 | ) | (1) | 283,915 | (21,826 | ) | (1) | 299,801 | ||||||||
Inventories, net | 7,211 | 260,556 | 12,721 | 250,568 | ||||||||||||
Deferred income taxes | 7,199 | 22,779 | 5,101 | 31,387 | ||||||||||||
Other current assets | 1,226 | 33,410 | 1,951 | 31,454 | ||||||||||||
Total current assets | 8,204 | 638,365 | 1,891 | 647,092 | ||||||||||||
Property, plant and equipment, net | 8,431 | 210,565 | 7,264 | 212,739 | ||||||||||||
Intangibles | 7,713 | 100,846 | 7,714 | 96,005 | ||||||||||||
Other long-term assets, net | (14,168 | ) | (1) | 76,581 | (12,484 | ) | (1) | 85,078 | ||||||||
Total assets | $ | 10,180 | $ | 1,026,357 | $ | 4,385 | $ | 1,040,914 | ||||||||
Liabilities and shareholders' equity | ||||||||||||||||
Short-term borrowings | $ | -- | $ | 9,700 | $ | -- | $ | 37,219 | ||||||||
Current portion of long-term debt and capital leases | 1,934 | 3,060 | 255 | 5,344 | ||||||||||||
Accounts payable | 329 | 82,792 | 758 | 93,298 | ||||||||||||
Other current liabilities | 3,523 | 133,172 | 4,190 | 147,460 | ||||||||||||
Total current liabilities | 5,786 | 228,724 | 5,203 | 283,321 | ||||||||||||
Long-term debt and capital leases | 6,256 | 213,549 | 7,211 | 181,807 | ||||||||||||
Deferred income taxes | -- | 5,389 | -- | 13,637 | ||||||||||||
Other long-term liabilities | (1,300 | ) | 51,409 | 295 | 39,821 | |||||||||||
Shareholders' equity (deficit) | (562 | ) | 527,286 | (8,324 | ) | 522,328 | ||||||||||
Total liabilities and shareholders' equity | $ | 10,180 | $ | 1,026,357 | $ | 4,385 | $ | 1,040,914 | ||||||||
(1) Includes the elimination of intercompany accounts and notes receivable.
LA-Z-BOY INCORPORATED
Impact of FIN 46 on Condensed Consolidated
Statement of Operations
Unaudited For the Quarter Ended 4/30/05 |
Unaudited For the Year Ended 4/30/05 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Amounts in thousands) |
VIEs |
Consolidated |
VIEs |
Consolidated | ||||||||||
Sales | $ | 7,877 | (2) | $ | 565,555 | $ | 46,019 | (2) | $ | 2,048,381 | ||||
Cost of sales | ||||||||||||||
Cost of goods sold | (1,217 | ) (2) | 434,941 | 1,224 | (2) | 1,572,844 | ||||||||
Restructuring | -- | (3,107 | ) | -- | 10,294 | |||||||||
Total cost of sales | (1,217 | ) | 431,834 | 1,224 | 1,583,138 | |||||||||
Gross profit | 9,094 | 133,721 | 44,795 | 465,243 | ||||||||||
Selling, general and administrative | 11,115 | 101,053 | 49,825 | 401,592 | ||||||||||
Write-down of intangibles | -- | -- | -- | -- | ||||||||||
Operating income (loss) | (2,021 | ) | 32,668 | (5,030 | ) | 63,651 | ||||||||
Interest expense | 97 | 2,942 | 427 | 10,442 | ||||||||||
Other income (expense), net | (1,092 | ) (3) | (122 | ) | (4,154 | ) (3) | 170 | |||||||
Income (loss) from continuing operations before income taxes | (3,210 | ) | 29,604 | (9,611 | ) | 53,379 | ||||||||
Income tax expense (benefit) | (1,221 | ) | 11,249 | (3,652 | ) | 20,284 | ||||||||
Income (loss) from continuing operations | (1,989 | ) | 18,355 | (5,959 | ) | 33,095 | ||||||||
Income from discontinued operations (net of tax) | -- | 1,009 | -- | 1,996 | ||||||||||
Extraordinary gains (net of tax) | -- | 1,392 | -- | 2,094 | ||||||||||
Net income (loss) | $ | (1,989 | ) | $ | 20,756 | $ | (5,959 | ) | $ | 37,185 | ||||
(2) Includes the elimination of intercompany sales and cost of
sales.
(3) Includes
the elimination of intercompany interest income and interest expense.
Exhibit 99.2
LA-Z-BOY INCORPORATED
Unaudited Quarterly Financial Data
(Amounts in thousands, except per share data) Quarter ended |
7/24/04 * (13 weeks) |
10/23/04 * (13 weeks) |
1/22/05 * (13 weeks) |
4/30/05 (14 weeks) | ||||||||||
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Sales | $ | 455,107 | $ | 520,760 | $ | 506,959 | $ | 565,555 | ||||||
Cost of sales | ||||||||||||||
Cost of goods sold | 351,716 | 400,834 | 385,353 | 434,941 | ||||||||||
Restructuring | 10,400 | 749 | 2,252 | (3,107 | ) | |||||||||
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Total cost of sales | 362,116 | 401,583 | 387,605 | 431,834 | ||||||||||
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Gross profit | 92,991 | 119,177 | 119,354 | 133,721 | ||||||||||
Selling, general and administrative | 97,045 | 103,874 | 99,620 | 101,053 | ||||||||||
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Operating income (loss) | (4,054 | ) | 15,303 | 19,734 | 32,668 | |||||||||
Interest expense | 2,209 | 2,607 | 2,684 | 2,942 | ||||||||||
Other income (expense), net | 373 | (354 | ) | 273 | (122 | ) | ||||||||
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Income (loss) from continuing operations before income taxes | (5,890 | ) | 12,342 | 17,323 | 29,604 | |||||||||
Income tax expense (benefit) | (2,238 | ) | 4,690 | 6,583 | 11,249 | |||||||||
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Income (loss) from continuing operations | (3,652 | ) | 7,652 | 10,740 | 18,355 | |||||||||
Income from discontinued operations (net of tax) | 129 | 506 | 352 | 1,009 | ||||||||||
Extraordinary gains (net of tax) | -- | 702 | -- | 1,392 | ||||||||||
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Net income (loss) | $ | (3,523 | ) | $ | 8,860 | $ | 11,092 | $ | 20,756 | |||||
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Diluted weighted average shares outstanding | 51,967 | 52,101 | 52,193 | 52,262 | ||||||||||
Diluted income (loss) from continuing operations per share | $ | (0.07 | ) | $ | 0.15 | $ | 0.21 | $ | 0.35 | |||||
Diluted net income (loss) per share | (0.07 | ) | 0.17 | 0.21 | 0.40 |
* Income statements have been reclassified for discontinued operations.
LA-Z-BOY INCORPORATED
Unaudited Quarterly Financial Data
(Amounts in thousands, except per share data) Quarter ended |
7/26/03 * (13 weeks) |
10/25/03 * (13 weeks) |
1/24/04 * (13 weeks) |
4/24/04 * (13 weeks) | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sales | $ | 440,530 | $ | 498,360 | $ | 480,904 | $ | 532,203 | ||||||
Cost of sales | ||||||||||||||
Cost of goods sold | 344,031 | 384,883 | 374,574 | 406,376 | ||||||||||
Restructuring | 6,273 | 1,976 | 1,244 | 948 | ||||||||||
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Total cost of sales | 350,304 | 386,859 | 375,818 | 407,324 | ||||||||||
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Gross profit | 90,226 | 111,501 | 105,086 | 124,879 | ||||||||||
Selling, general and administrative | 78,700 | 85,211 | 79,474 | 88,235 | ||||||||||
Writedown of intangible | -- | -- | -- | 71,943 | ||||||||||
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Operating income (loss) | 11,526 | 26,290 | 25,612 | (35,299 | ) | |||||||||
Interest expense | 3,213 | 3,026 | 2,697 | 2,317 | ||||||||||
Other income, net | 1,270 | 440 | 1,273 | 1,381 | ||||||||||
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Income (loss) from continuing operations before income taxes | 9,583 | 23,704 | 24,188 | (36,235 | ) | |||||||||
Income tax expense (benefit) | 3,641 | 9,008 | 9,192 | (2,479 | ) | |||||||||
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Income (loss) from continuing operations | 5,942 | 14,696 | 14,996 | (33,756 | ) | |||||||||
Income (loss) from discontinued operations (net of tax) | (139 | ) | 481 | 283 | 25 | |||||||||
Cumulative effect of accounting change (net of tax) | -- | -- | -- | (8,324 | ) | |||||||||
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Net income (loss) | $ | 5,803 | $ | 15,177 | $ | 15,279 | $ | (42,055 | ) | |||||
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Diluted weighted average shares outstanding | 54,916 | 54,339 | 52,931 | 52,318 | ||||||||||
Diluted income (loss) from continuing operations per share | $ | 0.11 | $ | 0.27 | $ | 0.28 | $ | (0.65 | ) | |||||
Diluted net income (loss) per share | 0.11 | 0.28 | 0.29 | (0.80 | ) |
* Income statements have been reclassified for discontinued
operations.