2013 ANNUAL REPORT
San Marcos, California
SHAREHOLDERS’ MEETING
Wednesday, August 21, 2013
11:00 AM
La-Z-Boy Auditorium
1284 North Telegraph Road
Monroe, Michigan USA
PERFORMANCE
DRIVEN
FUTURE
FOCUSED
Kennedy sofa
2013 Annual Report
01
OUR
GROWTH
WAS FUELED
TRANSFORM
OUR ORGANIZATION
BY STRATEGIC DECISIONS TO
FISCAL 2013 SALES: $1.3 BILLION
BUSINESS SEGMENTS
% Sales by Business Segment
73%
upholstery
18% retail
9%
casegoods
Through lean and efficient operating initiatives,
and effective marketing and merchandising
programs, we have reinvented our company and
are well positioned for profitable growth. Our
objectives are simple. We want to continue to
grow our business based on the principles that
have made this company a success for more
than 86 years.
02
La-Z-Boy Incorporated
Jazz chair
LA-Z-BOY FURNITURE GALLERIES® NETWORK
CONSOLIDATED OPERATING MARGIN
SAME-STORE SALES
PERFORMANCE
11.8%
13.3%
11.8%
11.2%
9.7%
9.2%
8.6%
10%
9.2%
14%
12%
10%
8%
6%
4%
2%
0%
4.7%
Q3 FY11
Q4 FY11 Q1 FY12 Q2 FY12 Q3 FY12 Q4 FY12 Q1 FY13 Q2 FY13
Q3 FY13
Q4 FY13
Launch of “Live life comfortably”
Campaign featuring Brooke Shields
9%
6%
3%
0%
-3%
-6%
-9%
3.4%
▲
2.2%
▲
4.0%
▲
5.1%
▲
▲
-7.6%
FY09
FY10
FY11
FY12
FY13
BALANCE SHEET STRENGTH
INCREASING VALUE OF THE ENTERPRISE
CASH BALANCE
MARKET CAP
= DEBT
= CASH
151
$150
$100
$50
104
52
61
14
17
108
115
48
35
($mm)
152
131
10
8
$1,200
$1,000
$800
$600
$400
$200
$0
($mm)
2007
2008
2009
2010
2011
2012
2013
2008
2009
2010
2011
2012
2013
2013 Annual Report 03
LEVERAGING THE
OF OUR INDUSTRY-LEADING
POWER
BRAND
TO OUR SHAREHOLDERS:
The transformation of La-Z-Boy Incorporated
over the past five years has allowed us to emerge
as a stronger and more competitive company
within the home furnishings industry. Although
a significant undertaking, we have become a
successful integrated retailer that is growing
profitably and delivering results.
04
La-Z-Boy Incorporated
Talbot sofa and Leo ottoman
FISCAL YEAR 2013 OVERVIEW
SALES GROWTH
During fiscal 2013, we grew sales by $100 million, turned the retail segment
profitable, increased operating income by 36%, opened 10 new concept
design stores throughout the network, entered new markets and expanded
our stationary upholstery business. We also generated $68 million in cash
from operations, reinstated our quarterly dividend and purchased approximately
700,000 shares. In addition, after 86 years in our existing location, we announced
plans to build a new World Headquarters in our hometown of Monroe, Michigan,
that will provide a much more collaborative and effective workspace to help take
our company into the future.
Our success is reflected in our financial performance and valuation. In fiscal
2013, we earned $0.85 per diluted share on an increase in sales of 8.2% to
$1.3 billion and closed the year with $174 million in cash, cash equivalents and
investments. Our market capitalization surpassed the $1 billion level this year,
rebounding from a low point of approximately $30 million in early 2009. And, since
the financial and credit crisis that began in the fall of 2008, we have reported
16 quarters of profitability. Our goal was to ensure that our swift and
aggressive restructuring and repositioning efforts would allow us to operate
profitably even if demand trends did not strengthen from that time period and,
if demand increased, we would be able to earn a higher profit on the additional
sales. With the heavy lifting behind us, our growth potential is yet to be
maximized, providing for an exciting future as we leverage the potential of the
solid platform and business model we have created.
Today, our positioning in the marketplace is as solid as it has ever been.
La-Z-Boy is the most recognized brand in the industry. Our “Live life
comfortably” advertising campaign, compelling product line, new concept
store format and strong merchandising strategies are driving sustained volume
growth and same-store-sales comparisons. Essential to our growth strategy is a
focus on branded distribution, particularly the build out of the La-Z-Boy Furniture
Galleries® store network, the channel through which we are experiencing the
strongest momentum. As housing and the overall macroeconomic environment
continue to improve, we are well positioned to capitalize on those trends and
leverage our lean operating structure.
2013 Annual Report
05
Eden sofa and Arianna chair
STRIVING FOR IMPROVED PERFORMANCE
PROFITABLE GROWTH
While confident in our ability to execute on a strategy we believe will continue
experienced its own disruption with traditional furniture retailers closing
to deliver results, our work will never be done. We will not rest on our laurels.
their doors and alternative forms of distribution surfacing, most notably
Rather, we will continue on our lean journey and ensure we adjust and adapt
online, big-box and lifestyle retailers.
to the outside environment, remain nimble with our responses and develop
creative solutions and growth opportunities to strengthen the solid foundation
we have established in North America and around the world.
We addressed these issues head on. The overriding concern, however, was
to ensure there were enough distribution outlets through which to sell our
furniture and generate sustainable growth. This drove the development
In addition to facing macroeconomic challenges over recent years, the furniture
of our strategy to emphasize branded distribution, where we are able to
industry also had to respond to and overcome a myriad of changes that had
offer the consumer the best brand experience, including the opportunity
occurred throughout the industry, including an influx of inexpensive upholstery
to see our full merchandise assortment while receiving an excellent
and wood imports from Asia and a dislocation in the upholstery supply chain
sales presentation.
with fabric and leather moving offshore. At the same time, the retail landscape
06
La-Z-Boy Incorporated
At the core of our growth strategy is the plan to expand our branded distribution
We also see great opportunity to continue to grow our stationary upholstery
channel from today’s level of 878 outlets to approximately 1,000, including
business. Known for recliners, La-Z-Boy enjoys the largest market share
La-Z-Boy Furniture Galleries® stores and Comfort Studios® (a store-within-
percentage in the category. However, the market for stationary sofas,
a-store format). When completed, these branded locations will represent
loveseats and occasional chairs is much larger and, while we have
approximately 80% of the La-Z-Boy division’s volume. We have identified
enjoyed strong recent growth in these categories, the opportunity for us
around 80 additional potential locations throughout North America for La-Z-Boy
to continue to increase our share is significant. Also, as our advertising
Furniture Galleries® stores, which would bring our store count to about 400.
works to widen the age demographic of our consumer base, we believe
Split between our independent dealers and the company, plans are to complete
this will not only drive overall sales, but enhance sales across all our
the build out over the next five years. We have dubbed this our “4-4-5”
product categories.
strategy: 400 stores averaging $4 million in sales per store in five years. And,
we are working to grow our Comfort Studios® count to 600. Historically, the
La-Z-Boy branded business has provided the greatest return of all our
companies, and we believe it will continue to do so as we take advantage of
the current solid momentum of our business to open more stores.
During fiscal 2013, six new La-Z-Boy Furniture Galleries® stores were opened
across the network. The company opened four new stores, including three in
the Pittsburgh, Pennsylvania market – a market without La-Z-Boy distribution
for several years. There are a number of other markets without any stores, such
as southeast Michigan, right in our own backyard, where we will open three
stores this fall. The good news is that our store network has performed well
these past couple of years, providing confidence across our dealer base that
La-Z-Boy – Kuka Store, Hangzhou, China
the time is right to grow the network.
The success of our advertising campaign is demonstrable in the strong
same-store written sales numbers we have posted for the La-Z-Boy Furniture
Increasing Our Presence
Around the World
Galleries® store system. Over the two-and-a-half-year life of the campaign,
While we are concentrating on growing our North American retail
which features Brooke Shields as our brand ambassador, we more than doubled
footprint, we are also working to increase our presence around the world,
our time on TV and experienced a consequent increase in volume. While
expanding upon the more than 40 countries where La-Z-Boy furniture is
maintaining a discipline of keeping our advertising spend at a consistent
currently sold. During fiscal 2013, we grew our international team to focus
percentage of sales, moving forward, we will continue to invest in the campaign
on increasing sales in the Latin American, European, Middle Eastern,
to drive consumers to the La-Z-Boy brand and our various locations, thereby
African and Asian markets. And since its launch in March of 2012, our
supporting the ongoing investment we and our dealers are making to build
partner in China, Kuka, has opened more than 40 La-Z-Boy stores and
out our store system.
has plans to open between 75 and 100 stores in the coming year.
2013 Annual Report
07
Ontario, California Distribution Center
A PLATFORM FOR THE FUTURE
INTEGRATED RETAIL
Over the past five years, we have been working on the execution of our
Distribution Center system. All of these changes resulted in a steady
integrated retail strategy. This has allowed us to provide consumers with a
performance improvement for the segment, culminating in profitability
more holistic and consistent experience across all touch points, from
this year. That said, much potential remains, particularly as we build out
manufacturing to delivery and service. Importantly, it also has allowed us to
our La-Z-Boy Furniture Galleries® store system over the next five years,
capture both the wholesale and retail margins.
through which the company could ultimately own about 40% of the
During this time period, we transformed our company-owned retail operation
and it will play an essential role in our company’s future. Back in the fall of 2008,
we brought in a new management team who completely restructured the
segment’s operations and cost structure, improved margins, modified selling
processes and played a central role in the revamping of our Regional
08
La-Z-Boy Incorporated
potential 400 stores within North America. We continue to grow our
company-owned store base and, in fiscal 2013, increased our store
count to 94, which included the three stores opened in Pittsburgh and the
acquisition of nine stores in the southern Ohio market.
LEAN AND EFFICIENT MANUFACTURING
OPERATIONAL EXCELLENCE
Core to our strategic repositioning was ensuring we created a model that
have improved our flow of goods by keeping our bestsellers in stock and
would allow us to maintain competitiveness, and this necessitated a number of
providing our dealers with access to a much larger base of inventory,
significant modifications to our operating structure.
enabling them to concentrate on the front end of their business while we
With a strong brand heritage built on quality products manufactured in the
U.S., shoring up the efficiencies of our domestic manufacturing facilities was
essential to maintain competitiveness and deliver on our brand promise to the
consumer: custom furniture with quick delivery. Shortly before the financial
crisis of 2008, we completed the two-and-a-half-year process of converting
our La-Z-Boy branded manufacturing facilities to a cellular form of production.
This lean manufacturing method enabled us to increase speed and quality,
while lowering costs significantly. And, in April of 2008, we announced we
would move our cutting-and-sewing operations for our custom-order business
to Mexico, where fabric kits are made at a lower cost and shipped to our U.S.
plants within a 48-hour period. That operation is performing well and is integral
to the overall success of our wholesale upholstery segment.
manage inventory, logistics, delivery and service.
Custom
Furniture with
Quick Delivery
Although the La-Z-Boy branded business represents the largest component
of the total enterprise, our other companies – Bauhaus and England in our
upholstery segment, and American Drew, Lea, Hammary and Kincaid in
our casegoods segment – also have undergone changes in their
structures, and are operating as lean and efficient entities which are
To provide some perspective on the efficiencies of our operations, today we
contributing to our results. They also provide the overall enterprise with
are manufacturing the same amount of furniture in our five La-Z-Boy branded
access to additional distribution channels. Our dealers have responded
facilities as we did in nine plants several years ago. And, what is most exciting
positively to the new lines of furniture England introduced to broaden its
is that our lean structure provides the ability to manufacture approximately
offering, including a line of affordably priced motion furniture and a line
$250 to $300 million in additional wholesale volume at our existing
of more modern, stationary upholstered furniture, both of which should
manufacturing facilities without any new brick and mortar. Given the relatively
serve to drive growth. And, while the casegoods industry as a whole has
high fixed-cost structure of our plants and of our retail segment, we have good
been more challenged since the 2008-2009 period due to the higher
potential to leverage additional volume and increase our level of profitability.
ticket associated with full wood room groups, we believe it is poised to
Our operating platform is key to ensuring the success of our integrated
benefit from a strengthening housing market.
retail strategy and the ability to maximize the blended wholesale/retail
operating margin.
In addition, to support the many growth initiatives across the corporation,
we are making investments in various technologies and systems while
Our efficiencies also have been improved through blended sourcing strategies
working to streamline and strengthen our global supply chain process
that were adopted by our upholstery and casegoods businesses. And, we
to improve productivity and efficiencies. These initiatives, combined
streamlined our distribution center operations for the La-Z-Boy Furniture
with the many changes implemented throughout our manufacturing
Galleries® store system. In addition to reducing costs, the Regional Distribution
facilities, will enable us to better service our customer base while
Centers provide for efficiencies in inventory management and service. We
reducing our lead times.
2013 Annual Report
09
New store format Design Center
EXCEEDING EXPECTATIONS
INCREASING CONSUMER ENGAGEMENT
Every day we need to ensure that we meet, and hopefully exceed, consumers’
Our new concept La-Z-Boy Furniture Galleries® stores truly represent the
expectations of La-Z-Boy so they continue to rely on us to deliver a great brand,
La-Z-Boy brand and products today and provide an in-store experience
shopping and product experience. We also are striving to increase consumers’
that is in alignment with our marketing. With a more modern look and
understanding of all that La-Z-Boy represents and how we can make their lives
feel, the stores are set up by style category and designed to highlight
and homes more comfortable and stylish.
The “Live life comfortably” brand platform continues to build momentum.
Elevating our image and defining what the brand means today, the
campaign highlights the fact that La-Z-Boy offers a broad range and selection
of great-looking, on-trend upholstered furniture beyond recliners. The
advertising campaign has broadened our reach with the consumer, increasing
consideration for our product among an expanded age group. All of these
factors work to solidify our position as the strongest brand in the industry
and demonstrate that we are a credible home décor retailer in the mind
of the consumer.
10
La-Z-Boy Incorporated
customization opportunities and increase the
average ticket by showing fully accessorized
room groups. To date, there are 14 new
concept design stores across North America,
and all new stores will be in the new
concept design, with existing stores
converted to the new design over time.
Connecting
with Consumers
Everywhere
Once in the stores, consumers visualize the potential for their rooms and
Facebook, Twitter, YouTube and Pinterest. We are striving to ensure
they are more interested in taking advantage of our free In-Home Design
that all of our digital connection points inspire the consumer, provide
service, where they have the opportunity to work one on one with a
opportunities for her to interact with us, educate her on our products,
certified interior designer to decorate their rooms from top to bottom – frame
stores, promotions and prices and, when she prefers, allow her to
and fabric selection, accessories, furniture configuration and paint colors.
purchase those products online. La-Z-Boy.com offers the ability for
We believe this service is a key differentiator for us within the industry and,
consumers to design and purchase our furniture at the same level
as more customers become aware of it, we are gaining traction in this line of
that is available in our stores, with the model providing the optimum
our business. Representing approximately 20% of sales across the La-Z-Boy
balance between a national web presence and local delivery and
Furniture Galleries® stores today, the potential to grow the In-Home Design
Zip-code-based pricing determined by the local La-Z-Boy Furniture
business is significant. Research tells us that, ultimately, the consumer truly
Galleries® dealer.
enjoys and appreciates professional decorating assistance and not only is more
satisfied with a beautifully decorated room, but is more inclined to utilize the
La-Z-Boy In-Home Design service for additional rooms throughout her home.
Early in calendar 2013, we launched the second version of our
mobile site to respond to and capitalize on the incredible increase in
the use of smartphones and other mobile devices. The new and
With respect to our product line, we strive to offer the consumer enhanced
improved site
features Zip-code-based pricing
to ensure our
choice and customization, including a wide selection of fabric and other product
consumers have accurate, local information at their fingertips,
options with innovation at their roots. In tandem with our advertising campaign,
the ability to customize their furniture with any fabric they choose
we have designed more stylish and on-trend furniture pieces throughout our
and details on their nearest store based on geo-sensed location data,
stationary product group. The frames for these pieces are sleeker in scale,
among several other new features. We believe having the ability to
have cleaner and more modern lines and interesting accents, like contemporary
do everything from selecting fabrics to purchasing home furnishings
tufting and tapered wood legs. Our line of power furniture has also exhibited
on a smartphone will be a driving factor in our e-commerce and
great success as we provide a mechanism that is unique in the marketplace.
overall growth.
Smooth and quiet, the mechanism offers the consumer more
functionality and appeals to those who are
interested in technology and the innovative
aspect of our products.
As consumers continue to increase their
engagement with all things digital and
interactive, we are focused on the
continuous enhancement of various digital
platforms, including web and mobile sites,
and our interaction with our consumers
through social media platforms such as
TRANSFORMATION
OUR CULTURE
The ongoing transformation of our culture has and will play an essential role
enabling us to work in an inspiring environment that fosters creativity,
in our success and positioning for the future. Over the past five years, there
collaboration and ongoing innovation. Although a large undertaking,
has been a shift in the cultural paradigm of our organization, with each person
we have received numerous city, state and local incentives that will
understanding his or her role, responsibility and accountability for delivering
offset a significant portion of the cost, and fully expect to fund the
profitable growth. This mindset permeates our employees’ approach to
remaining portion through our normalized free cash flow. We have
every aspect of our business. They are open-minded, embracing change
just broken ground on the property and expect it will take about
and bringing creativity and solutions to their jobs every day. We have built a
18 months to complete the project.
solid team with talented leadership and our organization is well positioned
for the future.
Our company has had a number of
other notable achievements this past
We are excited about building a new World Headquarters in our hometown
year. We are gratified and humbled
of Monroe, Michigan. Our new building, which will be LEED-certified, will
that La-Z-Boy Incorporated was named
utilize sustainable building practices, be nestled on a 120-acre site purchased
to the Forbes list of “America’s 100 Most Trustworthy Companies,”
early in 2013 and will preserve a beautiful oak savanna ecosystem. The
based on transparency, conservative accounting practices and
landmark facility will herald our evolving image as a global company,
prudent management.
Architectural renderings of the new La-Z-Boy World Headquarters
12
La-Z-Boy Incorporated
LA-Z-BOY’S
FUTURE
IS BRIGHT
Our transformation has been difficult and long in the making.
While meeting significant and varied challenges along the way,
we have built a solid operation and integrated retail platform
designed to drive growth and profitable conversion on that
growth. Our future is bright. As we move forward, we will stay
intently focused on continuing our lean journey to further
strengthen our business. We are well positioned to capitalize on
an improving economy and housing market and will continue
to develop products which appeal to our customers. At the
IndustryWeek magazine “10 Best Plants in North America” award
It was also an honor for our Dayton, Tennessee La-Z-Boy plant to be named
same time, we are becoming a best-in-class retailer while
by IndustryWeek magazine as one of its “10 Best Plants in North America” for
maintaining our status as the best known and loved brand in
2012. It is a competitive and coveted title to obtain and, in fact, the Dayton
the furniture industry. These factors provide us with every
facility was a finalist the previous three years before receiving the prestigious
opportunity to leverage our business model and we look forward
award. Lean initiatives are part of our company’s DNA, and we have worked
to the ongoing evolution of our company and its ability to grow
for years to implement them and will continue to do so. Part and parcel to
and prosper.
being efficient is the objective to deliver the highest quality products to our
customers. This award recognizes the world-class manufacturing operation
at our Dayton facility, which totals 1.2 million square feet. I am proud of the
1,300 associates there who earned this recognition. They and thousands of
others throughout our other manufacturing facilities contribute every day
through their dedication and tireless work.
As always, we thank you for your support of our efforts.
KURT L. DARROW
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
2013 Annual Report
13
THE LA-Z-BOY
FAMILY
OF COMPANIES
In addition to our flagship La-Z-Boy brand, our
family of companies provides a diverse mix of
products to fill every room of the home.
Casegoods offerings include beautiful bedroom
suites, dining rooms and occasional pieces
marketed under the American Drew, Lea,
Hammary and Kincaid names.
Upholstery products are manufactured and sold
by La-Z-Boy, as well as Bauhaus and England.
Together, we offer consumers a wide array of
products and price points to meet every budget
and design sensibility.
Mila collection by England
14
La-Z-Boy Incorporated
Kinsley sofa by La-Z-Boy
OUR PORTFOLIO OF COMPANIES
Artisan’s Shoppe dining collection by Kincaid
Hidden Treasures accent
chest by Hammary
Jessica McClintock bedroom
by American Drew
Rhett room group by Bauhaus
Willow Run panel bed by Lea
2013 Annual Report
15
16
La-Z-Boy Incorporated
Arianna chair and Roundabout ottoman
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 27, 2013
COMMISSION FILE NUMBER 1-9656
LA-Z-BOY INCORPORATED
(Exact name of registrant as specified in its charter)
MICHIGAN
(State or other jurisdiction of incorporation or organization)
38-0751137
(I.R.S. Employer Identification No.)
1284 North Telegraph Road, Monroe, Michigan
(Address of principal executive offices)
48162-3390
(Zip Code)
Registrant's telephone number, including area code (734) 242-1444
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Shares, $1.00 Par Value
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in rule 405 of the Securities Act.
Yes
No
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.
Yes
No
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes
No
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter
period that the Registrant was required to submit and post such files).
Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
No
Based on the closing price on the New York Stock Exchange on October 26, 2012, the aggregate market value of Registrant’s common
shares held by non-affiliates of the Registrant on that date was $848.1 million.
The number of common shares outstanding of the Registrant was 52,215,231 as of June 11, 2013.
DOCUMENTS INCORPORATED BY REFERENCE:
(1) Portions of the Registrant’s Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation
14A for its 2013 Annual Meeting of Shareholders are incorporated by reference into Part III.
LA-Z-BOY INCORPORATED
FORM 10-K ANNUAL REPORT FISCAL 2013
TABLE OF CONTENTS
Cautionary Statement Concerning Forward-Looking Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
Number(s)
3
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . 20
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . 67
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
PART III
Item 10. Directors, Executive Officers, and Corporate Governance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Item 13. Certain Relationships and Related Transactions, and Director Independence. . . . . . . . . . . . . . . . 68
Item 14. Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Item 15. Exhibits, Financial Statement Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
PART IV
Note: The responses to Items 10 through 14 will be included in the Company’s definitive proxy statement to be
filed pursuant to Regulation 14A for the 2013 Annual Meeting of Shareholders. The required information is
incorporated into this Form 10-K by reference to that document and is not repeated herein.
2
Cautionary Statement Concerning Forward-Looking Statements
La-Z-Boy Incorporated and its subsidiaries (individually and collectively, “we,” “our” or the “Company”)
makes forward-looking statements in this report, and its representatives may make oral forward-looking
statements from time to time. Generally, forward-looking statements include information concerning possible or
assumed future actions, events or results of operations. More specifically, forward-looking statements may
include information regarding:
⎯ future income, margins and cash flows
⎯ future growth
⎯ adequacy and cost of financial resources
⎯ future economic performance
⎯ industry and importing trends
⎯ management plans
Forward-looking statements also include those preceded or followed by the words "anticipates," "believes,"
"estimates," "hopes," "plans," "intends" and "expects" or similar expressions. With respect to all forward-
looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995.
Actual results could differ materially from those we anticipate or project due to a number of factors, including: (a)
changes in consumer confidence and demographics; (b) speed of economic recovery or the possibility of another
recession; (c) changes in the real estate and credit markets and their effects on our customers and suppliers; (d)
international political unrest, terrorism or war; (e) volatility in energy and other commodities prices; (f) the impact
of logistics on imports; (g) interest rate and currency exchange rate changes; (h) operating factors, such as supply,
labor or distribution disruptions; (i) any court actions requiring us to return any of the Continued Dumping and
Subsidy Offset Act distributions we have received; (j) changes in the domestic or international regulatory
environment; (k) adoption of new accounting principles; (l) severe weather or other natural events such as
hurricanes, earthquakes, flooding, tornadoes and tsunamis; (m) our ability to procure fabric rolls and leather hides
or cut-and-sewn fabric and leather sets domestically or abroad; (n) fluctuations in our stock price; (o) information
technology conversions or system failures; (p) effects of our brand awareness and marketing programs; (q) the
discovery of defects in our products resulting in delays in manufacturing, recall campaigns, reputational damage,
or increased warranty costs; (r) litigation arising out of alleged defects in our products; (s) our ability to locate new
La-Z-Boy Furniture Galleries® stores (or store owners) and negotiate favorable lease terms for new or existing
locations; (t) our ability to integrate acquired businesses and realize the benefit of anticipated synergies; and (u)
those matters discussed in Item 1A of this Annual Report and other factors identified from time-to-time in our
reports filed with the Securities and Exchange Commission. We undertake no obligation to update or revise any
forward-looking statements, whether to reflect new information or new developments or for any other reason.
PART I
ITEM 1. BUSINESS.
Edward M. Knabusch and Edwin J. Shoemaker started Floral City Furniture in 1927, and in 1928 the newly
formed company introduced its first recliner. In 1941, we were incorporated as La-Z-Boy Chair Company in the
state of Michigan, and in 1996 our name was changed to La-Z-Boy Incorporated. Today, our La-Z-Boy brand is
the most recognized brand in the furniture industry.
La-Z-Boy Incorporated manufactures, markets, imports, distributes and retails upholstery products, accessories
and casegoods (wood) furniture products. We are the leading global producer of reclining chairs and the second
largest manufacturer/distributor of residential furniture in the United States according to the May 2013 Key
Sources for the U.S. Furniture Market in Furniture Today. The La-Z-Boy Furniture Galleries® stores retail
network is the second largest retailer of single-branded upholstered furniture in North America according to the
May 2013 Top 100 ranking by Furniture Today. We have nine major North American manufacturing locations
to support our speed to market and customization strategy.
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We sell our products, primarily in the United States and Canada, to furniture retailers and directly to consumers
through stores owned and operated by our subsidiaries. The centerpiece of our retail distribution strategy is our
network of 313 La-Z-Boy Furniture Galleries® stores and 565 Comfort Studios® locations, each dedicated to
marketing our La-Z-Boy branded products. We consider this dedicated space to be “branded outlets” or
“proprietary.” We own 94 of the La-Z-Boy Furniture Galleries® stores. The remainder of the La-Z-Boy Furniture
Galleries® stores, as well as all 565 Comfort Studios® locations, are independently owned and operated. La-Z-
Boy Furniture Galleries® stores help consumers furnish their homes by combining the style, comfort and quality
of La-Z-Boy furniture with our available in-home design service. Comfort Studios® locations are defined spaces
within larger independent retailers that are dedicated to displaying and selling La-Z-Boy branded products. In
addition to the La-Z-Boy Comfort Studios® locations, our Kincaid, England and Lea operating units have their
own dedicated proprietary in-store gallery programs with over 730 outlets and 4.3 million square feet of
proprietary floor space. In total, our proprietary floor space includes approximately 11.7 million square feet.
Principal Products and Industry Segments
Our reportable segments are the Upholstery segment, the Casegoods segment and the Retail segment.
Upholstery Segment. Our Upholstery segment is our largest segment in terms of revenue and consists of three
operating units: La-Z-Boy, our largest operating unit, and our Bauhaus and England operating units. The
Upholstery segment manufactures or imports upholstered furniture such as recliners and motion furniture, sofas,
loveseats, chairs, sectionals, modulars, ottomans and sleeper sofas. The Upholstery segment sells directly to La-
Z-Boy Furniture Galleries® stores, operators of Comfort Studios® locations, major dealers and other
independent retailers.
Casegoods Segment. Our Casegoods segment is an importer, marketer, manufacturer and distributor of
casegoods (wood) furniture such as bedroom sets, dining room sets, entertainment centers and occasional
pieces, and some coordinated upholstered furniture. The Casegoods segment consists of two operating units,
one consisting of American Drew, Lea and Hammary, and the second being Kincaid. The Casegoods segment
primarily sells to major dealers and other independent retailers.
Retail Segment. Our Retail segment consists of 94 company-owned La-Z-Boy Furniture Galleries® stores
located in 11 markets ranging from southern California to the Midwest to the east coast of the United States.
During fiscal 2013, we acquired nine La-Z-Boy Furniture Galleries® stores in the southern Ohio market that
were previously independently owned and operated. The Retail segment primarily sells upholstered furniture, in
addition to some casegoods and other accessories, to the end consumer through the retail network.
Additional detailed information regarding our segments and their products is contained in Note 16 to our
consolidated financial statements and our “Management’s Discussion and Analysis” section, both of which are
included in this report.
Raw Materials and Parts
The principal raw materials for the Upholstery segment are purchased cover (primarily fabrics and leather),
polyester batting and non-chlorofluorocarbonated polyurethane foam for cushioning and padding, lumber and
plywood for frames and steel for motion mechanisms, which together total about 79% of the segment’s total
upholstery material costs. We purchase about 74% of our polyurethane foam from one supplier, and it has
several facilities across the United States that deliver to our plants. The largest raw material cost of the
Upholstery segment is purchased cover, which represents about 46% of the segment’s total material costs. We
purchase cover from a variety of sources, but we rely on a limited number of major suppliers. If one of these
major suppliers experienced financial or other difficulties we could experience temporary disruptions in our
manufacturing process until we obtained an alternate supplier.
We purchase our cover either in a raw state (a roll or hide) and cut and sew it into parts, or purchase cut-and-
sewn parts from third-party offshore suppliers. Our cover material costs are evenly divided between fabric rolls
and hides and cut-and-sewn parts. We have four primary suppliers of cut-and-sewn leather and fabric products.
Of the products we import from China, two suppliers manufacture over 85% of the leather cut-and-sewn sets
and three suppliers manufacture approximately 99% of the fabric products.
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During fiscal 2013, prices on materials we used in our upholstery manufacturing process increased
approximately 3.2% compared with fiscal 2012. We expect raw material costs to rise in fiscal 2014 due to
increased global demand for steel, leather, wood, yarn, polyurethane, and other materials used in our upholstery
manufacturing processes. Additionally, costs associated with our transportation activities are sensitive to
changes in crude oil pricing.
As the Casegoods segment is primarily an importer, marketer, and distributor of casegoods furniture, with some
manufacturing operations, raw materials represent only about 12% of the total inventory of this segment. The
principal raw materials used by our Casegoods manufacturing facility are hardwoods, plywood and chip wood,
veneers, liquid stains, paints and finishes and decorative hardware. During the year, our Casegoods
manufacturing operations discontinued lumber processing and switched to primarily a “parts assembly” model.
Once we fully implement the parts assembly model, it will result in a decrease in the percentage of the
segment’s material costs for lumber and an increase in the share of imported and domestically sourced
component parts. Hardwood lumber, plywood, and purchased hardwood components represented about 64% of
this segment’s total material costs in fiscal 2013.
Casegoods Finished Goods Imports
The majority of finished wood furniture marketed and distributed by our Casegoods segment is imported,
primarily due to the low labor (both wages and benefits) and overhead costs associated with manufacturing
casegoods product overseas. We have continued to make changes to our model in order to improve our service
performance levels by improving our supply chain management and distribution networks.
During fiscal 2013, prices on imported casegoods were essentially flat compared with fiscal 2012. We currently
expect these prices and transportation costs to remain fairly stable in fiscal 2014.
Sales of imported casegoods finished goods represented about 77% and 75% of our total casegoods sales for
fiscal 2013 and fiscal 2012, respectively. Sales of imported finished goods, for all our segments, represented
approximately 10% of both our fiscal 2013 and fiscal 2012 consolidated sales.
Seasonal Business
We believe that the demand for furniture generally reflects sensitivity to overall economic conditions, including
consumer confidence, housing market conditions and unemployment rates. Historically, our Upholstery and
Retail segments have experienced lower levels of sales during the first fiscal quarter and higher levels during
the fourth fiscal quarter.
During fiscal 2013, our Upholstery segment and our Retail segment experienced their highest level of sales
during our fourth fiscal quarter while our Casegoods segment experienced its highest level of sales during our
first fiscal quarter. Our Upholstery and Retail segments both experienced their lowest level of sales for fiscal
2013 during our first fiscal quarter while our Casegoods segment experienced its lowest level of sales in our
fourth fiscal quarter of fiscal 2013.
When possible, we schedule production to maintain uniform manufacturing activity throughout the year. We
shut down our domestic plants for a week in July to perform routine maintenance on our equipment.
Economic Cycle and Purchasing Cycle
Of our product segments, upholstered furniture has a shorter life cycle and exhibits a less volatile sales pattern
over an economic cycle than casegoods furniture. This is because upholstered furniture is typically more fashion
and design oriented, and is often purchased one or two pieces at a time. In contrast, casegoods products are
longer-lived and frequently purchased in groupings or “suites,” resulting in a much larger cost to the consumer.
5
Practices Regarding Working Capital Items
The following describes our significant practices regarding working capital items.
Inventory: We maintain raw materials and work in process inventory at our manufacturing locations. We
maintain finished goods inventory at our six regional distribution centers. Our regional distribution centers
allow us to streamline the warehousing and distribution processes for our La-Z-Boy Furniture Galleries® store
network, including both company-owned stores and independently owned stores. Regional distribution centers
also allow us to reduce the number of individual warehouses we need to supply our retail outlets and help us
reduce our inventory levels at our manufacturing and retail locations. We also maintain finished goods
inventory at our manufacturing locations, which primarily consists of sold orders.
Rather than manufacture to fill custom orders, we generally build or import casegoods to go into inventory to
enable us to attain manufacturing efficiencies and meet our customers’ delivery requirements. This practice
results in higher levels of finished goods inventory for our casegoods products than our upholstery products as a
percentage of sales. Our company-owned La-Z-Boy Furniture Galleries® stores maintain finished goods
inventory at the stores for display purposes.
During fiscal 2013 our inventory increased $2.6 million compared with fiscal 2012, but decreased 0.7
percentage points as a percentage of sales. We will continue to manage our inventory levels to ensure they are
in line with sales levels, while maintaining our focus on service to our customers.
Accounts Receivable: During fiscal 2013 our accounts receivable decreased $7.5 million compared with fiscal
2012, and decreased 1.6 percentage points as a percentage of sales. The improvement in our cash collections
was the result of an improvement in the financial health of our customer base, including our independent La-Z-
Boy Furniture Galleries® dealers. We continue to monitor our customers’ accounts and limit our credit
exposure to certain independent dealers, and decrease our days sales outstanding where possible.
Customers
Our customers are furniture retailers located primarily throughout the United States and Canada, though we do sell
to a number of furniture retailers outside of North America. We did not have any single customer whose purchases
amounted to more than 3% of our consolidated, Upholstery segment, or Casegoods segment sales in fiscal 2013.
Sales in our Upholstery and Casegoods segments are almost entirely to furniture retailers, but we sell to consumers
through our company-owned La-Z-Boy Furniture Galleries® stores that make up our Retail segment.
We have formal agreements with many furniture retailers for them to display and merchandise products from
one or more of our operating units and sell them to consumers in dedicated retail space, either in stand-alone
stores or dedicated proprietary galleries or studios within their stores. We consider this dedicated space to be
“proprietary.” For our Upholstery and Casegoods segments, our 2013 customer mix based on sales was about
55% proprietary, 10% major dealers (for example, Art Van Furniture, Berkshire Hathaway, Havertys Furniture,
and Raymour & Flanigan Furniture) and 35% other independent retailers.
The success of our product distribution relies heavily on having retail floor space that is dedicated to displaying
and marketing our products. This distribution system originated with our La-Z-Boy Furniture Galleries® stores
network, which continues to have the largest number of proprietary stores and galleries among our other
operating units. According to the May 2013 Top 100 ranking by Furniture Today, an industry trade publication,
the La-Z-Boy Furniture Galleries® stores retail network is the second largest retailer of single-brand
upholstered furniture in North America.
Maintaining, updating, and expanding, when appropriate, our proprietary distribution network is a key part of
our overall sales and marketing strategy. As we continue to maintain and update our current stores, the La-Z-
Boy Furniture Galleries® store network plans to open, relocate or remodel 15 to 20 stores during fiscal 2014.
All of these new stores will feature the new concept store design we developed and introduced in fiscal 2012.
We select independent dealers for our proprietary distribution network based on factors such as the management
and financial qualifications of those potential dealers as well as the potential for distribution in a specific
6
geographical area. This proprietary method of distribution is beneficial to La-Z-Boy, our dealers and the
consumer. For La-Z-Boy, it allows us to have a concentration of marketing of our product by sales personnel
dedicated to our entire product line, and only that line. For dealers who join this proprietary group, it allows
them to take advantage of practices that have proven successful based on past experiences of other proprietary
dealers. As a part of this, we facilitate forums and communications for these dealers to share best practices
among their peers. For our consumers, these stores provide a full-service shopping experience with
knowledgeable sales associates and in-home design consultants to support their purchasing process. The La-Z-
Boy Furniture Galleries® stores’ independent dealers and the Comfort Studios® locations retailers are
responsible for displaying and merchandising our product within the dedicated retail space.
Orders and Backlog
Because the measure of backlog at a point in time may not be indicative of our future sales performance, we do
not rely entirely on backlogs to predict future sales. Most of our operating units do not allow our customers to
cancel orders after the orders have been selected for production. Upholstery orders are primarily built to a
specific dealer order as either a sold order based on a consumer’s custom order or a stock order. Casegoods are
primarily produced to our internal order (not a customer or consumer order), resulting in higher finished goods
inventory on hand as a percentage of sales.
As of April 27, 2013, and April 28, 2012, our Upholstery segment backlogs were approximately $78.6 million
and $65.4 million, respectively. The timing of orders placed just before our fiscal year end accounts for the
majority of this increase, and the units driving the increase in backlog are expected to be shipped primarily in
the second quarter of fiscal 2014. Our Casegoods segment backlogs as of April 27, 2013, and April 28, 2012,
were approximately $13.8 million and $14.0 million, respectively.
Competitive Conditions
According to the May 2013 Key Sources for the U.S. Furniture Market in Furniture Today, we are currently the
second largest manufacturer/distributor of residential (living and family room, bedroom, and dining room)
furniture in the United States, as measured by annual sales volume.
In the Upholstery segment, our largest competitors are Ashley, Bassett Furniture, Bernhardt, Ethan Allen,
Flexsteel, Furniture Brands International, Klaussner, and Natuzzi.
In the Casegoods segment, our main competitors are Ashley, Bernhardt, Ethan Allen, Furniture Brands
International, Hooker Furniture, Stanley Furniture, and Lacquer Craft. The Casegoods segment faces additional
market pressures from foreign manufacturers entering the United States market and increased direct purchases
from foreign suppliers by large United States retailers.
The La-Z-Boy Furniture Galleries® stores operate in the retail furniture industry throughout North America,
and they have different competitors based on their locations. Competitors include: Arhaus, Ashley, Bassett
Furniture Direct, Crate and Barrel, Ethan Allen, Restoration Hardware, Thomasville Home Furnishings Stores,
several other regional competitors (for example Art Van Furniture, Raymour & Flanigan Furniture, and
Havertys Furniture), and family-owned independent furniture stores.
In addition to the larger competitors listed above, a substantial number of small and medium-sized companies
operate within our business segments, all of which are highly competitive.
Over the past decade alternative distribution channels have increasingly affected our retail markets. Companies
such as Costco, Home Depot, IKEA, Sam’s Club, Target, Wal-Mart, Williams Sonoma and others, now offer
products that compete with some of our product lines. The increased ability of consumers to purchase furniture
through various furniture manufacturers’ and retailers’ internet websites has also increased competition.
The home furnishings industry competes primarily on the basis of product styling and quality, customer service
(product availability and delivery), and price, and we compete on these factors through our distribution models,
marketing and customization capabilities.
7
We compete primarily by emphasizing our brand and the value, comfort, quality, and styling of our products. In
addition, we remain committed to innovation while striving to provide outstanding customer service,
exceptional dealer support, and efficient on-time delivery. Maintaining, updating and expanding our proprietary
distribution system appropriately is a key strategic initiative for us in striving to remain competitive. We
compete in the mid-to-upper-mid price point, and a shift in consumer taste and trends to lower price point
products could negatively affect our competitive position.
Research and Development Activities
We provide information regarding our research and development activities in Note 1 to our consolidated
financial statements, which is included in Item 8 of this report.
Trademarks, Licenses and Patents
We own several trademarks, including La-Z-Boy, our most valuable. The La-Z-Boy trademark is essential to the
upholstery and retail segments of our business. To protect our trademarks, we have registered them in the United
States and various other countries where our products are sold. These trademarks have a perpetual life, subject to
renewal every ten years. We license the use of the La-Z-Boy trademark to our major international partners and
dealers outside of North America. We also license the use of the La-Z-Boy trademark on contract office furniture,
outdoor furniture and non-furniture products for the purpose of enhancing brand awareness, broadening the
perceptions of La-Z-Boy and creating visibility of the La-Z-Boy brand in channels outside of the furniture
industry. In addition, we license to our branded dealers the right to use our La-Z-Boy trademark in connection with
the sale of our products and related services, on their signs, and in other ways, which we consider to be a key part
of our marketing strategies. We provide more information about those dealers, under “Customers.”
We hold a number of patents that we actively enforce, but we believe that the loss of any single patent or group
of patents would not significantly affect our business.
Compliance with Environmental Regulations
Our manufacturing operations involve the use and disposal of certain substances regulated under environmental
protection laws, and we are involved in a small number of remediation actions and site investigations
concerning such substances. Based on a review of all currently known facts and our experience with previous
environmental matters, we believe we have adequate reserves in respect of probable and reasonably estimable
losses arising from environmental matters and currently do not anticipate any material loss.
Employees
We employed approximately 8,185 full-time equivalent employees as of April 27, 2013. The Upholstery
segment employed approximately 6,960, the Casegoods segment employed approximately 370, and the Retail
segment employed approximately 660, with the remainder being corporate personnel. The majority of our
employees are employed on a full-time basis, except in our Retail segment, which employs approximately 495
part-time employees. As of April 28, 2012, we had approximately 8,160 full-time equivalent employees.
Financial Information About Foreign and Domestic Operations and Export Sales
In fiscal 2013, our direct export sales, including sales in Canada, were approximately 13% of our total sales. We
have a manufacturing joint venture in Thailand, which distributes furniture in Australia, New Zealand, Thailand
and other countries in Asia. In addition, we have a sales and marketing joint venture in Asia, which sells and
distributes furniture in Korea, Taiwan, Japan, India, Malaysia, and other Asian countries.
We also have a facility in Mexico which provides cut-and-sewn fabric sets for our domestic upholstery
manufacturing facilities. Information about sales in the United States, Canada, and other countries is contained
in Note 16 to our consolidated financial statements, which is included in Item 8 of this report. Our net property,
plant, and equipment value in the United States was $109.9 million and $106.0 million at the end of fiscal 2013
and fiscal 2012, respectively. Our net property, plant, and equipment value in foreign countries was $8.2 million
and $8.4 million in fiscal 2013 and fiscal 2012, respectively.
See Item 1A of this report for information about the risks related to our foreign operations.
8
Internet Availability
Our Forms 10-K, 10-Q, 8-K, and proxy statements on Schedule 14A and amendments to those reports are
available free of charge through links on our internet website, www.la-z-boy.com, as soon as reasonably
practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission
(SEC). Copies of any materials we file with the SEC can also be obtained free of charge through the SEC’s
website at www.sec.gov. The information on our website is not part of this report.
ITEM 1A. RISK FACTORS.
Our business is subject to a variety of risks. Interest rates, consumer confidence, housing starts and the overall
housing market, increased unemployment, tightening of the financial and consumer credit markets, downturns
in the economy and other general economic factors that affect many other businesses are particularly significant
to us because our principal products are consumer goods.
The risks and uncertainties described below are those that we currently believe may significantly affect our
business. Additional risks and uncertainties that we are unaware of or that we do not currently deem significant
may also become important factors that affect us at a later date. The risks and uncertainties described below
should be carefully considered with all other information provided in this document and our subsequent filings
with the Securities and Exchange Commission. Any of the following risks could significantly and adversely
affect our business, results of operations, and financial condition.
The slow pace of recovery from prolonged economic downturn, or any new downturn, could have a
significant negative effect on our sales, results of operations and cash flows.
Our business is subject to international, national and regional economic conditions. The global economy
experienced a major recession beginning in 2008. Although we have seen some signs of improvement in the
economy, the pace of improvement in housing, consumer confidence, unemployment and access to consumer
credit has not returned to historic levels. In addition, repercussions from the ongoing European debt crisis could
further damage the U.S. economy. While these factors are outside of our control, they directly affect our
business. The slow pace of recovery or any new economic downturn could cause our current and potential
customers to delay their purchases or affect their ability to pay, which could reduce our future sales, results of
operations and cash flows.
Our current retail markets and other markets that we enter in the future may not achieve the growth and
profitability we anticipate. We could incur charges for the impairment of long-lived assets if we cannot
meet our earnings expectations for these markets.
From time to time we acquire retail locations and related assets, remodel and relocate existing stores, and close
underperforming stores. Our assets include goodwill and other indefinite-lived intangible assets in connection
with acquisitions. Profitability of acquired, remodeled, and relocated stores will depend on lease rates (for stores
we lease) and retail sales and profitability justifying the costs of acquisition, remodeling, and relocation. If we
cannot meet our sales or earnings expectations for these stores, we may incur charges for the impairment of
long-lived assets, the impairment of goodwill, or the impairment of other indefinite-lived intangible assets.
Availability of foreign sourcing and economic uncertainty in countries outside of the United States in
which we operate or from which we purchase product could adversely affect our business and results of
operations.
We have operations in countries outside the United States, some of which are located in emerging markets.
Long-term economic and political uncertainty in some of the countries in which we operate, such as Mexico and
Thailand, could result in the disruption of markets and negatively affect our business. Our Casegoods segment
is primarily an importer of products manufactured by foreign sources, mainly in China and Vietnam, and our
Upholstery segment purchases cut-and-sewn fabric and leather sets and some finished goods from Chinese and
other foreign vendors. The majority of the cut-and-sewn leather kits that we purchase from China are from one
supplier. Our sourcing partners may not be able to produce goods in a timely fashion or the quality of their
product may lead us to reject it, causing disruptions in our domestic operations and delays in our shipments to
our customers.
9
There are other risks that are inherent in our non-U.S. operations, including the potential for changes in socio-
economic conditions, changes in laws and regulations, including import, export, labor and environmental laws,
tariffs and trade barriers, monetary and fiscal policies, investments, taxation, and exchange controls.
Additionally, unsettled political conditions, possible terrorist attacks, organized crime and public health
concerns present a risk to our non-U.S. operations. All of these items could make servicing our customers more
difficult or cause disruptions in our plants that could reduce our sales, earnings, or both in the future.
Changes in regulation of our international operations could adversely affect our business and results of
operations.
Because we have operations outside of the United States and sell product in various countries, we are subject to
many laws governing international relations, including the Foreign Corrupt Practices Act and the U.S. Export
Administration Act. These laws include prohibitions on improper payments to government officials and
restrictions on where we can do business, what products we can supply to certain countries, and what
information we can provide to certain governments. Violations of these laws, which are complex, may result in
criminal penalties or sanctions that could have a significant adverse effect on our business and results of
operations. Although we have implemented policies and procedures designed to ensure compliance with these
laws, there can be no assurance that our employees, contractors, or agents will not violate our policies.
Fluctuations in the price, availability and quality of raw materials could cause delays that could result in
our inability to provide goods to our customers or could increase our costs, either of which could decrease
our earnings.
In manufacturing furniture, we use various types of wood, fabrics, leathers, upholstered filling material, steel,
and other raw materials. Because we are dependent on outside suppliers for our raw materials, fluctuations in
their price, availability and quality could have a negative effect on our cost of sales and our ability to meet our
customers’ demands. Competitive and marketing pressures may prevent us from passing along price increases
to our customers, and the inability to meet our customers’ demands could cause us to lose sales. Since we have
a higher concentration (70%) in upholstery sales, including motion furniture, than most of our competitors, the
effects of steel, polyurethane foam, leather and fabric price increases or quantity shortages are more significant
for our business than for most other publicly traded furniture companies. About 74% of our polyurethane foam
comes from one supplier. This supplier has several facilities across the United States, but severe weather or
natural disasters could result in delays in shipments of polyurethane foam to our plants. We have attempted to
minimize this risk by requiring a commitment from our supplier that it would continue to supply us despite
disruptions in its operations.
A change in the financial condition of some of our domestic and foreign fabric suppliers could impede their
ability to provide their products to us in a timely manner. Upholstered furniture is fashion oriented, and if we
are not able to acquire sufficient fabric variety, or if we are unable to predict or respond to changes in fashion
trends, we may lose sales and have to sell excess inventory at reduced prices. Doing so would have a negative
effect on our sales and earnings.
Inability to maintain and enhance our brand and respond to changes in our current and potential
customers’ tastes and trends in a timely manner could adversely affect our business and operating results.
The success of our business depends on our ability to maintain and enhance our brands to increase our business
by retaining customers and attracting new ones. Because furniture product is fashion oriented, changes in
consumers’ tastes and trends and the resultant change in our product mix could adversely affect our business
and operating results. We attempt to minimize these risks by maintaining a strong advertising and marketing
campaign promoting both our brands and our current product designs, styles, quality and prices. If these efforts
are unsuccessful or require us to incur substantial costs, our business, operating results and financial or
competitive condition could be adversely affected.
We may be subject to product liability claims or undertake to recall one or more products, with a
negative impact on our financial results and reputation.
Millions of our products, sold over many years, are currently used by consumers. We may be named as a
defendant in lawsuits instituted by persons allegedly injured while using one of our products. We have
10
insurance that we believe is adequate to cover such claims, but we are self-insured for the first $1.5 million in
liability and defense costs. Furthermore, such claims could damage our brands and reputation and negatively
affect our operating results. In addition, regulation of consumer products has increased in recent years as the
U.S. Consumer Product Safety Commission has acquired greater regulatory and enforcement power. Products
that we have previously sold could be the subject of one or more recalls, resulting in related expenses and
potential penalties, injury to our brands and reputation, and negative impact on our operating results.
We rely extensively on computer systems to process transactions, summarize results and manage our
business and that of certain independent dealers. Disruptions in both our primary and back-up systems
could adversely affect our business and operating results.
Our primary and back-up computer systems are subject to damage or interruption from power outages,
computer and telecommunications failures, computer viruses, security breaches, natural disasters and errors by
employees. Though losses arising from some of these issues would be covered by insurance, interruptions of
our critical business computer systems or failure of our back-up systems could reduce our sales or result in
longer production times. If our critical business computer systems or back-up systems are damaged or cease to
function properly, we may have to make a significant investment to repair or replace them.
In addition, we are implementing an enterprise resource planning or ERP system in our largest operating unit. The
implementation is expected to occur in phases over the next several years. ERP implementations are complex and
time-consuming projects that involve substantial expenditures on system software and implementation activities.
ERP implementations also require transformation of business and financial processes in order to reap the benefits
of the ERP system; any such transformation involves risks inherent in the conversion to a new computer system,
including loss of information and potential disruption to our normal operations. Our business and results of
operations may be adversely affected if we experience operating problems and/or cost overruns during the ERP
implementation process, or if the ERP system and the associated process changes do not give rise to the benefits
that we expect. Additionally, if we do not effectively implement the ERP system as planned or if the system does
not operate as intended, it could adversely affect the effectiveness of or cause delays in our ability to adequately
assess our internal control over financial reporting. Significant delays in documenting, reviewing and testing our
internal control could cause us to fail to comply with our SEC reporting obligations related to our management’s
assessment of our internal control over financial reporting.
Loss of market share and other financial or operational difficulties due to competition would likely result
in a decrease in our sales, earnings, and liquidity.
The residential furniture industry is highly competitive and fragmented. We compete with many other
manufacturers and retailers, some of which offer widely advertised products, and others of which are large retail
furniture dealers offering their own store-branded products. Competition in the residential furniture industry is
based on quality, style of products, perceived value, price, service to the customer, promotional activities, and
advertising. The highly competitive nature of the industry means we are constantly subject to the risk of losing
market share, which would likely decrease our future sales, earnings and liquidity. In addition, due to the large
number of competitors and their wide range of product offerings, we may not be able to differentiate our
products (through styling, finish, and other construction techniques) from those of our competitors. These and
other competitive pressures could result in a decrease in our sales, earnings, and liquidity.
Our business and our reputation could be adversely affected by the failure to protect sensitive employee
data or to comply with evolving regulations relating to our obligation to protect such data.
Cyber-attacks designed to gain access to sensitive information by breaching security systems of large
organizations leading to unauthorized release of confidential information have occurred recently at a number of
major U.S. companies despite widespread recognition of the cyber-attack threat and improved data protection
methods. While we have invested in the protection of our information technology and maintain what we believe
are adequate security procedures and controls over financial and employee data, a breach in our systems that
results in the unauthorized release of sensitive data could nonetheless occur, have a material adverse effect on
our reputation, and lead to financial losses from remedial actions or potential liability, including for possible
punitive damages. An electronic security breach resulting in the unauthorized release of sensitive data from our
information systems could also materially increase the costs we already incur to protect against such risks.
11
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 2. PROPERTIES.
We owned or leased approximately 10.9 million square feet of manufacturing, warehousing and distribution
centers, office, showroom, and retail facilities, and had approximately 1.4 million square feet of idle facilities, at
the end of fiscal 2013. Of the 10.9 million square feet occupied at the end of fiscal 2013, our Upholstery
segment occupied approximately 6.8 million square feet, our Casegoods segment occupied approximately 2.0
million square feet, our Retail segment occupied approximately 1.7 million square feet and our Corporate and
other operations occupied the balance.
Our active facilities and retail locations are located in Arkansas, California, Connecticut, Delaware, Florida,
Illinois, Indiana, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New
Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, Tennessee, Utah,
Virginia, Washington D.C., Wisconsin, Coahuila (Mexico) and Bangkok (Thailand). All of our plants and stores
are well maintained and insured. We do not expect any major land or building additions will be needed to
increase capacity in the foreseeable future for our manufacturing operations. We own all of our domestic plants,
one of which has been financed under long-term industrial revenue bonds, and our Thailand plant. We lease the
majority of our retail stores and regional distribution centers, as well as our manufacturing facility in Mexico.
For information on terms of operating leases for our properties, see Note 10 to our consolidated financial
statements, which is included in Item 8 of this report.
ITEM 3. LEGAL PROCEEDINGS.
We are involved in various legal proceedings arising in the ordinary course of our business. Based on a review
of all currently known facts and our experience with previous legal matters, we have recorded expense in
respect of probable and reasonably estimable losses arising from legal matters and currently do not anticipate
any material additional loss.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
EXECUTIVE OFFICERS OF REGISTRANT
Listed below are the names, ages and current positions of our executive officers and, if they have not held those
positions for at least five years, their former positions during that period with us or other companies. All
executive officers serve at the pleasure of the board of directors.
Kurt L. Darrow, age 58
• Chairman, President and Chief Executive Officer since August 2011
•
President and Chief Executive Officer from September 2003 through August 2011
Louis M. Riccio, Jr., age 50
•
• Treasurer from February 2010 through April 2010
Senior Vice President of La-Z-Boy and Chief Financial Officer since July 2006
Mark S. Bacon, Sr., age 50
•
•
Senior Vice President of La-Z-Boy and President of La-Z-Boy Branded Business since July 2011
Senior Vice President of La-Z-Boy and Chief Retail Officer from October 2008 through July 2011
Steven M. Kincaid, age 64
•
•
Senior Vice President of La-Z-Boy and President of Casegoods since November 2003
President, Kincaid Furniture Company, Incorporated since June 1983
Otis S. Sawyer, age 55
•
•
Senior Vice President of La-Z-Boy and President of Non-Branded Upholstery since February 2008
President, England, Inc. since February 2008
12
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Our board of directors has authorized the purchase of company stock. As of April 27, 2013, 4.2 million shares
remained available for purchase pursuant to this authorization. We purchased 0.7 million shares during fiscal
2013, totaling $10.3 million. During the fourth quarter of fiscal 2013, pursuant to the existing board
authorization, we adopted a plan to purchase company stock pursuant to Rule 10b5-1 of the Securities
Exchange Act of 1934. The plan was effective March 30, 2013. Under this plan, our broker has the authority to
purchase company shares on our behalf, subject to SEC regulations and the price, market volume and timing
constraints specified in the plan. The plan expires at the close of business on June 30, 2013. With the cash flows
we anticipate generating in fiscal 2014 we expect to continue being opportunistic in purchasing company stock.
The following table summarizes our purchases of company stock during the fourth quarter of fiscal 2013:
(shares in thousands)
Fiscal February (January 27 – March 2, 2013) . . . . . . . . . .
Fiscal March (March 3 – March 30, 2013) . . . . . . . . . . . . . .
Fiscal April (March 31 – April 27, 2013) . . . . . . . . . . . . . . .
Fiscal Fourth Quarter of 2013 . . . . . . . . . . . . . . . . . . . . . . . . .
Total
number of
shares
purchased as
part of
publicly
announced
plan
Maximum
number of
shares that
may yet be
purchased
under the
plan
Total
number of
shares
purchased
Average
price paid
per share
64 $
99 $
124 $
287 $
15.81
18.78
17.97
17.77
64
99
124
287
4,406
4,307
4,183
4,183
Recent Sales of Unregistered Securities
There were no sales of unregistered securities during fiscal year 2013.
Equity Plans
The table below provides information concerning our compensation plans under which common shares may be
issued.
Equity Compensation Plan Information as of April 27, 2013
Number of
securities
remaining
available for
future
issuance
under equity
compensation
plans
(excluding
securities
reflected in
column (i))
(iii)
Number of
securities to
be issued
upon
exercise of
outstanding
options (i)
Weighted-
average
exercise
price of
outstanding
options (ii)
Plan category
Equity compensation plans approved by shareholders . . . . . . . . . . . . . . . 1,255,890(1) $
9.78 3,251,457(2)
Note 1: These options were issued under our 2010 Omnibus Incentive Plan, 2004 Long-Term Equity Award
Plan and 1997 Incentive Stock Option Plan. No additional options can be awarded under the 2004 or 1997
plans, but as of April 27, 2013, 421,507 and 196,525 options were still outstanding under the 2004 and 1997
plans, respectively.
13
Note 2: Thi
Incentive P
performanc
period) to s
the plan tha
2,883,376 s
is amount is the
lan. The omnib
ce awards (awar
selected key em
at would reduce
shares, assumin
e aggregate num
bus incentive p
rds of our com
mployees and no
e the number of
ng the maximum
mber of shares
lan provides fo
mon stock base
on-employee di
f shares remain
m performance
available for fu
or awards of sto
ed on achievem
irectors. We ha
ning available f
e targets were a
uture issuance u
ock options, res
ment of pre-set g
ave performanc
for future issuan
achieved.
under our 2010
stricted stock, a
goals over a pe
ce awards outst
nce under the p
0 Omnibus
and
erformance
tanding under
plan by
Performan
nce Graph
The graph b
(assuming r
shares, in th
below shows th
reinvestment of
he S&P 500 Co
he cumulative t
f dividends) by
omposite Index
total return for
y an investor wh
x and in the Dow
our last five fis
ho invested $10
w Jones U.S. F
scal years that w
00 on April 26,
Furnishings Inde
would have bee
, 2008 in our co
ex.
en realized
ommon
Company/Inde
La-Z-Boy I
S&P 500 C
Dow Jones
ex/Market
Incorporated . .
Composite Index
U.S. Furnishin
. . . . . . . . . $
x . . . . . . . . $
ngs Index $
2008
100 $
100 $
100 $
20
2011
0
2010
009
3.30 $ 178.0
32.85 $ 223
91
1.31 $ 104.3
63.63 $
4.59 $ 136.5
66.04 $ 114
03 $ 232.23
37 $ 109.76
54 $ 130.73
2012
2013
$ 269.01
$ 126.57
$ 120.20
14
Dividend and Market Information
The New York Stock Exchange is the principal market in which our common stock is traded. The tables below
show the high and low sale prices of our common stock on the New York Stock Exchange during each quarter
of our last two fiscal years.
Fiscal 2013
Quarter
Ended
July 28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
October 27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
January 26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
April 27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
$
Dividends
Paid
— $
— $
0.04 $
0.04 $
0.08
Fiscal 2012
Quarter
Ended
July 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
October 29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
April 28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends
Paid
$
$
$
$
$
— $
— $
— $
— $
—
Market Price
High
Low
Close
16.43 $
17.13 $
17.06 $
19.43 $
10.95 $
11.46 $
13.30 $
15.00 $
12.09
16.18
15.74
17.69
Market Price
High
Low
Close
11.84 $
11.00 $
13.85 $
15.44 $
8.41 $
6.76 $
9.11 $
12.96 $
8.77
10.62
13.73
15.34
Our credit agreement would prohibit us from paying dividends or purchasing shares if excess availability, as
defined in the agreement, fell below 12.5% of the revolving credit commitment or if we failed to maintain a
fixed charge coverage ratio of at least 1.05 to 1.00 on a pro forma basis. The agreement would not currently
prohibit us from paying dividends or repurchasing shares. Refer to Note 9 of the consolidated financial
statements in Item 8 for further discussion of our credit agreement. The payment of future cash dividends is
within the discretion of our board of directors and will depend, among other factors, on our earnings, capital
requirements and operating and financial condition, as well as excess availability under the credit agreement.
Shareholders
We had approximately 12,400 shareholders of record at June 11, 2013.
15
ITEM 6. SELECTED FINANCIAL DATA.
The following table presents our selected financial data. The table should be read in conjunction with Item 7,
Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Item 8,
Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. This information is
derived from our audited financial statements and should be read in conjunction with those statements,
including the related notes.
Consolidated Five-Year Summary of Financial Data
(52 weeks)
(53 weeks)
4/30/2011
(52 weeks)
4/27/2013
(52 weeks)
4/28/2012
(52 weeks)
4/24/2010
(Dollar amounts in thousands, except per share data)
Fiscal Year Ended
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,332,525 $1,231,676 $1,187,143 $1,179,212 $1,226,674
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
832,799 806,086 888,785
907,586
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . .
354,344 373,126 337,889
424,939
Selling, general and administrative . . . . . . . . .
323,964 332,698 375,767
357,312
Write-down of long-lived assets . . . . . . . . . . .
7,503
—
Write-down of trade names . . . . . . . . . . . . . . .
5,541
—
Write-down of goodwill . . . . . . . . . . . . . . . . . .
42,136
—
Operating income (loss) . . . . . . . . . . . . . . . . . .
(93,058 )
67,627
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . .
5,581
746
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . .
2,504
621
Income from Continued Dumping and
851,819
379,857
330,226
—
—
—
49,631
1,384
611
—
—
—
40,428
2,972
724
4,471
—
—
25,909
2,346
944
4/25/2009
Subsidy Offset Act, net . . . . . . . . . . . . . . . . .
Other income (expense), net . . . . . . . . . . . . . . .
Income (loss) before income taxes . . . . . . . . .
Income tax expense (benefit) . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . .
Net (income) loss attributable to
noncontrolling interests . . . . . . . . . . . . . . . . .
—
3,208
70,710
23,528
47,182
18,037
(38 )
66,857
(22,051 )
88,908
1,054
405
25,966
8,593
17,373
4,436
8,124
480
(7,888 )
43,096
(95,899 )
26,514
11,737
31,359 (122,413 )
(793)
(942 )
6,674
1,342
(252 )
Net income (loss) attributable to La-Z-Boy
Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . $
46,389 $
87,966 $
24,047 $
32,701 $ (122,665)
Basic weighted average shares . . . . . . . . . . . .
Basic net income (loss) per share
attributable to La-Z-Boy Incorporated . . . . $
Diluted weighted average shares . . . . . . . . . . .
Diluted net income (loss) per share
attributable to La-Z-Boy Incorporated . . . . $
Dividends declared per share . . . . . . . . . . . . . . $
Book value of year-end shares
outstanding (1) . . . . . . . . . . . . . . . . . . . . . . . . . $
52,351
51,944
51,849
51,533
51,460
0.87 $
53,685
1.66 $
52,478
0.46 $
52,279
0.63 $
51,732
(2.39)
51,460
0.85 $
0.08 $
1.64 $
— $
0.45 $
— $
0.62 $
— $
(2.39)
0.10
9.25 $
8.46 $
6.96 $
6.56 $
5.81
16
Consolidated Five-Year Summary of Financial Data (continued)
(Dollar amounts in thousands)
Fiscal Year Ended
Return on average total equity (2) . . . . . . . . .
Gross profit as a percent of sales . . . . . . . . . .
Operating profit (loss) as a percent of sales
Effective tax rate (2) . . . . . . . . . . . . . . . . . . . . .
Return on sales (2) . . . . . . . . . . . . . . . . . . . . . .
(52 weeks)
4/27/2013
(52 weeks)
4/28/2012
(53 weeks)
4/30/2011
(52 weeks)
4/24/2010
(52 weeks)
4/25/2009
10.0%
31.9%
5.1%
33.3%
3.5%
21.9 %
30.8 %
4.0 %
(33.0 )%
7.2 %
4.9 %
29.8 %
2.2 %
33.1 %
1.5 %
9.7 %
31.6 %
3.4 %
27.2 %
2.7 %
(32.5 )%
27.5 %
(7.6 )%
(27.6 )%
(10.0 )%
Depreciation and amortization . . . . . . . . . . . . $
25,246 $ 24,142
23,140 $
Capital expenditures . . . . . . . . . . . . . . . . . . . . . $
10,986 $ 15,625
25,912 $
Property, plant and equipment, net . . . . . . . . $ 118,060 $ 114,366 $ 120,603 $ 138,857 $ 146,896
23,486 $
15,663 $
24,302 $
10,540 $
Working capital . . . . . . . . . . . . . . . . . . . . . . . . . $ 350,717 $ 350,241 $ 300,119 $ 279,768 $ 220,401
Current ratio (3) . . . . . . . . . . . . . . . . . . . . . . . . .
2.7 to 1
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 720,371 $ 685,739 $ 593,455 $ 607,783 $ 548,330
2.9 to 1
3.3 to 1
3.3 to 1
3.3 to 1
Long-term debt, excluding current portion . $
46,917 $ 52,148
7,576 $
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
47,983 $ 60,872
8,089 $
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 491,968 $ 447,815 $ 364,140 $ 343,114 $ 303,419
Debt to equity ratio (4). . . . . . . . . . . . . . . . . . .
20.1 %
1.6%
Debt to capitalization ratio (5) . . . . . . . . . . . .
16.7 %
1.6%
29,937 $
35,057 $
7,931 $
9,760 $
14.0 %
12.3 %
2.2 %
2.1 %
9.6 %
8.8 %
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,400
8,185
13,900
8,160
13,900
7,910
17,400
8,290
16,700
7,730
(1) Equal to total equity divided by the number of outstanding shares on the last day of the fiscal year
(2) Based on income (loss) from continuing operations
(3) Equal to total current assets divided by total current liabilities
(4) Equal to total debt divided by total equity
(5) Equal to total debt divided by total debt plus total equity
17
Unaudited Quarterly Financial Information Fiscal 2013
(13 weeks)
4/27/2013
(13 weeks)
7/28/2012
(13 weeks)
10/27/2012
(13 weeks)
1/26/2013
(Dollar amounts in thousands, except per share data)
Fiscal Quarter Ended
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 301,501 $ 322,341 $ 349,148 $ 359,535
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
222,032 235,699 237,966
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100,309 113,449 121,569
Selling, general and administrative expense. . . . . . . . . . . . .
95,409
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26,160
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
234
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
186
Other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . .
713
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . .
26,825
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,333
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18,492
Net income attributable to noncontrolling interests . . . . . .
(184)
Net income attributable to La-Z-Boy Incorporated . . . $
18,308
211,889
89,612
81,986
7,626
173
121
(121)
7,453
2,758
4,695
(297)
4,398 $
90,171
23,278
148
198
2,404
25,732
8,569
17,163
(99 )
17,064 $
89,746
10,563
191
116
212
10,700
3,868
6,832
(213 )
6,619 $
Diluted weighted average shares . . . . . . . . . . . . . . . . . . . . . . .
53,040
53,268
53,401
53,754
Diluted net income per share attributable to La-Z-Boy
Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.08 $
0.12 $
0.32 $
Dividends declared per share . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $
— $
0.04 $
0.33
0.04
18
Unaudited Quarterly Financial Information Fiscal 2012
(13 weeks)
7/30/2011
(Dollar amounts in thousands, except per share data)
Fiscal Quarter Ended
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 280,094 $ 307,679 $ 316,515 $ 327,388
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
211,896 216,724 224,033
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
99,791 103,355
Selling, general and administrative expense. . . . . . . . . . . . .
86,465
82,771
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16,890
17,020
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
297
274
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
124
138
Income from Continued Dumping and Subsidy Offset
199,166
80,928
77,455
3,473
424
183
95,783
83,535
12,248
389
166
(13 weeks)
1/28/2012
(13 weeks)
10/29/2011
4/28/2012
(13 weeks)
Act, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (income) loss attributable to noncontrolling interests
Net income attributable to La-Z-Boy Incorporated . . . $
322
373
3,927
(41,929 )
45,856
(320 )
45,536 $
—
(108 )
11,917
4,245
7,672
198
7,870 $
1,415
(89 )
18,210
2,864
15,346
(388 )
14,958 $
16,300
(214 )
32,803
12,769
20,034
(432 )
19,602
Diluted weighted average shares . . . . . . . . . . . . . . . . . . . . . . .
52,443
52,475
52,379
52,609
Diluted net income per share attributable to La-Z-Boy
Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.85 $
0.15 $
0.28 $
0.37
Dividends declared per share . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $
— $
— $
—
19
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
We have prepared this Management’s Discussion and Analysis as an aid to better understand our financial
results. It should be read in conjunction with the accompanying Consolidated Financial Statements and related
Notes to Consolidated Financial Statements. We begin with an introduction to our key businesses and
significant operational events in fiscal 2013. We then provide discussions of our results of operations, liquidity
and capital resources, and critical accounting policies.
Introduction
Our Business
La-Z-Boy Incorporated manufactures, markets, imports, distributes and retails upholstery products, accessories
and casegoods (wood) furniture products. We are the leading global producer of reclining chairs and the second
largest manufacturer/distributor of residential furniture in the United States according to the May 2013 Key
Sources for the U.S. Furniture Market in Furniture Today. The La-Z-Boy Furniture Galleries® stores retail
network is the second largest retailer of single-branded upholstered furniture in North America according to the
May 2013 Top 100 ranking by Furniture Today. We have nine major North-American manufacturing locations
to support our speed to market and customization strategy.
We sell our products, primarily in the United States and Canada, to furniture retailers and directly to consumers
through stores owned and operated by our subsidiaries. The centerpiece of our retail distribution strategy is our
network of 313 La-Z-Boy Furniture Galleries® stores and 565 Comfort Studios® locations, each dedicated to
marketing our La-Z-Boy branded products. We consider this dedicated space to be “branded outlets” or
“proprietary.” We own 94 of the La-Z-Boy Furniture Galleries® stores. The remainder of the La-Z-Boy
Furniture Galleries® stores, as well as all 565 Comfort Studios® locations, are independently owned and
operated. La-Z-Boy Furniture Galleries® stores help consumers furnish their homes by combining the style,
comfort and quality of La-Z-Boy furniture with our available in-home design service. Comfort Studios®
locations are defined spaces within larger independent retailers that are dedicated to displaying and selling La-
Z-Boy branded products. In addition to the La-Z-Boy Comfort Studios® locations, our Kincaid, England and
Lea operating units have their own dedicated proprietary in-store gallery programs with over 730 outlets and 4.3
million square feet of proprietary floor space. In total, our proprietary floor space includes approximately 11.7
million square feet.
Our reportable operating segments are the Upholstery segment, the Casegoods segment and the Retail segment.
• Upholstery Segment. Our Upholstery segment is our largest segment in terms of revenue, and consists
of three operating units: La-Z-Boy, our largest operating unit, and the Bauhaus and England operating
units. The Upholstery segment manufactures or imports upholstered furniture such as recliners and
motion furniture, sofas, loveseats, chairs, sectionals, modulars, ottomans and sleeper sofas. The
Upholstery segment sells directly to La-Z-Boy Furniture Galleries® stores, operators of Comfort
Studios® locations, major dealers and other independent retailers.
• Casegoods Segment. Our Casegoods segment is an importer, marketer, manufacturer and distributor of
casegoods (wood) furniture such as bedroom sets, dining room sets, entertainment centers and
occasional pieces, and some coordinated upholstered furniture. The Casegoods segment consists of two
operating units, one consisting of American Drew, Lea and Hammary, and the second being Kincaid.
The Casegoods segment primarily sells to major dealers and other independent retailers.
• Retail Segment. Our Retail segment consists of 94 company-owned La-Z-Boy Furniture Galleries®
stores located in eleven markets ranging from southern California to the Midwest to the east coast of
the United States. The Retail segment primarily sells upholstered furniture, in addition to some
casegoods and other accessories, to the end consumer through the retail network.
20
Significant Operational Events in Fiscal 2013
During fiscal 2013, we generated $68.4 million in cash from operating activities, due to stronger sales volume
and improved profitability margins in our Upholstery and Retail segments. We used the cash generated from
operating activities, combined with our existing cash on hand, to fund capital expenditures, to acquire the assets
of La-Z Recliner Shops, Inc., an independent operator of nine La-Z-Boy Furniture Galleries® stores and one
distribution center in the southern Ohio market, to purchase shares of our stock and to pay dividends to
shareholders. In addition, we funded $29.9 million of investment purchases to enhance our returns on our
excess cash, and made a $20.0 million discretionary payment into our defined benefit pension plan in order to
improve the funded status of the plan and as part of our broader pension de-risking strategy.
Also during fiscal 2013, we recorded a restructuring charge of $2.7 million, mainly related to fixed asset and
inventory write-downs resulting from the closure of our lumber processing operation in our Casegoods segment.
As a result of this restructuring, we will no longer process component lumber parts for our domestically
produced Casegoods furniture and will instead outsource all component lumber parts.
These items are all discussed in more detail throughout this Management’s Discussion and Analysis.
Results of Operations
Fiscal Year 2013 Compared to Fiscal Year 2012
La-Z-Boy Incorporated
(Amounts in thousands, except percentages)
Consolidated sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,332,525 $1,231,676
Consolidated operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49,631
Consolidated operating margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.0 %
67,627
5.1 %
(52 weeks)
4/27/2013
(52 weeks)
4/28/2012
Percent
change
8.2 %
36.3 %
Sales
Our consolidated sales increased by $100.8 million due mainly to the combination of stronger volume,
favorable changes in product mix, and the benefit of selling price increases and less promotional activity.
Operating Margin
Our consolidated operating margin increased by 1.1 percentage points in fiscal 2013. Our Retail segment’s
operating margin continued to improve in fiscal 2013 as compared to the prior year and our Upholstery
segment’s operating margin also increased compared to the prior year. These improvements were partially
offset by our Casegoods segment, whose operating margin declined in fiscal 2013 as compared to fiscal 2012.
• Our gross margin increased 1.1 percentage points in fiscal 2013 as compared to fiscal 2012.
o Our Retail segment increase in gross margin was a result of mix, merchandising, and price.
o We also saw favorable absorption of fixed costs resulting from sales volume increases in our
Upholstery segment.
o These improvements were partially offset by 0.2 percentage points of restructuring charges
recorded during fiscal 2013, which mainly related to fixed asset and inventory write-downs
associated with the closure of our lumber processing operation in our Casegoods segment
during the second quarter.
• Selling, General, and Administrative (“SG&A”) expenses increased in dollars in fiscal 2013 as
compared to fiscal 2012, but remained flat as a percent of sales.
Increased sales resulted in favorable absorption of fixed costs.
o
o Offsetting the favorable fixed cost absorption was $8.8 million of additional incentive
compensation expense in fiscal 2013 across all segments, or an increase of 0.7 percentage
points. This increase in incentive compensation was due to our continued improvements in
21
sales and operating results for the full fiscal year. As a result, we have three outstanding
performance based stock awards, each with three-year performance measurement periods, for
which we were recognizing expense during fiscal 2013.
Upholstery Segment
(Amounts in thousands, except percentages)
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,067,047 $ 975,103
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
81,753
Operating margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.4 %
96,762
9.1 %
(52 weeks)
4/27/2013
(52 weeks)
4/28/2012
Percent
change
9.4 %
18.4 %
Sales
Our Upholstery segment’s sales increased $91.9 million in fiscal 2013 as compared to fiscal 2012.
Increased volume and selling price, in addition to favorable changes in product mix drove the majority of
the 9.4% increase in sales. We believe the increase in orders was a result of an effective marketing plan that
led to greater customer awareness of our improved product value and styling, which drove increased
volume for our La-Z-Boy branded business, as well as the improved performance of our network of retail
stores, which includes our company-owned and independent-licensed stores.
Operating Margin
Our Upholstery segment’s operating margin increased by 0.7 percentage points in fiscal 2013 compared to
fiscal 2012.
• The segment’s gross margin increased 0.9 percentage points during fiscal 2013 due to a combination of
factors, the most significant of which were:
o Selling price changes as well as changes in product mix resulted in a 1.6 percentage point
increase in gross margin.
o Raw material cost increases resulted in a 1.1 percentage point decrease in gross margin.
• The segment’s SG&A as a percentage of sales increased 0.2 percentage points, mainly due to higher
incentive compensation expense in fiscal 2013, as well as increased costs related to our ERP
implementation. These increased costs were partially offset by favorable absorption of fixed costs
resulting from our sales volume increase.
Casegoods Segment
(Amounts in thousands, except percentages)
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 133,994 $ 139,639
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,540
Operating margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.0%
2,640
2.0%
(52 weeks)
4/27/2013
(52 weeks)
4/28/2012
Percent
change
(4.0 )%
(52.3 )%
Sales
Our Casegoods segment’s sales decreased $5.6 million in fiscal 2013 as compared to fiscal 2012. Our
casegoods sales continued to be weak during fiscal 2013. This impact was partially offset by the increases
in selling price.
Operating Margin
Our Casegoods segment’s operating margin declined 2.0 percentage points in fiscal 2013 compared to
fiscal 2012.
• The segment’s gross margin decreased 0.4 percentage points in fiscal 2013 compared to fiscal 2012.
Gross margin was reduced by 1.1 percentage points due to a charge taken in the third quarter of fiscal
2013 for a probable adjustment to our import duties, combined with a decline in volume which resulted
in an inability to absorb fixed costs. Partially offsetting these declines was an increase in gross margin
due to a shift to a larger mix of sales of occasional furniture, which carry better margins.
22
• The segment’s SG&A as a percentage of sales increased 1.6 percentage points during fiscal 2013
compared to fiscal 2012, due mainly to higher incentive compensation costs, which were driven by
equity-based awards and consolidated financial performance. The inability to absorb fixed costs due to
the decline in sales volume also contributed to the increased SG&A costs as a percentage of sales.
Retail Segment
(52 weeks)
4/28/2012
(Amounts in thousands, except percentages)
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 264,723 $ 215,490
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7,819)
Operating margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(52 weeks)
4/27/2013
4,099
1.5%
(3.6)%
Percent
change
22.8 %
152.4 %
Sales
Our Retail segment’s sales increased $49.2 million in fiscal 2013 as compared to fiscal 2012. Of this
increase, $18.1 million was due to the acquisition of nine retail stores in the southern Ohio market on
October 1, 2013. The remainder of the increase in sales was driven by increases in traffic and average ticket
combined with an improved mix of merchandise.
Operating Margin
Our Retail segment’s operating margin improved 5.1 percentage points in fiscal 2013 compared to fiscal
2012.
• The segment’s gross margin benefitted from selling price increases, differentiated product
•
merchandising, and lower promotional activity.
Increased sales volume contributed to a higher operating margin, through greater leverage of SG&A
expenses as a percentage of sales.
Corporate and Other
(52 weeks)
4/27/2013
(52 weeks)
4/28/2012
Percent
Change
(Amounts in thousands, except percentages)
Sales
VIEs, net of intercompany sales eliminations. . . . . . . . . . . . . . . . . . . . . . . $
8,840
Corporate and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,356
Eliminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (135,552 ) (109,752)
— $
2,313
N/M
(1.8 )%
(23.5 )%
Operating income (loss)
VIEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(2,715 )
(33,159 )
959
(281)
(30,521)
N/M
N/M
(8.6 )%
Sales
During the third quarter of fiscal 2012, we deconsolidated our last VIE due to the expiration of the
operating agreement that previously caused us to be considered its primary beneficiary. Eliminations
increased in fiscal 2013 as compared to fiscal 2012 due to higher sales from our Upholstery and Casegoods
segments to our Retail segment as a result of the increased volume in the Retail segment, which included
the acquisition of the southern Ohio market.
Operating Loss
Our Corporate and Other operating loss increased $2.6 million in fiscal 2013 compared to fiscal 2012 due
primarily to higher incentive compensation costs in fiscal 2013 as compared to fiscal 2012.
The $2.7 million restructuring charge recorded in fiscal 2013 mainly related to fixed asset and inventory
write-downs associated with the closure of our lumber processing operation in our Casegoods segment.
23
Other Income
Other income totaled $3.2 million during fiscal 2013, compared to other expense of less than $0.1 million in
fiscal 2012. The other income generated in fiscal 2013 primarily resulted from gains realized on the sales of
investments held to fund our non-qualified defined benefit retirement plan.
Income from Continued Dumping and Subsidy Offset Act
The Continued Dumping and Subsidy Offset Act of 2000 (“CDSOA”) provides for distribution of duties
collected by U.S. Customs and Border Protection from antidumping cases to domestic producers that supported
the antidumping petition. We received $18.0 million during fiscal 2012 in CDSOA distributions related to the
antidumping order on wooden bedroom furniture from China. Certain domestic producers who did not support
the antidumping petition (“Non-Supporting Producers”) filed actions in the U.S. Court of International Trade
challenging the CDSOA’s “support requirement” and seeking a share of the distributions. As a result, Customs
withheld a portion of those distributions pending resolution of the Non-Supporting Producers’ actions. Between
October 2011 and February 2012, the Court of International Trade entered judgments against the Non-
Supporting Producers and dismissed their actions. On January 1, 2012, Customs announced that it would
distribute the withheld distributions. The Non-Supporting Producers then filed motions in the Court of
International Trade and, later, in the U.S. Court of Appeals for the Federal Circuit to enjoin such distributions
pending their appeal of the Court of International Trade’s judgments. On March 5, 2012, the Federal Circuit
denied the Non-Supporting Producers’ motions for injunction “without prejudicing the ultimate disposition of
these cases.” In November 2012, Customs determined to withhold CDSOA distributions pending resolution of
the Federal Circuit appeals. As a result, we did not receive any CDSOA distributions in fiscal 2013. In view of
the uncertainties associated with this program, we are unable to predict the amounts, if any, we may receive in
the future under the CDSOA. Also, if the Federal Circuit were to reverse the judgments of the Court of
International Trade and determine that the Non-Supporting Producers are entitled to CDSOA distributions, it is
possible that Customs may seek to have us return all or a portion of our company’s share of the distributions.
Based on what we know today, we do not expect this will occur.
Income Taxes
Our effective tax rate for fiscal 2013 was 33.3% compared to a net tax benefit of (33.0)% for fiscal 2012. Our
effective tax rate varies from the 35% U.S. federal statutory rate primarily due to state income taxes and the
U.S. manufacturing deduction. In fiscal 2013, we recorded an income tax benefit of 1.6% as a result of non-
taxable gain on the sale of marketable securities. Absent this benefit and discrete items, the effective rate for
fiscal 2013 would have been 35.4%. During fiscal 2012, we recorded a substantial tax benefit as a result of
releasing a portion of the valuation allowance related to U.S. federal and state deferred tax assets and other
discrete items. Absent this adjustment, our effective tax rate for fiscal 2012 would have been 37.5%.
Results of Operations
Fiscal Year 2012 Compared to Fiscal Year 2011
La-Z-Boy Incorporated
(Amounts in thousands, except percentages)
Consolidated sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,231,676 $1,187,143
Consolidated operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,909
Consolidated operating margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.2 %
49,631
4.0 %
(52 weeks)
4/28/2012
(53 weeks)
4/30/2011
Percent
change
3.8 %
91.6 %
24
Sales
Fiscal 2012 includes results for a 52 week period, while fiscal 2011 includes results for a 53 week period.
Our consolidated sales increased by $44.5 million on one less week of shipments due to increased sales
volume in our Upholstery and Retail segments. We believe these improvements were the result of an effective
promotional plan which drove increased volume for our La-Z-Boy branded business, as well as the improved
performance of our network of retail stores, which includes our company-owned and independent-licensed
stores. The operating results of our Retail segment continued to improve, with increased sales levels resulting
from increased average ticket sales on customer traffic that was slightly down.
The improvement in our Upholstery and Retail segments were partially offset by the performance of our
Casegoods segment, which experienced decreased sales in fiscal 2012 as compared to fiscal 2011. Overall
Casegoods order levels decreased during fiscal 2012, as our new product introductions during the year were
not as well-received as our new product introductions in the prior year.
Operating Margin
Our consolidated operating margin increased by 1.8 percentage points in fiscal 2012. Our Retail segment’s
operating margin continued to improve in fiscal 2012 as compared to the prior year and our Upholstery
segment’s operating margin also increased compared to the prior year. These improvements were partially
offset by our Casegoods segment, whose operating margin declined in fiscal 2012 as compared to fiscal 2011.
• Our gross margin increased 1.0 percentage point in fiscal 2012 as compared to fiscal 2011. Ongoing
cost reductions, primarily in our Upholstery segment related to our Mexican operations, along with
improvements in our Retail segment’s gross margin, drove this improvement. Partially offsetting these
items were raw material price increases in our Upholstery and Casegoods segments.
• Selling, General, and Administrative (“SG&A”) expenses increased in dollars in fiscal 2012 as
compared to fiscal 2011, but as a percent of sales, SG&A decreased by 0.5 percentage points. The
improvement as a percentage of sales was driven by our increased sales volume and greater leverage of
SG&A expenses. The increase in dollars was driven by an increase in employee incentive and
compensation expense, primarily in the Upholstery segment and in Corporate and Other, as well as
increased advertising spend in the Upholstery segment.
• Our fiscal 2011 operating margin was impacted by 0.4 percentage points for the write-down of long-
lived assets.
Upholstery Segment
(Amounts in thousands, except percentages)
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 975,103 $ 916,867
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
72,743
Operating margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.9 %
81,753
8.4 %
(52 weeks)
4/28/2012
(53 weeks)
4/30/2011
Percent
change
6.4 %
12.4 %
Sales
Fiscal 2012 includes results for a 52 week period, while fiscal 2011 includes results for a 53 week period.
Our Upholstery segment’s sales increased $58.2 million in fiscal 2012 as compared to fiscal 2011 despite
the extra week in fiscal 2011. Increased volume drove the majority of the 6.4% increase in sales, which we
believe was the result of an effective promotional plan, combined with new product introductions and
accelerated sales in our stationary upholstery business, which drove increased volume for our La-Z-Boy
branded business, as well as the improved performance of our network of retail stores, which includes our
company-owned and independent-licensed stores.
25
Operating Margin
Our Upholstery segment’s operating margin increased by 0.5 percentage points in fiscal 2012 mainly due to
the following:
• The segment’s gross margin increased 1.0 percentage point during fiscal 2012 due to a combination of
factors, the most significant of which were:
o Ongoing cost reductions and efficiencies, including the favorable operating impact of our
Mexican operations, resulting in a 2.0 percentage point increase in gross margin.
o Raw material cost increases resulting in a 1.6 percentage point decrease in gross margin.
• Offsetting the increase in gross margin were higher warranty costs of $1.0 million in fiscal 2012 as
compared to fiscal 2011, due to a reduction in the warranty reserve recorded in fiscal 2011 related to
the redesign of a mechanism that had historically experienced high claims activity. Also offsetting the
increase in gross margin was higher advertising spend and increased employee incentive and
compensation expenses in fiscal 2012.
Casegoods Segment
(Amounts in thousands, except percentages)
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 139,639 $ 152,534
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,698
Operating margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.4%
5,540
4.0%
(52 weeks)
4/28/2012
(53 weeks)
4/30/2011
Percent
change
(8.5 )%
(17.3 )%
Sales
Fiscal 2012 includes results for a 52 week period, while fiscal 2011 includes results for a 53 week period.
Our Casegoods segment’s sales decreased $12.9 million in fiscal 2012 as compared to fiscal 2011. The
decline in sales volume was driven by our new product introductions in fiscal 2012 which were not as well-
received as our new product introductions in fiscal 2011.
Operating Margin
Our Casegoods segment’s operating margin decreased 0.4 percentage points in fiscal 2012 mainly due to
the de-leverage of fixed costs caused by the decline in sales volume.
Retail Segment
(53 weeks)
4/30/2011
(Amounts in thousands, except percentages)
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 215,490 $ 176,987
Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(15,078 )
Operating margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(52 weeks)
4/28/2012
(3.6 )%
(7,819 )
(8.5 )%
Percent
change
21.8 %
48.1 %
Sales
Fiscal 2012 includes results for a 52 week period, while fiscal 2011 includes results for a 53 week period.
Our Retail segment’s sales increased $38.5 million in fiscal 2012 even though fiscal 2011 included an extra
week. Of this increase, $29.2 million was primarily due to the acquisition of our Southern California VIE in
the fourth quarter of fiscal 2011. The remaining increase of $9.3 million related mainly to sales increases at
stores that were open in both fiscal 2012 and fiscal 2011. This increase was the result of increased average
ticket sales on customer traffic that was slightly down. We believe the increase in average ticket sales was
the result of an effective advertising campaign bringing in a more qualified consumer.
26
Operating Margin
Our Retail segment’s operating margin increased 4.9 percentage points in fiscal 2012 compared to fiscal
2011. While our Retail segment improved its operating margin for the third year in a row, the segment
continued to experience negative operating profit due to its high lease expense to sales volume ratio.
• The segment’s gross margin during fiscal 2012 increased 2.5 percentage points compared to fiscal
2011.
• The improved operating margin for this segment was primarily a result of the increased sales volume
which resulted in a greater leverage of SG&A expenses as a percentage of sales.
• The stores acquired from our Southern California VIE were essentially break-even on an operating
margin basis for fiscal 2012, a substantial improvement over fiscal 2011 when these stores generated
an operating loss of $3.5 million when they were a consolidated VIE and not reported as part of the
Retail segment.
VIEs/Corporate and Other
(52 weeks)
4/28/2012
(53 weeks)
4/30/2011
Percent
change
(Amounts in thousands, except percentages)
Sales
VIEs, net of intercompany sales eliminations. . . . . . . . . . . . . . . . . . . . . . . $
8,840 $
Corporate and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,356
Eliminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (109,752 )
29,105
1,909
(90,259)
(69.6 )%
23.4 %
(21.6 )%
Operating income (loss)
VIEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
959
(281 )
(30,521 )
(4,949)
(487)
(28,547)
119.4 %
N/M
(6.9 )%
Sales
During the third quarter of fiscal 2012, we deconsolidated our last VIE due to the expiration of the
operating agreement that previously caused us to be considered its primary beneficiary. Our VIEs’ sales
decreased $20.3 million (net of intercompany eliminations) in fiscal 2012 compared to fiscal 2011. This
was mainly the result of acquiring our Southern California VIE in the fourth quarter of fiscal 2011. Prior to
deconsolidation, our remaining VIE had operating income of $1.0 million in fiscal 2012, compared to an
operating loss of $4.9 million in fiscal 2011 for the two VIEs we had at that time. Eliminations increased in
fiscal 2012 as compared to fiscal 2011 due to higher sales from our Upholstery and Casegoods segments to
our Retail segment as a result of the increased volume in the Retail segment.
Operating Loss
Our Corporate and Other operating loss increased $1.8 million in fiscal 2012 compared to fiscal 2011 due
to higher costs for incentive compensation expenses of $6.2 million as a result of improved operating
performance, partially offset by lower consulting costs of $1.8 million, a gain recognized on the
deconsolidation of our last VIE of $1.1 million and a $1.0 million reduction of an environmental reserve
recorded in the first quarter of fiscal 2012 related to a previously sold division.
Interest Expense
Interest expense decreased $1.0 million in fiscal 2012 as compared to fiscal 2011, mainly due to a 2.1
percentage point decrease in our weighted average interest rate as a result of the May 2011 expiration of our
interest rate swap. Our average debt level decreased by $5.7 million in fiscal 2012 compared to fiscal 2011.
27
Income from Continued Dumping and Subsidy Offset Act
We received $18.0 million during fiscal 2012 and $1.1 million during fiscal 2011 in CDSOA distributions
related to the antidumping order on wooden bedroom furniture from China. The $18.0 million we received in
fiscal 2012 included $16.3 million of previously withheld distributions received in the fourth quarter of fiscal
2012. Please see “Fiscal Year 2013 Compared to Fiscal Year 2012-Income from Continued Dumping and
Subsidy Offset Act” for more information about the CDSOA and related legal actions.
Income Taxes
Our effective tax rate for fiscal 2012 was a net tax benefit of (33.0)%. During fiscal 2012, we reduced by $46.2
million the valuation allowances associated with certain U.S. federal, state and foreign deferred tax assets, in
addition to recording other minor discrete items that together reduced our tax expense by an additional $0.9
million. These adjustments increased diluted earnings per share by $0.88. The reduction in the valuation
allowance was the result of the following factors at the point we reduced the allowance, including primarily (i)
our cumulative pre-tax income position, (ii) our most recent operating results which had exceeded both our
operating plan and prior year results, and (iii) our then-current forecasts, all of which caused us to temper our
concerns at that time regarding the economic environment. Absent these adjustments, our effective tax rate for
fiscal 2012 would have been 37.5%.
The effective tax rate was 33.1% for fiscal 2011. Changes in the valuation reserve for deferred taxes due to
temporary timing differences increased our fiscal 2011 effective tax rate by 13.5 percentage points. Offsetting
this rate increase was a tax benefit associated with our southern California VIE that resulted in a rate reduction
of 17.6 percentage points. This tax benefit related primarily to the amount of accounts receivable written off in
excess of the fair value of the assets received from this VIE.
Liquidity and Capital Resources
Our sources of cash liquidity include cash and equivalents, short-term and long-term investments, cash from
operations and amounts available under our credit facility. We believe these sources remain adequate to meet
our short-term and long-term liquidity requirements, finance our long-term growth plans, meet debt service, and
fulfill other cash requirements for day-to-day operations, dividends to shareholders and capital expenditures
including the construction of our new world headquarters. We had cash and equivalents of $131.1 million at
April 27, 2013, compared to $152.4 million at April 28, 2012. The decrease in cash and equivalents was
primarily attributable to investment purchases to enhance our returns on our excess cash, acquisition of assets,
and an increase in restricted cash for letters of credit collateral. In addition, we made a $20.0 million
discretionary payment to our defined benefit pension plan during the fourth quarter of fiscal 2013.
We maintain a revolving credit facility secured primarily by all of our accounts receivable, inventory, and cash
deposit and securities accounts. Availability under the agreement fluctuates according to a borrowing base
calculated on eligible accounts receivable and inventory. The credit agreement includes affirmative and
negative covenants that apply under certain circumstances, including a 1.05 to 1.00 fixed charge coverage ratio
requirement that applies when excess availability under the line is less than 12.5% of the revolving credit
commitment of $150 million. At April 27, 2013, we were not subject to the fixed charge coverage ratio
requirement, had no borrowings outstanding under the agreement, and had excess availability of $143.3 million.
Capital expenditures for fiscal 2013 were $25.9 million compared with $15.7 million during fiscal 2012. We
have no material contractual commitments outstanding for future capital expenditures. We have announced
plans to begin construction on our new world headquarters in June 2013, a project that is estimated at $57
million, which we expect will be spent over the next 18 months. We expect capital expenditures to be in the
range of $60 million to $70 million in fiscal 2014.
28
In November 2012, the board of directors reinstated payment of quarterly cash dividends to our shareholders.
The board of directors has sole authority to determine if and when future dividends will be declared and on
what terms. It currently expects to continue declaring regular quarterly cash dividends for the foreseeable future
but may discontinue doing so at any time.
We believe our present cash and equivalents balance of $131.1 million, cash flows from operations, $29.9
million of short and long-term investments, and current excess availability under our credit facility of $143.3
million will be sufficient to fund our business needs, including our fiscal 2014 contractual obligations of $134.0
million as presented in our contractual obligations table.
The following table illustrates the main components of our cash flows:
(Amounts in thousands)
Cash Flows Provided By (Used For)
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net cash used for investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used for financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange rate changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
68,440 $
(78,041 )
(11,616 )
(68 )
Change in cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (21,285 ) $
82,848
(19,094 )
(26,517 )
(129 )
37,108
Year Ended
4/27/2013
4/28/2012
Operating Activities
During fiscal 2013, net cash provided by operating activities was $68.4 million. Our cash provided by operating
activities was mainly the result of pre-tax income generated during fiscal 2013. Cash from net income net of the
change in deferred taxes, depreciation and amortization and stock-based compensation expense, along with cash
provided by working capital, was partially reduced by pension plan contributions. Pension plan contributions in
fiscal 2013 included a $20 million discretionary contribution made to improve the funded status of the plan and
as part of our broader pension de-risking strategy.
The primary components of the increase in working capital are listed below:
•
Increase in other liabilities of $11.0 million, mainly due to increases in customer deposits, warranty
and freight, which have all increased as a result of our volume increases.
• Decrease in accounts payable of $6.1 million.
• Decrease in accounts receivable of $7.1 million primarily due to an increase in cash collections, which
resulted in lower days sales outstanding. The improvement in our cash collections was the result of an
improvement in the financial health of our customer base, including our independent La-Z-Boy
Furniture Galleries® dealers.
During fiscal 2012, net cash provided by operating activities was $82.8 million, which included CDSOA funds
received during the year. We generated net income of $88.9 million during the year, partially offset by a non-
cash increase in deferred taxes of $42.1 million. Depreciation and amortization totaled $23.5 million, partially
offset by $5.8 million in pension contributions. Working capital increased and the major components of the
change are listed below:
•
•
Increase in other liabilities of $12.6 million, mainly due to higher accrued incentive compensation of
$6.2 million, income taxes of $3.8 million and freight of $1.5 million.
Increase in accounts payable of $7.5 million, offset by increased inventory levels of $7.4 million.
These increases were primarily due to increased raw material inventory in our Upholstery segment.
Increase in accounts receivable of $6.2 million, driven by the increase in sales.
•
• Decrease in other assets of $3.3 million.
29
Investing Activities
During fiscal 2013, net cash used for investing activities was $78.0 million, which consisted primarily of $25.9
million in capital expenditures, a $9.8 million increase in restricted cash, a net $30.9 million in investment
purchases, and the acquisition of nine retail stores and a distribution center in the southern Ohio market of $15.8
million, net of cash acquired. Our restricted cash relates to deposits serving as collateral for certain letters of
credit, and $29.9 million of our investment purchases were intended to enhance returns on our excess cash.
During fiscal 2012, net cash used for investing activities was $19.1 million, which consisted primarily of $15.7
million in capital expenditures and a $2.9 million increase in restricted cash.
Financing Activities
We used $11.6 million of cash for financing activities in fiscal 2013 compared to $26.5 million during fiscal
2012, both primarily related to the repayment of debt and purchases of common stock. Cash used in fiscal 2013
also included $4.2 million of dividend payments to shareholders.
Our board of directors has authorized the purchase of company stock. As of April 27, 2013, 4.2 million shares
remained available for purchase pursuant to this authorization. We purchased 0.7 million shares during fiscal
2013, totaling $10.3 million. During the fourth quarter of fiscal 2013, pursuant to the existing board
authorization, we adopted a plan to purchase company stock pursuant to Rule 10b5-1 of the Securities
Exchange Act of 1934. The plan was effective March 30, 2013. Under this plan, our broker has the authority to
purchase company shares on our behalf, subject to SEC regulations and the price, market volume and timing
constraints specified in the plan. The plan expires at the close of business on June 30, 2013. With the cash flows
we anticipate generating in fiscal 2014 we expect to continue being opportunistic in purchasing company stock.
Other
The following table summarizes our contractual obligations of the types specified:
Total
Less than
1 Year
Payments Due by Period
1-3 Years
4-5 Years
More than
5 Years
(Amounts in thousands)
Long-term debt obligations. . . . . . . . . . . . . . . . $
Capital lease obligations . . . . . . . . . . . . . . . . . .
Operating lease obligations. . . . . . . . . . . . . . . .
Interest obligations . . . . . . . . . . . . . . . . . . . . . . .
Purchase obligations* . . . . . . . . . . . . . . . . . . . .
— $
513
46,562
13
86,961
Total contractual obligations . . . . . . . . . . . . . $ 414,255 $ 134,049 $
7,100 $
989
319,191
14
86,961
7,100 $
476
88,390
1
—
95,967 $
— $
—
—
—
75,623 108,616
—
—
75,623 $ 108,616
—
—
* We have purchase order commitments of $87.0 million related to open purchase orders, primarily with
foreign and domestic casegoods, leather and fabric suppliers, which are generally cancellable if production
has not begun.
Our consolidated balance sheet at the end of fiscal 2013 reflected a $1.4 million net liability for uncertain
income tax positions. It is reasonably possible that $0.2 million of this liability will be settled within the next 12
months. The remaining balance will be paid or released as tax audits are completed or settled, statutes of
limitations expire or other new information becomes available.
Our debt-to-capitalization ratio was 1.6% at April 27, 2013, and 2.1% at April 28, 2012. Capitalization is
defined as total debt plus total equity.
Continuing compliance with existing federal, state and local statutes dealing with protection of the environment
is not expected to have a significant effect upon our capital expenditures, earnings, competitive position or
liquidity.
30
Business Outlook
We are confident the integrated retail model developed over the last several years is the right strategy to take
our company forward to deliver profitable growth. Our operating platform is efficient and that, combined with
the strongest brand in the industry, positions us to continue to benefit from a strengthening economy,
particularly with an ongoing recovery in the housing market. We have much to look forward to in terms of
increasing the value of our enterprise through the build out of La-Z-Boy branded outlets throughout North
America and have every intention of aggressively pursuing many and varied growth opportunities. The furniture
industry typically experiences weaker demand during the summer months and, as a result, our plants shut down
for one week of vacation and maintenance during the first quarter, which ends in July. Accordingly, the first
quarter is usually our weakest in terms of sales and earnings. Due to seasonality, we ship product for 12 weeks
instead of the usual 13 weeks.
Critical Accounting Policies
Our consolidated financial statements have been prepared in conformity with U.S. generally accepted
accounting principles. In some cases, these principles require management to make difficult and subjective
judgments regarding uncertainties and, as a result, such estimates and assumptions may significantly impact our
financial results and disclosures. Estimates are based on currently known facts and circumstances, prior
experience and other assumptions believed to be reasonable. We use our best judgment in valuing these
estimates and may, as warranted, use external advice. Actual results could differ from these estimates,
assumptions, and judgments and these differences could be significant. We make frequent comparisons
throughout the year of actual experience to our assumptions in order to mitigate the likelihood of significant
adjustments. Adjustments are recorded when the differences are known. The following critical accounting
policies affect our consolidated financial statements.
Revenue Recognition and Related Allowances
Substantially all of our shipping agreements with third-party carriers transfer the risk of loss to our customers
upon shipment. Accordingly, our shipments using third-party carriers are generally recognized as revenue upon
shipment of the product. In all cases, for product shipped on our company-owned trucks, revenue is recognized
upon delivery. This revenue includes amounts billed to customers for shipping. Provisions are made at the time
revenue is recognized for estimated product returns and warranties, as well as other incentives that may be
offered to customers. We also recognize revenue for amounts received from our customers in connection with
our shared advertising cost arrangement. We import certain products from foreign ports, which are shipped
directly to our domestic customers. In this case, revenue is not recognized until title is assumed by our
customer, which is normally after the goods pass through U.S. Customs.
Incentives offered to customers include cash discounts and other sales incentive programs. Estimated cash
discounts and other sales incentives are recorded as a reduction of revenues when the revenue is recognized.
Trade accounts receivable arise from the sale of products on trade credit terms. On a quarterly basis, our
management team reviews all significant accounts as to their past due balances, as well as collectability of the
outstanding trade accounts receivable for possible write off. It is our policy to write off the accounts receivable
against the allowance account when we deem the receivable to be uncollectible. Additionally, for those dealers
that are significantly past due, we review their sales orders and ship product when collectability of the
incremental sale is reasonably assured.
We have notes receivable balances due to us from various customers. These notes receivable generally relate to
past due accounts receivable which were converted to a note receivable in order to secure further collateral from
the customer. The collateral from the customer is generally in the form of inventory or real estate. Additionally,
we have personal guarantees from some of these customers on these notes receivable. In cases where we do not
have sufficient collateral to support the carrying value of the note receivable, we recognize an allowance for
credit losses for this difference.
31
The allowance for credit losses reflects our best estimate of probable incurred losses inherent in the accounts
and notes receivable balances. We determine the allowance based on known troubled accounts, historical
experience and other currently available evidence.
Investments
We evaluate our available for sale investments periodically for possible other-than-temporary impairments by
reviewing factors such as the length of time and extent to which fair value has been below cost basis, the
financial condition of the issuer and our ability and intent to hold the investment for a period of time which may
be sufficient for anticipated recovery of market value. If the impairment is determined to be other-than-
temporary, the amount of the impairment is recognized as part of earnings. If the impairment is determined to
be temporary, then the resulting change in market value is recorded as part of other comprehensive
income/(loss) in our consolidated statement of changes in equity.
Long-lived Assets
We review long-lived assets for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset or asset group may not be recoverable. Our assessment of recoverability is based on
our best estimates using either quoted market prices or an analysis of the undiscounted projected future cash
flows by asset groups in order to determine if the fair value of our long-lived assets exceed their carrying value.
Our asset groups consist of our operating units in our Upholstery and Casegoods segments (La-Z-Boy, England,
Bauhaus, American Drew, Lea and Hammary, Kincaid) and each of our retail stores.
Indefinite-lived Intangible Assets and Goodwill
We test indefinite-lived intangibles and goodwill for impairment on an annual basis in the fourth quarter of our
fiscal year, or more frequently if events or changes in circumstances indicate that the asset might be impaired.
Indefinite-lived intangible assets include certain of our trade names and the reacquired right to own and operate
La-Z-Boy Furniture Galleries® stores in the southern Ohio market. Goodwill is tested for impairment by
comparing the fair value of our reporting unit to its carrying value. The reporting unit for our goodwill is our
southern Ohio retail market because the acquisition of this market is where the goodwill was generated. The fair
value for the reporting unit is established based upon the discounted cash flows in order to determine if the fair
value of our goodwill exceeds its carrying value.
Other Loss Reserves
We have various other loss exposures arising from the ordinary course of business, including inventory
obsolescence, health insurance, litigation, environmental claims, insured and self-insured workers’
compensation and product liabilities. Establishing loss reserves requires estimates and the judgment of
management with respect to risk and ultimate liability. We use legal counsel or other experts, including
actuaries as appropriate, to assist in developing estimates. Due to the uncertainties and potential changes in facts
and circumstances, additional charges related to these reserves could be required in the future.
We have various excess loss coverages for auto, product liability and workers’ compensation liabilities. Our
deductibles generally do not exceed $1.0 to $1.5 million.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit
carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in
which those temporary differences are expected to be recovered or settled. In periods when deferred tax assets
are recorded, we are required to estimate whether recoverability is more likely than not, based on forecasts of
32
taxable earnings in the related tax jurisdiction. We consider historic and projected future operating results, the
eligible carry-forward period, tax law changes and other relevant considerations when making judgments about
realizing the value of our deferred tax assets.
Pensions
We maintain a defined benefit pension plan for eligible factory hourly employees at some operating units. The
plan does not allow new participants. Active participants at some operating units continue to earn service credits.
Annual net periodic expense and benefit liabilities under our defined benefit pension plan are determined on an
actuarial basis using various assumptions and estimates including discount rates, long-term rates of return,
estimated remaining years of service and estimated life expectancy. Each year, we compare the actual experience
to the more significant assumptions used, and if warranted, we make adjustments to the assumptions.
Our pension plan discount rate assumption is evaluated annually. The discount rate is based upon a single rate
developed after matching a pool of high quality bond payments to the plan’s expected future benefit payments.
We used a discount rate of 4.0% at April 27, 2013, compared with a rate of 4.6% at April 28, 2012, and 5.6% at
April 30, 2011. We used the same methodology for determining the discount rate in fiscal 2013, fiscal 2012 and
fiscal 2011.
Pension benefits are funded through deposits with trustees and satisfy, at a minimum, the applicable funding
regulations.
Besides evaluating the discount rate used to determine our pension obligation, we also evaluate our assumption
relating to the expected return on plan assets annually. In selecting the expected long-term rate of return on
assets, we considered the average rate of earnings expected on the funds invested or to be invested to provide
the benefits of this plan. This included considering the trust’s asset allocation, investment strategy, and the
expected returns likely to be earned over the life of the plan. The rate of return assumption as of April 27, 2013
was 6.3% compared with 7.8% at April 28, 2012. The expected rate of return assumption as of April 27, 2013,
will be used to determine pension expense for fiscal 2014.
For fiscal 2014, we will use liability driven investing to more closely match the profile of our assets to the
pension plan liabilities. Initially we will invest 70% of the plan’s assets in fixed rate investments with a duration
that approximates the duration of its liabilities. The allocation to fixed rate investments may be increased
depending on the performance of the assets and changes in market interest rates.
We are not required to make contributions to our defined benefit pension plan in fiscal 2014. We expect that the
fiscal 2014 pension expense for the defined benefit pension plan, after considering all relevant assumptions will
be approximately $2.7 million, unchanged from fiscal 2013. A 25 basis point change in our discount rate or our
expected return on plan assets would not have a material impact on our results of operations.
Product Warranties
We account for product warranties by accruing an estimated liability at the time the revenue is recognized. We
estimate future warranty claims based on claim experience and any additional anticipated future costs on
previously sold product. Our liability estimates incorporate the cost of repairs including materials consumed,
labor and overhead amounts necessary to perform the repair and any costs associated with delivery of the
repaired product to the customer. Considerable judgment is used in making our estimates. Differences between
actual and estimated costs are recorded when the differences are known.
Stock-Based Compensation
We measure stock-based compensation cost for equity-based awards at the grant date based on the fair value of the
award and recognize it as expense over the vesting period. We measure stock-based compensation cost for
liability-based awards based on the fair value of the award on the last day of the reporting period and recognize it
33
as expense over the vesting period. The liability for these awards is remeasured and adjusted to its fair value at the
end of each reporting period until paid. Determining the fair value of stock-based awards at the grant date requires
judgment, including estimating expected dividends, future stock-price volatility, expected option lives and the
amount of share-based awards that are expected to be forfeited. While the assumptions used to calculate and
account for stock-based compensation awards represent management’s best estimates, these estimates involve
inherent uncertainties and the application of management’s judgment. As a result, if revisions are made to our
assumptions and estimates, our stock-based compensation expense could be materially different in the future.
We record compensation cost for stock-based awards that vest based on performance conditions ratably over the
vesting periods when the vesting of such awards become probable. Determining the probability of award
vesting requires judgment, including assumptions about future operating performance.
The fair value of each option grant was estimated using a Black-Scholes option-pricing model. Expected
volatility was estimated based on the historic volatility of our common shares. The average expected life was
based on the contractual term of the stock option and expected employee exercise and post-vesting employment
termination trends. The risk-free rate was based on U.S. Treasury issues with a term equal to the expected life
assumed at the date of grant. Forfeitures were estimated at the date of grant based on historic experience.
The fair value of the performance award grant that vests based on a market condition was estimated using a
Monte Carlo valuation model. The Monte Carlo model was used to incorporate more complex variables than
closed-form models such as the Black-Scholes option valuation model used for option grants. The Monte Carlo
valuation model simulates a distribution of stock prices to yield an expected distribution of stock prices over the
remaining performance period. The stock-paths are simulated using volatilities calculated with historical
information using data from a look-back period that is equal to the vesting period. The model assumes a zero-
coupon, risk-free interest rate with a term equal to the vesting period. The simulations are repeated many times
(100,000 in this valuation) and the mean of the discounted values is calculated as the grant date fair value for
the award. The final payout of the award as calculated by the model is then discounted back to the grant date
using the risk-free interest rate.
Both the Monte Carlo and Black-Scholes methodologies are based, in part, upon inputs for which there is little
or no observable market data, requiring us to develop our own assumptions. Inherent in both of these models are
assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield.
Regulatory Developments
Recent Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board issued accounting guidance related to reporting
amounts reclassified out of accumulated other comprehensive income. The guidance amends the comprehensive
income reporting standards to require items that are reclassified in their entirety to net income from
accumulated other comprehensive income in the same reporting period to be reported separately from other
amounts in other comprehensive income. These amounts may be disclosed on the face of the financial
statements where net income is presented or in the notes to the financial statements. The guidance does not
amend any existing disclosures around net income or other comprehensive income; it is only intended to
improve the transparency of items in other comprehensive income. We adopted this guidance in our fourth
quarter of fiscal 2013 and it had no significant impact on our consolidated financial statements.
34
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are exposed to market risk from changes in interest rates. Our exposure to interest rate risk results from our
variable rate debt, under which we had $7.1 million of borrowings at April 27, 2013. Management estimates
that a one percentage point change in interest rates would not have a material impact on our results of
operations for fiscal 2014 based upon our current and expected levels of exposed liabilities.
We are exposed to market risk from changes in the value of foreign currencies primarily related to our plant in
Mexico, as wages and other local expenses are paid in Mexican pesos. Nonetheless, gains and losses resulting
from market changes in the value of foreign currencies have not had and are not expected to have a significant
effect on our consolidated results of operations. A decrease in the value of foreign currencies in relation to the
U.S. dollar could impact the profitability of some of our vendors which could translate into higher prices on our
supplies, but we believe any impact would be similar for our competitors.
We are exposed to market risk with respect to commodity and fuel price fluctuations, principally related to
commodities used in the production of our products, including steel, wood and polyurethane. As commodity prices
increase, we determine whether a price increase to our customers to offset these increases is warranted. We do not
believe that an increase in these commodity costs would have a material impact on our results of operations.
35
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Management’s Report to our Shareholders
Management’s Responsibility for Financial Information
Management of La-Z-Boy Incorporated is responsible for the preparation, integrity and objectivity of La-Z-Boy
Incorporated’s consolidated financial statements and other financial information contained in this Annual
Report on Form 10-K. Those consolidated financial statements were prepared in conformity with accounting
principles generally accepted in the United States of America. In preparing those consolidated financial
statements, management was required to make certain estimates and judgments, which are based upon currently
available information and management’s view of current conditions and circumstances.
The Audit Committee of the board of directors, which consists solely of independent directors, oversees our
process of reporting financial information and the audit of our consolidated financial statements. The Audit
Committee is informed of the financial condition of La-Z-Boy Incorporated and regularly reviews management’s
critical accounting policies, the independence of our independent auditors, our internal controls and the objectivity
of our financial reporting. Both the independent auditors and the internal auditors have free access to the Audit
Committee and meet with the Audit Committee periodically, both with and without management present.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. Under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief Financial Officer, we
conducted an evaluation of the effectiveness of our internal controls over financial reporting based upon the
framework in “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations
of the Treadway Commission. Based on that evaluation, our management concluded that our internal control
over financial reporting was effective as of April 27, 2013. The effectiveness of the Company’s internal control
over financial reporting as of April 27, 2013, has been audited by PricewaterhouseCoopers, LLP, an
independent registered public accounting firm, as stated in their report which appears herein.
/s/ Kurt L. Darrow
Kurt L. Darrow
Chairman, President and Chief Executive Officer
/s/ Louis M. Riccio, Jr.
Louis M. Riccio, Jr.
Senior Vice President and Chief Financial Officer
36
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of La-Z-Boy Incorporated:
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income,
of comprehensive income, of changes in equity and of cash flows present fairly, in all material respects, the
financial position of La-Z-Boy Incorporated and its subsidiaries at April 27, 2013 and April 28, 2012, and the
results of their operations and their cash flows for each of the three years in the period ended April 27, 2013 in
conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the
Company maintained, in all material respects, effective internal control over financial reporting as of April 27,
2013, based on criteria established in Internal Control - Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for
these financial statements, for maintaining effective internal control over financial reporting and for its assessment
of the effectiveness of internal control over financial reporting, included in Management's Report on Internal
Control over Financial Reporting on the preceding page. Our responsibility is to express opinions on these
financial statements and on the Company's internal control over financial reporting based on our integrated audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement and whether effective internal control over
financial reporting was maintained in all material respects. Our audits of the financial statements included
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and evaluating the overall financial
statement presentation. Our audit of internal control over financial reporting included obtaining an understanding
of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also
included performing such other procedures as we considered necessary in the circumstances. We believe that our
audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company; and (iii)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
Detroit, Michigan
June 18, 2013
37
LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF INCOME
Fiscal Year Ended
(52 weeks)
4/28/2012
(52 weeks)
4/27/2013
(53 weeks)
(Amounts in thousands, except per share data)
4/30/2011
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,332,525 $1,231,676 $1,187,143
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
907,586 851,819 832,799
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
424,939 379,857 354,344
Selling, general and administrative expense. . . . . . . . . . . . . . . . . . . . . . . . . .
357,312 330,226 323,964
Write-down of long-lived assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,471
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,909
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,346
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
944
Income from Continued Dumping and Subsidy Offset Act, net . . . . . . . .
1,054
Other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
405
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,966
Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,593
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17,373
Net (income) loss attributable to noncontrolling interests . . . . . . . . . . . . .
6,674
Net income attributable to La-Z-Boy Incorporated. . . . . . . . . . . . . . . . . . $
24,047
—
49,631
1,384
611
18,037
(38 )
66,857
(22,051 )
88,908
(942 )
87,966 $
—
67,627
746
621
—
3,208
70,710
23,528
47,182
(793 )
46,389 $
Basic average shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
52,351
51,944
51,849
Basic net income per share attributable to La-Z-Boy Incorporated . . . . . $
0.87 $
1.66 $
0.46
Diluted average shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
53,685
52,478
52,279
Diluted net income per share attributable to La-Z-Boy Incorporated . . . $
0.85 $
1.64 $
0.45
Dividends declared per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.08 $
— $
—
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
38
LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Amounts in thousands)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other comprehensive income (loss)
Currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of cash flow hedges, net of tax. . . . . . . . . . . . . . .
Net unrealized gains (losses) on marketable securities, net of tax . . .
Net pension amortization and actuarial gain (loss), net of tax . . . . . .
Total other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . .
Total comprehensive income before allocation to noncontrolling
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive (income) loss attributable to noncontrolling interests.
Comprehensive income attributable to La-Z-Boy Incorporated. . . . . . . $
4/27/2013
Fiscal Year Ended
4/28/2012
4/30/2011
47,182 $
88,908 $
17,373
1,089
231
(2,543 )
(2,653 )
(3,876 )
(132 )
28
(331 )
(12,209 )
(12,644 )
55
548
590
640
1,833
43,306
(1,132 )
42,174 $
76,264
(775 )
75,489 $
19,206
6,321
25,527
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
39
LA-Z-BOY INCORPORATED
CONSOLIDATED BALANCE SHEET
As of
4/27/2013
4/28/2012
(Amounts in thousands, except par value)
Current assets
Cash and equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 131,085 $ 152,370
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,861
Receivables, net of allowance of $21,607 at 4/27/13 and $22,254 at 4/28/12 . . . . . . 160,005 167,232
Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146,343 143,787
Deferred income taxes – current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19,081
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,669
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,880 500,000
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,060 114,366
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,028
Deferred income taxes – long term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33,649
Other long-term assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34,696
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 720,371 $ 685,739
12,837
4,838
30,572
53,184
20,640
30,121
12,686
Current liabilities
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,829
56,630
91,300
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,163 149,759
7,931
80,234
—
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingencies and commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders' equity
513 $
50,542
99,108
7,576
70,664
—
Preferred shares – 5,000 authorized; none issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common shares, $1 par value – 150,000 authorized; 52,392 outstanding at 4/27/13
—
—
and 52,244 outstanding at 4/28/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
52,244
Capital in excess of par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241,888 231,332
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226,044 189,609
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(31,281 )
Total La-Z-Boy Incorporated shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 484,828 441,904
5,911
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 491,968 447,815
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 720,371 $ 685,739
Noncontrolling interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(35,496 )
52,392
7,140
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
40
LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands)
Cash flows from operating activities
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Adjustments to reconcile net income to cash provided by operating
activities
(Gain) loss on disposal of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on deconsolidation of VIE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-down of long-lived assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension plan contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities. . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from investing activities
Proceeds from disposals of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash effects on deconsolidation of VIE . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used for investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4/27/2013
Fiscal Year Ended
4/28/2012
4/30/2011
47,182 $
88,908 $
17,373
(659 )
(3,170 )
—
—
3,198
2,715
1,005
23,140
11,458
(23,480 )
7,139
391
(5,407 )
(6,088 )
11,016
68,440
4,455
(25,912 )
(49,589 )
18,662
—
(15,832 )
(9,825 )
—
(78,041 )
45
(519 )
(1,125 )
—
(42,146 )
281
4,196
23,486
5,718
(5,798 )
(6,182 )
(7,414 )
3,318
7,470
12,610
82,848
372
(15,663 )
(7,944 )
8,649
(971 )
—
(2,861 )
(676 )
(19,094 )
201
(529 )
—
4,471
(120 )
487
7,197
24,302
3,720
(4,495 )
1,599
(10,531 )
(563 )
(4,429 )
(10,837 )
27,846
506
(10,540 )
(10,200 )
10,655
(632 )
—
—
(49 )
(10,260 )
Cash flows from financing activities
Proceeds from debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30,585
—
Payments on debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(41,618 )
(2,511 )
Payments for debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Stock issued for stock and employee benefit plans . . . . . . . . . . . . . . . . . .
270
2,901
Excess tax benefit on stock option exercises . . . . . . . . . . . . . . . . . . . . . . .
—
2,563
Purchases of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(10,333 )
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(4,236 )
Net cash used for financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(10,763 )
(11,616 )
Effect of exchange rate changes on cash and equivalents. . . . . . . . . . . . . .
12
(68 )
Change in cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(21,285 )
6,835
Cash and equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . .
152,370 115,262 108,427
Cash and equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 131,085 $ 152,370 $ 115,262
—
(25,936 )
(568 )
4,943
223
(5,179 )
—
(26,517 )
(129 )
37,108
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
41
LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Amounts in thousands)
Common
Shares
Capital in
Excess of
Par Value
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Non-
Controlling
Interests
Total
At April 24, 2010 $ 51,770 $ 218,622 $
Net income (loss) . . . . . . . . . . .
Other comprehensive income .
Stock issued for stock and
89,717 $
24,047
(20,284) $
1,480
3,289 $ 343,114
17,373
(6,674 )
1,833
353
employee benefit plans, net
of cancellations . . . . . . . . . . . .
Stock option and restricted
stock expense . . . . . . . . . . . . .
Acquisition of VIE and other .
Cumulative effect of change in
accounting for
noncontrolling interests . . . .
At April 30, 2011
Net income . . . . . . . . . . . . . . . . .
Other comprehensive loss. . . .
Stock issued for stock and
employee benefit plans, net
of cancellations . . . . . . . . . . . .
Purchases of common stock . .
Stock option and restricted
stock expense . . . . . . . . . . . . .
Tax benefit from exercise of
options . . . . . . . . . . . . . . . . . . .
Changes in noncontrolling
interest upon deconsolidation
of VIE and other changes in
noncontrolling interests . . . .
At April 28, 2012
Net income . . . . . . . . . . . . . . . . .
Other comprehensive income
(loss) . . . . . . . . . . . . . . . . . . . . .
Stock issued for stock and
employee benefit plans, net
of cancellations . . . . . . . . . . . .
Purchases of common stock . .
Stock option and restricted
stock expense . . . . . . . . . . . . .
Tax benefit from exercise of
options . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . .
Change in noncontrolling
interests . . . . . . . . . . . . . . . . . .
139
(244 )
3,717
(8,573 )
8,633
(105 )
3,717
60
925
51,909 222,339 105,872
87,966
(18,804 )
(12,477 )
(2,777 )
(1,852 )
2,824 364,140
88,908
(12,644 )
942
(167 )
835
(500 )
4,011
(958 )
(509 )
(3,721 )
5,717
1
223
4,337
(5,179 )
5,718
223
52,244 231,332 189,609
46,389
(31,281 )
2,312
2,312
5,911 447,815
47,182
793
(4,215 )
339
(3,876 )
817
(669 )
1,849
(5,314 )
(1,368 )
(4,350 )
11,458
2,563
(4,236 )
1,298
(10,333 )
11,458
2,563
(4,236 )
97
97
7,140 $ 491,968
At April 27, 2013 $ 52,392 $ 241,888 $ 226,044 $
(35,496) $
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Accounting Policies
The following is a summary of significant accounting policies followed in the preparation of La-Z-Boy
Incorporated and its subsidiaries’ (individually and collectively, “we,” “our” or the “Company”) consolidated
financial statements. Our fiscal year ends on the last Saturday of April. Our 2013 and 2012 fiscal years included
52 weeks, while fiscal year 2011 included 53 weeks. The additional week in fiscal 2011 was included in our
fourth fiscal quarter.
Principles of Consolidation
The accompanying consolidated financial statements include the consolidated accounts of La-Z-Boy
Incorporated and our majority-owned subsidiaries. The portion of less than wholly-owned subsidiaries is
included as non-controlling interest. All intercompany transactions have been eliminated, including any related
profit on intercompany sales. Additionally, our consolidated financial statements previously included the
accounts of certain entities in which we held a controlling interest based on exposure to economic risks and
potential rewards (variable interests) for the periods in which we were the primary beneficiary. As of April 28,
2012, we no longer had any such arrangements where we were the primary beneficiary.
Use of Estimates
The consolidated financial statements are prepared in conformity with accounting principles generally accepted
in the United States of America. These principles require management to make estimates and assumptions that
affect the reported amounts or disclosures of assets, liabilities (including contingent assets and liabilities) sales
and expenses at the date of the financial statements. Actual results could differ from those estimates.
Cash and Equivalents
For purposes of the consolidated balance sheet and statement of cash flows, we consider all highly liquid debt
instruments purchased with initial maturities of three months or less to be cash equivalents.
Restricted Cash
We have cash on deposit with a bank as collateral for certain letters of credit.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined using the last-in, first-out (“LIFO”)
basis for approximately 67% and 72% of our inventories at April 27, 2013, and April 28, 2012, respectively.
Cost is determined for all other inventories on a first-in, first-out (“FIFO”) basis. The FIFO method of
accounting is mainly used for our Retail segment’s inventory and the smaller operating companies within our
Upholstery segment.
Property, Plant and Equipment
Items capitalized, including significant betterments to existing facilities, are recorded at cost. Capitalized
computer software costs include internal and external costs incurred during the software's development stage.
Internal costs relate primarily to employee activities related to coding and testing the software under
development. Computer software costs are depreciated over three to ten years. All maintenance and repair costs
are expensed when incurred. Depreciation is computed principally using straight-line methods over the
estimated useful lives of the assets.
Disposal and Impairment of Long-Lived Assets
Retirement or dispositions of long-lived assets are recorded based on carrying value and proceeds received. Any
resulting gains or losses are recorded as a component of selling, general and administrative expenses.
We review the carrying value of our long-lived assets for impairment annually or whenever events or changes
in circumstances indicate that their carrying amounts may not be recoverable. Our assessment of recoverability
is based on our best estimates using either quoted market prices or an analysis of the undiscounted projected
future cash flows by asset groups in order to determine if the fair value of our long-lived assets exceed their
43
carrying value. Our asset groups consist of our operating units in our Upholstery and Casegoods segments (La-
Z-Boy, England, Bauhaus, American Drew, Lea and Hammary, Kincaid) and each of our retail stores.
Indefinite-lived intangible assets and goodwill
We test indefinite-lived intangibles for impairment on an annual basis in the fourth quarter of our fiscal year, or
more frequently if events or changes in circumstances indicate that the asset might be impaired. Indefinite-lived
intangible assets include certain of our trade names and the reacquired right to own and operate La-Z-Boy
Furniture Galleries® stores in the southern Ohio market. In the fourth quarter of fiscal 2013 and fiscal 2012, we
performed our annual testing on our indefinite-lived intangible assets, and recorded an impairment charge
related to our trade names of $0.3 million and $0.1 million, respectively.
Goodwill is tested for impairment by comparing the fair value of our reporting unit to its carrying value. The
reporting unit for our goodwill is our southern Ohio retail market because the acquisition of this market is where
the goodwill was generated. The estimated fair value for the reporting unit is determined based upon discounted
cash flows. In situations where the fair value is less than the carrying value, indicating a potential impairment, a
second comparison is performed using a calculation of implied fair value of goodwill to measure any such
impairment. We did not have any goodwill impairment during fiscal 2013.
Investments
Available-for-sale securities are recorded at fair value with the net unrealized gains and losses (that are deemed to
be temporary) reported as a component of other comprehensive income/(loss). Realized gains and losses and
charges for other-than-temporary impairments are included in determining net income, with related purchase costs
based on the first-in, first-out method. For impairments that are other-than-temporary, an impairment loss is
recognized in earnings equal to the difference between the investment’s cost and its fair value at the balance sheet
date of the reporting period for which the assessment is made. The fair value of the investment then becomes the
new amortized cost basis of the investment and it is not adjusted for subsequent recoveries in fair value.
Life Insurance
Life insurance policies are recorded at the amount that could be realized under the insurance contract as of the date
of our consolidated balance sheet. These assets are classified as other long-term assets on our consolidated balance
sheet. The change in cash surrender or contract value is recorded as income or expense during each period.
Revenue Recognition and Related Allowances for Credit Losses
Substantially all of our shipping agreements with third-party carriers transfer the risk of loss to our customers
upon shipment. Accordingly, our shipments using third-party carriers are generally recognized as revenue upon
shipment of the product. In all cases, for product shipped on our company-owned trucks, revenue is recognized
upon delivery. This revenue includes amounts billed to customers for shipping. Provisions are made at the time
revenue is recognized for estimated product returns and warranties, as well as other incentives that may be
offered to customers. We also recognize revenue for amounts received from our customers in connection with
our shared advertising cost arrangement. We import certain products from foreign ports, which are shipped
directly to our domestic customers. In this case, revenue is not recognized until title is assumed by our
customer, which is normally after the goods pass through U.S. Customs.
Incentives offered to customers include cash discounts and other sales incentive programs. Estimated cash
discounts and other sales incentives are recorded as a reduction of revenues when the revenue is recognized.
Trade accounts receivable arise from the sale of products on trade credit terms. On a quarterly basis, our
management team reviews all significant accounts as to their past due balances, as well as collectability of the
outstanding trade accounts receivable for possible write off. It is our policy to write off the accounts receivable
against the allowance account when we deem the receivable to be uncollectible. Additionally, for those dealers
that are significantly past due, we review their sales orders and ship product when collectability of the
incremental sale is reasonably assured.
44
We have notes receivable balances due to us from various customers. These notes receivable generally relate to
past due accounts receivable which were converted to a note receivable in order to secure further collateral from
the customer. The collateral from the customer is generally in the form of inventory or real estate. Additionally,
we have personal guarantees from some of these customers on these notes receivable. In cases where we do not
have sufficient collateral to support the carrying value of the note receivable, our policy is to recognize an
allowance for credit losses for this difference.
These allowances for credit losses reflect our best estimate of probable losses inherent in the trade accounts and
notes receivable balances. We determine the allowance based on known troubled accounts, historic experience
and other currently available evidence.
Cost of Sales
Our cost of sales consists primarily of the cost to manufacture or purchase our merchandise, inspection costs,
internal transfer costs, in-bound freight costs, outbound shipping costs, as well as warehousing costs, occupancy
costs and depreciation expense related to our manufacturing facilities and equipment.
Selling, General and Administrative Expenses
SG&A expenses include the costs of selling our products and other general and administrative costs. Selling
expenses are primarily composed of commissions, advertising, warranty, bad debt expense and compensation
and benefits of employees performing various sales functions. Additionally, the occupancy costs of our retail
facilities and the warehousing costs of our regional distribution centers are included as a component of SG&A.
Other general and administrative expenses included in SG&A are composed primarily of compensation and
benefit costs for administration employees and other administrative costs.
Research and Development Costs
Research and development costs are charged to expense in the periods incurred. Expenditures for research and
development costs were $7.5 million, $7.7 million and $8.2 million for the fiscal years ended April 27, 2013,
April 28, 2012, and April 30, 2011, respectively and are included as a component of SG&A.
Advertising Expenses
Production costs of commercials, programming and costs of other advertising, promotion and marketing programs
are charged to expense in the period incurred. Gross advertising expenses were $54.3 million, $48.0 million and
$46.3 million for the fiscal years ended April 27, 2013, April 28, 2012, and April 30, 2011, respectively.
A major portion of our advertising program is a national advertising campaign. This campaign is a shared
advertising program with our La-Z-Boy Furniture Galleries® stores, which are reimbursing us for about 36% of
the cost of the program (excluding company owned stores). Because of this shared cost arrangement, the
advertising expense is reported as a component of SG&A, while the dealers’ reimbursement portion is reported
as a component of sales.
Operating Leases
We record rent expense related to operating leases on a straight-line basis for minimum lease payments starting
with the beginning of the lease term based on the date that we have the right to control the leased property. Our
minimum lease payments may incorporate step rent provisions or rent escalations. We also record rental income
from subleases on a straight-line basis for minimum lease payments.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit
carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in
which those temporary differences are expected to be recovered or settled.
45
In periods when deferred tax assets are recorded, we are required to estimate whether recoverability is more
likely than not, based on forecasts of taxable earnings in the related tax jurisdiction. We consider historical and
projected future operating results, the eligible carry-forward period, tax law changes, tax planning opportunities
and other relevant considerations when making judgments about realizing the value of our deferred tax assets.
We recognize in our consolidated financial statements the benefit of a position taken or expected to be taken in
a tax return when it is more likely than not (i.e. a likelihood of more than 50%) that the position would be
sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount
of benefit that is more likely than not to be realized upon settlement. Changes in judgment that result in
subsequent recognition, derecognition or change in a measurement date of a tax position taken in a prior annual
period (including any related interest and penalties) are recognized as a discrete item in the interim period in
which the change occurs.
Foreign Currency Translation
The functional currency of our Mexico subsidiary is the U.S. dollar. Transaction gains and losses associated
with translating our Mexico subsidiary’s assets and liabilities, which are non-U.S. dollar denominated, are
recorded in other income/(expense) in our consolidated statement of income. The functional currency of each of
our other foreign subsidiaries is its respective local currency. Assets and liabilities of those subsidiaries whose
functional currency is their local currency are translated at the year-end exchange rates, and revenues and
expenses are translated at average exchange rates for the period, with the corresponding exchange effect
included as a component of other comprehensive income. When the foreign subsidiary has substantially ended
operations, the remaining translation adjustments are recognized in other income/(expense) in our consolidated
statement of income.
Accounting for Stock-Based Compensation
We estimate the fair value of equity-based awards on the date of grant using option-pricing models. The value
of the portion of the equity-based awards that are ultimately expected to vest is recognized as expense over the
requisite service periods in our consolidated statement of income using a straight-line single-option method. We
measure stock-based compensation cost for liability-based awards based on the fair value of the award on the
last day of the reporting period and recognize it as expense over the vesting period. The liability for these
awards is remeasured and adjusted to its fair value at the end of each reporting period until paid. We record
compensation cost for stock-based awards that vest based on performance conditions ratably over the vesting
periods when the vesting of such awards become probable.
Reclassifications and Revisions
Certain prior year information has been reclassified to be comparable to the current year presentation. These
items had no impact on the amounts of previously reported net income attributable to La-Z-Boy Incorporated or
total equity.
Insurance/Self-Insurance
We use a combination of insurance and self-insurance for a number of risks, including workers’ compensation,
general liability, vehicle liability and the company-funded portion of employee-related health care benefits.
Liabilities associated with these risks are estimated in part by considering historic claims experience,
demographic factors, severity factors and other assumptions. Our workers’ compensation reserve is an
undiscounted liability. We have various excess loss coverages for auto, product liability and workers’
compensation liabilities. Our deductibles generally do not exceed $1.0 to $1.5 million.
Recent Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board issued accounting guidance related to reporting
amounts reclassified out of accumulated other comprehensive income. The guidance amends the comprehensive
income reporting standards to require items that are reclassified in their entirety to net income from accumulated
other comprehensive income in the same reporting period to be reported separately from other amounts in other
comprehensive income. These amounts may be disclosed on the face of the financial statements where net income
is presented or in the notes to the financial statements. The guidance does not amend any existing disclosures
46
around net income or other comprehensive income; it is only intended to improve the transparency of items in
other comprehensive income. We adopted this guidance in our fourth quarter of fiscal 2013 and it had no
significant impact on our consolidated financial statements. See Note 15 for further information.
Note 2: Acquisition
In the second quarter of fiscal 2013, we acquired the assets of La-Z Recliner Shops, Inc., an independent
operator of nine La-Z-Boy Furniture Galleries® stores and one distribution center in the southern Ohio market,
for $17.4 million composed of cash and the forgiveness of accounts payable. The nine stores were included in
our Retail segment results upon acquisition.
Prior to this acquisition, we had licensed the exclusive right to own and operate La-Z-Boy Furniture Galleries®
stores in the southern Ohio market to La-Z Recliner Shops, Inc. The effective settlement of this arrangement
resulted in no settlement gain or loss as the contractual terms were at market value. As a result of the acquisition
we reacquired the right (a part of which relates to the use of associated trademarks and trade name in southern
Ohio) to own and operate La-Z-Boy Furniture Galleries® stores in the southern Ohio market. We recorded an
indefinite-lived intangible asset of $2.2 million related to this reacquired right. We also recognized $12.8
million of goodwill, which represents the purchase price in excess of the net assets acquired. The goodwill and
other intangible assets were recorded in the Retail segment and will be amortized and deducted for federal
income tax purposes over 15 years.
The purchase price allocations were based on fair values at the date of acquisition and are summarized in the
following table:
(Amounts in thousands)
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant, and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of
10/1/12
4,260
12,837
2,145
336
19,578
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,199 )
Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
17,379
The impact of this acquisition on our results of operations was not material, and therefore, pro forma financial
information is not presented.
Note 3: Allowance for Credit Losses
As of April 27, 2013, and April 28, 2012, we had gross notes receivable of $8.3 million from nine customers
and $10.3 million from 12 customers, respectively, with a corresponding allowance for credit losses of $2.0
million and $1.5 million, respectively. We have collateral from these customers in the form of inventory and/or
real estate to support the net carrying value of these notes. We do not accrue interest income on these notes
receivable, but we record interest income when it is received. Of the $8.3 million in notes receivable as of April
27, 2013, $1.8 million is expected to be repaid in the next twelve months, and was categorized as receivables in
our consolidated balance sheet. As of April 28, 2012, $1.9 million of the $10.3 million in notes receivable were
categorized as receivables in our consolidated balance sheet. The remainder of the notes receivable and the
entire allowance for credit losses were categorized as other long-term assets.
47
The following is an analysis of the allowance for credit losses related to our notes receivable as of April 27,
2013, and April 28, 2012:
(Amounts in thousands)
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4/27/2013
4/28/2012
1,537 $
(73 )
—
522
—
1,986 $
2,067
(38 )
(1,231 )
825
(86 )
1,537
Note 4: Inventories
(Amounts in thousands)
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FIFO inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess of FIFO over LIFO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
74,081
11,318
88,580
176,186 173,979
(30,192 )
(29,843 )
Total inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 146,343 $ 143,787
70,731 $
12,182
93,273
4/27/2013
4/28/2012
Note 5: Property, Plant and Equipment
Estimated
Useful
Lives
4/27/2013
4/28/2012
(Amounts in thousands)
Buildings and building fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-40 years $ 171,346 $ 168,451
Machinery and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-15 years 141,924 141,476
Information systems and software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-10 years
56,621
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,158
—
Land improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-30 years
10,772
Transportation equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-10 years
17,595
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-20 years
12,335
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,249
441,035 429,657
(322,975 ) (315,291 )
$ 118,060 $ 114,366
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
62,005
18,433
10,772
17,855
14,204
4,496
Depreciation expense for the fiscal years ended April 27, 2013, April 28, 2012, and April 30, 2011, was $19.8
million, $21.3 million, and $22.0 million, respectively.
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying value of an asset or asset group may not be recoverable. We did not have any long-lived asset
impairments during fiscal 2013 or fiscal 2012. During fiscal 2011, the estimated undiscounted cash flows (based
upon, among other things, our annual forecasting process) related to certain locations were less than the carrying
value of the underlying assets. As a result, we recorded an impairment charge of $1.8 million for several locations
owned by our then consolidated California VIE and $1.3 million for various other company owned stores. In
addition, during fiscal 2011 we decided to vacate one of our facilities and recorded an impairment charge of $1.3
million representing the full carrying value of leasehold improvements at that location.
Note 6: Goodwill
As a result of the acquisition of our southern Ohio retail market discussed in Note 2, we recognized $12.8
million of goodwill. Our goodwill is recorded in our Retail segment and will be amortized and deducted for
federal income tax purposes over 15 years.
48
Note 7: Investments
Our consolidated balance sheet at April 27, 2013, included $10.8 million of available-for-sale investments and
$1.1 million of trading securities in other current assets and $29.2 million of available-for sale investments in
other long-term assets. Available-for-sale investments of $10.2 million and trading securities of $1.0 million
were included in other long-term assets in our consolidated balance sheet at April 28, 2012. At April 27, 2013,
$29.9 million of these investments were to enhance returns on our cash. The remaining investments of $11.2
million at April 27, 2013, and our fiscal 2012 investments were designated to fund future obligations of our
non-qualified defined benefit retirement plan and our executive deferred compensation plan. All unrealized
gains or losses in the tables below relate to available-for-sale investments and were included in accumulated
other comprehensive loss within our consolidated statement of changes in equity because none of them were
considered other-than-temporary during fiscal 2013 or fiscal 2012. If there were a decline in fair value of an
investment below its costs and the decline was considered other-than-temporary, the amount of decline below
cost would be charged against earnings.
The following is a summary of investments at April 27, 2013, and April 28, 2012:
Fiscal 2013
(Amounts in thousands)
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fixed income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
296 $
159
—
1
456 $
Fair Value
6,668
33,076
1,126
220
41,090
(152) $
(1 )
—
(3 )
(156) $
Fiscal 2012
(Amounts in thousands)
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fixed income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,806 $
102
—
—
2,908 $
Fair Value
7,237
2,850
950
163
11,200
(83) $
(7 )
—
—
(90) $
The following table summarizes sales of available-for-sale securities (for the fiscal years ended):
(Amounts in thousands)
Proceeds from sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Gross realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross realized losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4/27/2013
4/28/2012
4/30/2011
18,662 $
4,486
(1,316 )
5,622 $
573
(54 )
7,448
592
(63 )
The fair value of fixed income available-for-sale securities by contractual maturity was $10.8 million within one
year, $20.8 million within two to five years, $1.0 million within six to ten years and $0.5 million thereafter.
Note 8: Accrued Expenses and Other Current Liabilities
(Amounts in thousands)
Payroll and other compensation . . . . . . . . . . . . . . . . . . . . . . . . . $
Accrued product warranty, current portion . . . . . . . . . . . . . . . .
Customer deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other current liabilities . . . . . . . . . . . $
4/27/2013
4/28/2012
39,270 $
9,532
15,852
34,454
99,108 $
36,638
8,230
12,204
34,228
91,300
49
Note 9: Debt
(Amounts in thousands)
Industrial revenue bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4/27/2013
4/28/2012
7,100 $
—
989
8,089
(513 )
7,576 $
7,131
1,984
645
9,760
(1,829 )
7,931
We maintain a revolving credit facility secured primarily by all of our accounts receivable, inventory, and cash
deposit and securities accounts. Availability under the agreement fluctuates according to a borrowing base
calculated on eligible accounts receivable and inventory. The credit agreement includes affirmative and
negative covenants that apply under certain circumstances, including a 1.05 to 1.00 fixed charge coverage ratio
requirement that applies when excess availability under the line is less than 12.5% of the revolving credit
commitment of $150 million. At April 27, 2013, we were not subject to the fixed charge coverage ratio
requirement, had no borrowings outstanding under the agreement, and had excess availability of $143.3 million.
Industrial revenue bonds were used to finance the construction of some of our manufacturing facilities. The
facilities constructed from the bond proceeds are mortgaged as collateral for the bonds. Interest for our remaining
bond is at a variable rate and at April 27, 2013, was approximately 0.3%. This bond matures in June 2014.
Fair value of our debt approximates the carrying value.
Capital leases consist primarily of long-term commitments for the purchase of IT equipment and have
maturities ranging from fiscal 2014 to fiscal 2016. Interest rates range from 7.6% to 9.1%.
Maturities of long-term debt, subsequent to April 27, 2013, are $0.5 million in fiscal 2014, $7.4 million in fiscal
2015, and $0.2 million in fiscal 2016.
Cash paid for interest during fiscal years 2013, 2012 and 2011 was $0.7 million, $1.6 million, and $1.9 million,
respectively.
Note 10: Operating Leases
We have operating leases for one manufacturing facility, executive and sales offices, warehouses, showrooms
and retail facilities, as well as for transportation, information technology and other equipment. The operating
leases expire at various dates through fiscal 2027. We have certain retail facilities which we sublease to outside
parties. The total rent liability included in our consolidated balance sheet as of April 27, 2013, and April 28,
2012, was $11.7 million and $10.7 million, respectively.
The future minimum rentals for all non-cancelable operating leases and future rental income from subleases are
as follows (for the fiscal years):
Future
Minimum
Rentals
Future
Minimum
Income
(Amounts in thousands)
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 and beyond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
46,562 $
46,428
41,962
39,281
36,342
108,616
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 319,191 $
3,651
3,669
3,772
3,664
3,634
13,614
32,004
50
Rental expense and rental income for operating leases were as follows (for the fiscal years ended):
(Amounts in thousands)
Rental expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4/27/2013
4/28/2012
4/30/2011
48,265 $
4,946
48,544 $
4,509
50,318
3,369
Note 11: Retirement and Welfare
Voluntary 401(k) retirement plans are offered to eligible employees within certain U.S. operating units. For
most operating units, we make matching contributions based on specific formulas.
We also maintain an executive deferred compensation plan for eligible highly compensated employees. An
element of this plan allows contributions for eligible highly compensated employees. As of April 27, 2013, and
April 28, 2012, we had $10.0 million and $8.3 million, respectively, of obligations for this plan included in
other long-term liabilities. We had life insurance contracts and mutual funds at April 27, 2013, and at April 28,
2012, with combined cash surrender and market values of $10.0 million and $8.3 million, respectively, included
in other long-term assets related to this plan.
We maintain a non-qualified defined benefit retirement plan for certain former salaried employees. Included in
other long-term liabilities were plan obligations of $17.0 million and $16.3 million at April 27, 2013, and April 28,
2012, respectively, which represented the unfunded projected benefit obligation of this plan. During fiscal 2013,
the total cost recognized for this plan was $0.8 million, which primarily related to interest cost. The actuarial loss
recognized in accumulated other comprehensive loss was $1.1 million and the benefit payments during the year
were $1.1 million. Benefit payments are scheduled to be approximately $1.0 million annually for the next ten
years. The discount rate used to determine the obligations under this plan was 3.7% as of the end of fiscal 2013.
During fiscal 2012, the total cost recognized for this plan was $0.8 million, which was all related to interest. The
actuarial loss recognized in accumulated other comprehensive loss was $1.6 million and the benefit payments
during the year were $1.1 million. The discount rate used to determine the obligations under this plan was 4.3% as
of the end of fiscal 2012. This plan is not funded and is excluded from the obligation charts and disclosures that
follow. We hold available-for-sale marketable securities to fund future obligations of this plan in a Rabbi trust (see
Notes 7 and 19). We are not required to make any contributions to the non-qualified defined benefit retirement
plan in fiscal year 2014; however, we have the discretion to make contributions.
We also maintain a defined benefit pension plan for eligible factory hourly employees at some operating units.
Active participants at some operating units continue to earn service cost. The measurement dates for the pension
plan assets and benefit obligations were April 27, 2013, April 28, 2012, and April 30, 2011, in the years presented.
The changes in plan assets and benefit obligations were recognized in accumulated other comprehensive loss as
follows (pre-tax) (for the fiscal years ended):
(Amounts in thousands)
Beginning of year net actuarial loss . . . . . . . . . . . . . . . . . . . . . . $
Net current year actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . .
End of year net actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . $
4/27/2013
4/28/2012
45,270 $
6,499
(3,024 )
48,745 $
27,118
19,787
(1,635 )
45,270
In fiscal 2014, we expect to amortize $3.4 million of unrecognized actuarial losses as a component of pension
expense.
51
The combined net periodic pension cost and retirement costs for retirement plans were as follows (for the fiscal
years ended):
(Amounts in thousands)
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net amortization and deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net periodic pension cost (hourly plan) . . . . . . . . . . . . . . . . .
401 (k)* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Profit sharing* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total retirement costs (excluding non-qualified defined
benefit retirement plan). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
*Not determined by an actuary
4/27/2013
4/28/2012
4/30/2011
1,231 $
5,325
(6,855 )
3,024
2,725
2,978
2,278
191
1,110 $
5,565
(6,820 )
1,635
1,490
2,476
—
107
1,187
5,531
(6,027 )
1,773
2,464
2,578
—
342
8,172 $
4,073 $
5,384
The funded status of the defined benefit pension plan for eligible factory hourly employees was as follows:
(Amounts in thousands)
Change in benefit obligation
Benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 118,347 $ 101,602
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,110
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,565
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,314
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5,244 )
Benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
123,495 118,347
1,231
5,325
8,178
(9,586 )
4/28/2012
4/27/2013
Change in plan assets
Fair value of plan assets at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employer contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
89,002
9,060
23,480
(526 )
(9,586 )
111,430
86,100
2,659
5,798
(311 )
(5,244 )
89,002
Funded status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (12,065) $ (29,345)
Amounts included in the consolidated balance sheet related to the defined benefit pension plan for eligible
factory hourly employees consist of:
(Amounts in thousands)
Other long-term liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (12,065) $ (29,345)
4/27/2013
4/28/2012
The actuarial assumptions for the defined benefit pension plan for eligible factory hourly employees were as
follows (for the fiscal years ended):
Discount rate used to determine benefit obligations. . . . . . . .
Discount rate used to determine net benefit cost. . . . . . . . . . .
Long-term rate of return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.0 %
4.6 %
6.3 %
4/27/2013
4/28/2012
4/30/2011
5.6 %
5.9 %
8.0 %
4.6 %
5.6 %
7.8 %
Consistent with prior years, the discount rate is calculated by matching a pool of high quality bond payments to
the plan’s expected future benefit payments as determined by our actuary. The long-term rate of return was
determined based on the average rate of earnings expected on the funds invested or to be invested to provide the
52
benefits of these plans. This included considering the trust’s asset allocation, investment strategy, and the
expected returns likely to be earned over the life of the plans. This is based on our goal of earning the highest
rate of return while maintaining acceptable levels of risk. We strive to have assets within the plan that are
diversified so that unexpected or adverse results from one asset class will not have a significant negative impact
on the entire portfolio.
Our investment objective is to minimize the volatility of the value of our pension assets relative to pension
liabilities and to ensure assets are sufficient to pay plan benefits. Our target asset allocations disclosed in the prior
year were 65% equities and 35% fixed income within a range of 5% of the target. In April 2013, as part of our
broader pension de-risking strategy, we revised our investment strategy to increase the matching characteristics of
our assets relative to our liabilities. At year end, our asset allocation reflected the contribution of $20.0 million
made during April 2013 and held in cash in preparation for the transition to this liability matching strategy.
The weighted average asset allocations at year end for the defined benefit pension plan for eligible factory
hourly employees were as follows:
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4/27/2013
57 %
29 %
14 %
100 %
4/28/2012
67 %
31 %
2 %
100 %
The investment strategy and policy for the pension plan reflects a balance of risk-reducing and return-seeking
considerations. The objective of minimizing the volatility of assets relative to liabilities is addressed primarily
through asset-liability matching and asset diversification. The fixed income target asset allocation matches the
bond-like and long-dated nature of the pension liabilities. Assets are broadly diversified within all asset classes
to achieve adequate risk-adjusted returns while reducing the sensitivity of the pension plan funding status to
market interest rates and equity return volatility, and maintaining liquidity sufficient to meet our defined benefit
pension plan obligations.
Investments are reviewed at least quarterly and rebalanced as needed. The overall expected long-term rate of
return is determined by using long-term historical returns for equity and debt securities in proportion to their
weight in the investment portfolio.
The following table presents the fair value of the assets in our defined benefit pension plan for eligible factory
hourly employees at April 27, 2013, and April 28, 2012. The various levels of the fair value hierarchy are
described in Note 19.
Fiscal 2013
(Amounts in thousands)
Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Equity funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Level 1 (a)
Level 2 (a)
Level 3
429 $
47,047
—
47,476 $
15,767 $
16,140
32,047
63,954 $
—
—
—
—
(a) There were no transfers between Level 1 and Level 2 during fiscal 2013.
Fiscal 2012
(Amounts in thousands)
Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Equity funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Level 1 (b)
Level 2 (b)
Level 3
359 $
44,725
—
45,084 $
1,377 $
15,071
27,470
43,918 $
—
—
—
—
(b) There were no transfers between Level 1 and Level 2 during fiscal 2012.
53
Level 1 retirement plan assets include U.S. currency held by a designated trustee, cash and equivalents of
commingled funds generally valued using observable market data, and equity funds of common and preferred
securities issued by U.S. and non-U.S. corporations. These equity funds are traded actively on exchanges and
price quotes for these shares are readily available.
Equity funds categorized as Level 2 include common trust funds which are composed of shares or units in open
ended funds with active issuances and redemptions. The value of these funds is determined based on the net
asset value of the funds, the underlying assets of which are publicly traded on exchanges. Price quotes for the
assets held by these funds are readily available. Debt funds categorized as Level 2 consist of corporate fixed
income securities issued by U.S. and non-U.S. corporations and fixed income securities issued directly by the
U.S. Treasury or by government-sponsored enterprises which are valued using a bid evaluation process with bid
data provided by independent pricing sources using observable market data.
Our funding policy is to contribute to our defined benefit pension plan amounts sufficient to meet the minimum
funding requirement as defined by employee benefit and tax laws, plus additional amounts which we determine
to be appropriate. During fiscal 2013 we contributed $23.5 million to our defined benefit pension plan,
including a $20 million discretionary contribution. We currently do not expect to contribute funds to our
defined benefit pension plan during fiscal 2014.
The expected benefit payments by our defined benefit pension plan for eligible factory hourly employees for
each of the next five fiscal years and for periods thereafter are presented in the following table:
(Amounts in thousands)
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 to 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Benefit
Payments
5,331
5,387
5,493
5,653
5,811
32,014
59,689
Note 12: Product Warranties
We accrue an estimated liability for product warranties at the time the revenue is recognized. We estimate
future warranty claims based on claim experience and any additional anticipated future costs on previously sold
products. Our liability estimates incorporate the cost of repairs including materials consumed, labor and
overhead amounts necessary to perform the repair and any costs associated with delivery of the repaired product
to the customer. Over 90% of our warranty liability relates to our Upholstery segment as we generally warrant
our products against defects for one year on fabric and leather, from one to ten years on cushions and padding,
and up to a lifetime on certain mechanisms and frames. Labor costs relating to our parts are warrantied for one
year. Considerable judgment is used in making our estimates. Differences between actual and estimated costs
are recorded when the differences are known.
A reconciliation of the changes in our product warranty liability is as follows:
(Amounts in thousands)
Balance as of the beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accruals during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of the end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4/27/2013
4/28/2012
14,327 $
15,370
(14,172 )
15,525 $
13,854
15,074
(14,601 )
14,327
54
As of April 27, 2013, and April 28, 2012, $9.5 million and $8.2 million, respectively, of our product warranty
liability was included in accrued expenses and other current liabilities in our consolidated balance sheet, with
the remainder included in other long-term liabilities. The accruals recorded during the periods presented
primarily reflect charges related to warranties issued during the respective periods.
Note 13: Contingencies and Commitments
We have been named as a defendant in various lawsuits arising in the ordinary course of business and as a
potentially responsible party at certain environmental clean-up sites. Based on a review of all currently known
facts and our experience with previous legal and environmental matters, we have recorded expense in respect of
probable and reasonably estimable losses arising from legal and environmental matters and currently do not
anticipate any material additional loss for legal or environmental matters.
Note 14: Stock-Based Compensation
In fiscal 2011, our shareholders approved the La-Z-Boy Incorporated 2010 Omnibus Incentive Plan. This plan
provides for the grant of stock options, stock appreciation rights, restricted stock, stock units (including deferred
stock units), unrestricted stock, dividend equivalent rights, and short-term cash incentive awards. Under this
plan, the aggregate number of common shares that may be issued through awards of any form is 4.6 million
shares. No grants may be issued under our previous plans.
The table below summarizes the grants made during fiscal 2013:
(Shares/units in millions)
Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock appreciation rights (“SARs”) . . . . . . . .
Restricted stock units – employees . . . . . . . . .
Restricted stock units – directors . . . . . . . . . . Less than 0.1 Equity
Performance-based units . . . . . . . . . . . . . . . . . .
Performance-based shares. . . . . . . . . . . . . . . . .
Equity
Liability
Liability
Liability
Equity
0.1
0.1
Shares/units
granted
0.2
0.1
0.2
Liability/ Equity
award
Settlement
Common shares
Cash
Cash
Common shares
Cash
Common shares
The table below summarizes the total stock-based compensation expense recognized in our consolidated
statement of income:
(Amounts in millions)
Equity-based awards expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Liability-based awards expense (income) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . $
4/27/2013
4/28/2012
4/30/2011
11.5 $
2.1
13.6 $
5.7 $
0.4
6.1 $
3.7
(0.5 )
3.2
Stock Options. The La-Z-Boy Incorporated 2010 Omnibus Incentive Plan authorizes grants to certain employees
and directors to purchase common shares at a specified price, which may not be less than 100% of the current
market price of the stock at the date of grant. Compensation expense for stock options is equal to the fair value
on the date the award was approved and is recognized over the vesting period. The vesting period for our stock
options ranges from one to four years. Options granted to retirement eligible employees are expensed
immediately because they vest upon retirement. Granted options outstanding under the former long-term equity
award plan and employee incentive stock option plan remain in effect and have a term of five or ten years.
Stock option expense recognized in selling, general and administrative expense for fiscal years 2013, 2012, and
2011 was $2.3 million, $1.9 million, and $1.7 million, respectively. We received $2.9 million and $4.9 million
in cash during fiscal 2013 and fiscal 2012, respectively, for exercises of stock options.
55
Plan activity for stock options under the above plans is as follows:
Number of
Shares (In
Thousands)
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
(Years)
Aggregate
Intrinsic
Value
Outstanding at April 28, 2012 . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at April 27, 2013 . . . . . . . . . . . . . . . . . . . . . . . . .
Exercisable at April 27, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . .
1,755 $
230
(554 )
(157 )
(18 )
1,256 $
490 $
9.33
11.97
5.72
22.56
7.05
9.78
12.19
3.7
$
5,978
4.7 $
2.8 $
10,537
3,291
The aggregate intrinsic value of options exercised was $4.5 million and $0.4 million in fiscal 2012 and 2011,
respectively. As of April 27, 2013, there was $1.0 million of total unrecognized compensation cost related to
non-vested stock option awards, which is expected to be recognized over a weighted-average remaining vesting
term of all unvested awards of 2.4 years. During the year ended April 27, 2013, 0.5 million shares vested.
The fair value of each option grant was estimated at the date of the grant using a Black-Scholes option-pricing
model, which requires management to make certain assumptions. Expected volatility was estimated based on
the historical volatility of our common shares. The average expected life was based on the contractual term of
the stock option and expected employee exercise and post-vesting employment termination trends. The risk-free
rate was based on U.S. Treasury issues with a term equal to the expected life assumed at the date of grant. The
turnover rate was estimated at the date of grant based on historical experience. The fair value of stock options
granted during fiscal 2013, fiscal 2012, and fiscal 2011 were calculated using the following assumptions:
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected life in years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock price volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Turnover rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
0.75%
0%
5.0
83.8%
0%
7.87 $
1.5 %
0 %
5.5
88.8 %
4.0 %
6.68 $
4/30/2011
0.75 %
0 %
3.0
86.6 %
3.0 %
4.27
4/27/2013
4/28/2012
Stock Appreciation Rights. Under the La-Z-Boy Incorporated 2010 Omnibus Incentive Plan, the Compensation
Committee of the board of directors is authorized to award stock appreciation rights to certain employees. SARs
will be paid in cash upon vesting and as such were accounted for as liability-based awards that will be
remeasured to reflect the fair value at the end of each reporting period. These awards vest at 25% per year,
beginning one year from the grant date for a term of four years. The fair value for the SARs is estimated at the
end of each period using the Black-Scholes option-pricing model, which requires management to make certain
assumptions. The average expected life was based on the contractual term of the SARs and expected employee
exercise and post-vesting employment termination trends (which is consistent with the expected life of our
option awards). The risk-free rate was based on U.S. Treasury issues with a term equal to the expected life
assumed at the end of the reporting period. Compensation expense of $0.6 million related to SARs was
recognized in selling, general and administrative expense for the year ended April 27, 2013. The unrecognized
compensation cost at April 27, 2013, related to SARs was $0.7 million and is expected to be recognized over a
weighted-average remaining contractual term of all unvested awards of 2.9 years.
56
The fair value of the SARs granted during the first quarter of fiscal 2013 was remeasured at April 27, 2013,
using the following assumptions:
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected life in years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock price volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4/27/2013
0.82 %
0.9 %
4.2
72.2 %
10.69
Restricted Shares. Under the La-Z-Boy Incorporated 2010 Omnibus Incentive Plan, the Compensation
Committee of the board of directors is authorized to award restricted common shares to certain employees. The
shares are offered at no cost to the employees, and the plan requires that all shares be held in an escrow account
until the vesting period ends. In the event of an employee’s termination during the escrow period, the shares are
returned at no cost to the company. Compensation expense for restricted stock is equal to the market value of
our common shares on the date the award is approved and is recognized over the service period. Expense
relating to the restricted shares recorded in selling, general and administrative expense was $1.0 million, $1.6
million, and $1.4 million during fiscal 2013, fiscal 2012, and fiscal 2011, respectively. The unrecognized
compensation cost at April 27, 2013, related to restricted shares was $1.0 million and is expected to be
recognized over a weighted-average remaining contractual term of all unvested awards of 1.9 years.
The following table summarizes information about non-vested share awards as of and for the year ended April
27, 2013:
Non-vested shares at April 28, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-vested shares at April 27, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Awards granted during fiscal 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Awards granted during fiscal 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of
Shares
(In Thousands)
Weighted
Average
Grant Date
Fair Value
6.58
—
6.34
7.30
6.67
6.58
6.41
973 $
—
(413 )
(30 )
530 $
$
$
Restricted Stock Units. Under the La-Z-Boy Incorporated 2010 Omnibus Incentive Plan, the Compensation
Committee of the board of directors is authorized to award restricted stock units to certain employees and our
non-employee directors.
The restricted stock units granted to employees are accounted for as liability-based awards because upon
vesting these awards will be paid in cash. Compensation expense is initially measured and recognized based on
the market value (intrinsic value) of our common stock on the grant date and amortized over the vesting period.
The liability is remeasured and adjusted based on the market value (intrinsic value) of our common shares on
the last day of the reporting period until paid with a corresponding adjustment to reflect the cumulative amount
of compensation expense. The fair value of the restricted stock units at April 27, 2013, was $17.69. Each
restricted stock unit is the equivalent of one common share. Restricted stock units vest at 25% per year,
beginning one year from the grant date for a term of four years. Compensation expense of $0.5 million related
to restricted stock units granted to employees was recognized in selling, general and administrative expense for
the year ended April 27, 2013. The unrecognized compensation cost at April 27, 2013, related to employee
restricted stock units was $2.2 million and is expected to be recognized over a weighted-average remaining
contractual term of all unvested awards of 3.2 years.
57
The following table summarizes information about non-vested stock units as of and for the year ended April 27,
2013:
Non-vested units at April 28, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-vested units at April 27, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of
Units
(In Thousands)
Weighted
Average
Grant Date
Fair Value
6.10
12.06
5.17
11.97
11.91
7 $
160
(2 )
(9 )
156 $
Restricted stock units granted to directors are offered at no cost to the directors and vest upon the director’s
leaving the board. These awards will be paid in shares of our common stock and we therefore account for them
as equity based awards. Compensation expense for these awards is measured and recognized on the grant date
based on the market price of our common shares at the date the grant was awarded. During fiscal 2013, fiscal
2012, and fiscal 2011 we granted less than 0.1 million restricted stock units each year to our non-employee
directors. Expense relating to the non-employee directors restricted stock units recorded in selling, general and
administrative expense was $0.6 million in fiscal 2013, fiscal 2012, and fiscal 2011.
Performance Awards. Under the La-Z-Boy Incorporated 2010 Omnibus Incentive Plan, the Compensation
Committee of the board of directors is authorized to award common shares and stock units to certain employees
based on the attainment of certain financial goals over a given performance period. The awards are offered at no
cost to the employees. In the event of an employee's termination during the vesting period, the potential right to
earn shares/units under this program is generally forfeited.
During fiscal 2013, we granted 0.1 million performance-based units and 0.1 million performance-based shares,
both of which have performance (80% of grants) and market-based (20% of grants) vesting provisions. The
performance award opportunity ranges from 50% of the employee’s target award if minimum performance
requirements are met to a maximum of 200% of the target award based on the attainment of certain financial
goals over a specific performance period, which is generally three fiscal years. These performance awards are
offered at no cost to the employees. During fiscal 2012, we granted 0.7 million performance-based shares that
have both performance and market-based vesting provisions, similar to the fiscal 2013 grant. During fiscal
2011, we granted 0.4 million performance-based shares which only have a performance condition.
Based on our financial results for fiscal 2013, certain performance conditions were met for some of our
outstanding performance-based awards. The number of awards earned based on performance conditions were as
follows:
Performance-based award earned
Fiscal 2011 performance-based shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2013 performance-based shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2013 performance-based units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of
Shares/Units
(In Millions)
0.2
0.1
0.1
The fiscal 2011 performance based shares will be settled in shares during the first quarter of fiscal 2014. The
fiscal 2013 shares will be settled in shares and the fiscal 2013 units will be settled in cash if service conditions
are also met, requiring employees to remain employed with the company through the end of fiscal 2015.
The performance-based units are accounted for as liability-based awards because upon vesting they will be paid
in cash. For performance-based units that vest based on performance conditions, the fair value of the award was
$17.33, which was the market value of our common shares on the last day of the reporting period less expected
dividends to be paid prior to vesting, and compensation cost is expensed based on the probability that the
58
performance goals will be obtained. For performance-based units that vest based on market conditions, the fair
value of the award was estimated using a Monte Carlo valuation model on the last day of the reporting period,
and compensation cost is expensed over the vesting period. The liability for these units is remeasured and
adjusted based on the common stock price and the Monte Carlo valuation at the end of each reporting period
until paid. Based on the Monte Carlo valuation, the fair value of the performance-based units that vest based on
market conditions was $25.21 at April 27, 2013. During fiscal 2013, we recognized $0.7 million of expense
related to performance-based units. The unrecognized compensation cost at April 27, 2013, related to
performance-based units was $1.7 million and is expected to be recognized over a weighted-average remaining
contractual term of all unvested awards of 1.5 years.
The performance-based shares are accounted for as equity-based awards because upon vesting they will be
settled in common shares. The grant date fair value of performance-based shares is expensed over the service
period. For performance-based shares that vest based on performance conditions, the fair value of the award
was $11.97, $9.35, and $7.75 for fiscal 2013, fiscal 2012, and fiscal 2011, respectively, which was the market
value of our common shares on the date of grant, and compensation cost is expensed based on the probability
that the performance goals will be obtained. For performance-based shares that vest based on market conditions,
the fair value of the award was estimated using a Monte Carlo valuation model on the date of grant, and
compensation cost is expensed over the vesting period, regardless of the ultimate vesting of the award, similar
to the expensing of a stock option award. The fair value for the performance-based shares that vest based on
market conditions, as determined by the Monte Carlo valuation, at the grant date was $15.41 and $15.12 for the
fiscal 2013 grant and the fiscal 2012 grant, respectively. The unrecognized compensation cost at April 27, 2013,
related to performance-based shares was $4.9 million and is expected to be recognized over a weighted-average
remaining contractual term of all unvested awards of 1.1 years.
Equity-based compensation expenses related to performance-based shares recognized in our consolidated
statement of income were as follows (for the fiscal years ended):
(Amounts in millions)
Fiscal 2011 grant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fiscal 2012 grant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fiscal 2013 grant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4/27/2013
4/28/2012
4/30/2011
1.7 $
5.5 $
0.4 $
0.2 $
1.4 $
— $
—
—
—
Previously Granted Deferred Stock Units. Awards under our deferred stock unit plan for non-employee
directors are accounted for as liability-based awards because upon exercise these awards will be paid in cash.
Compensation expense is initially measured and recognized based on the market price of our common stock on
the grant date. The liability is re-measured and adjusted at the end of each reporting period until paid. For
purposes of dividends and for measuring the liability, each deferred stock unit is the equivalent of one common
share. As of April 27, 2013, we had 0.1 million deferred stock units outstanding. Expense/ (benefit) relating to
the deferred stock units recorded in selling, general and administrative expense was $0.3 million, $0.4 million,
and $(0.5) million during fiscal 2013, fiscal 2012, and fiscal 2011, respectively. The liability related to these
awards was $2.2 million and $1.9 million at April 27, 2013, and April 28, 2012, respectively, and is included as
a component of other long-term liabilities on our consolidated balance sheet.
59
Note 15: Accumulated Other Comprehensive Loss
The activity in accumulated other comprehensive loss for the fiscal year ended April 27, 2013, is as follows:
(Amounts in thousands)
Balance at April 28,2012 . . . . . . . . . . . . . . . . . . $
Changes before reclassifications . . . . . . . . .
Amounts reclassified from accumulated
other comprehensive loss . . . . . . . . . . . . . .
Tax effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized
gain on
marketable
securities
Change in
fair value of
cash flow
hedge
Net pension
amortization
and net
actuarial loss
Translation
adjustment
3,017 $
651
4,029 $
750
— $
373
(38,327 ) $
(7,645 )
Accumulated
other
comprehensive
loss
(31,281)
(5,871 )
(3,170 )
(24 )
—
—
—
(142 )
3,140
1,852
(30 )
1,686
Other comprehensive income (loss)
attributable to La-Z-Boy Incorporated
Balance at April 27, 2013 . . . . . . . . . . . . . . . . . $
(2,543 )
474 $
750
4,779 $
231
231 $
(2,653 )
(40,980 ) $
(4,215 )
(35,496)
The unrealized gain on marketable securities was reclassified from accumulated other comprehensive loss to
other income (expense) in our consolidated statement of income, and net pension amortization was reclassified
to selling, general and administrative expense.
Note 16: Segment Information
Our reportable operating segments are the Upholstery segment, the Casegoods segment and the Retail segment.
Upholstery Segment. The Upholstery segment consists of three operating units, La-Z-Boy, England and
Bauhaus. This segment manufactures or imports upholstered furniture. Upholstered furniture includes recliners
and motion furniture, sofas, loveseats, chairs, sectionals, modulars, ottomans and sleeper sofas. The Upholstery
segment sells directly to La-Z-Boy Furniture Galleries ® stores, operators of Comfort Studios locations, major
dealers and other independent retailers.
Casegoods Segment. The Casegoods segment consists of two operating units, one consisting of American Drew,
Lea and Hammary, and the second being Kincaid. This segment sells imported or manufactured wood furniture
to furniture retailers. Casegoods product includes bedroom, dining room, entertainment centers, occasional
pieces and some coordinated upholstered furniture. The Casegoods segment sells to major dealers and other
independent retailers.
Retail Segment. The Retail segment consists of 94 company-owned La-Z-Boy Furniture Galleries® stores in 11
markets. During the second quarter of fiscal 2013, we acquired nine La-Z-Boy Furniture Galleries® stores in
the southern Ohio market that were previously independently owned and operated. The Retail segment sells
upholstered furniture, in addition to some casegoods and other accessories, to the end consumer through the
retail network.
Restructuring. During the second quarter of fiscal 2013, we recorded a restructuring charge of $2.7 million, mainly
related to fixed asset and inventory write-downs related to the closure of our lumber processing operation in our
Casegoods segment. As a result of this restructuring, we will no longer process component lumber parts for our
domestically produced casegoods furniture and will instead outsource all component lumber parts.
We have no customer that individually represents more than 3% of our consolidated or Upholstery segment’s
sales or more than 1% of our Casegoods segment’s sales in fiscal 2013.
The accounting policies of the operating segments are the same as those described in Note 1. We account for
intersegment revenue transactions between our segments consistent with independent third party transactions,
that is, at current market prices. As a result, the manufacturing profit related to sales to our Retail segment is
included within the appropriate Upholstery or Casegoods segment. Operating income realized on intersegment
60
revenue transactions is therefore generally consistent with the operating income realized on our revenue from
independent third party transactions. Segment operating income is based on profit or loss from operations
before interest expense, other income (expense) and income taxes. Identifiable assets are cash and equivalents,
notes and accounts receivable, net inventories, net property, plant and equipment, goodwill and other intangible
assets. Our unallocated assets include deferred income taxes, corporate assets (including a portion of cash and
equivalents), and various other assets. Sales are attributed to countries on the basis of the customer’s location.
(Amounts in thousands)
Sales
4/27/2013
4/28/2012
4/30/2011
Upholstery segment:
Sales to external customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 939,736 $ 871,511 $ 831,603
Intersegment sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
85,264
Upholstery segment sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,067,047 975,103 916,867
Casegoods segment:
127,311 103,592
Sales to external customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intersegment sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Casegoods segment sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail segment sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VIEs, net of intercompany sales eliminations. . . . . . . . . . . . . . . . . . . . . . .
Corporate and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eliminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
125,753 133,479 147,539
4,995
133,994 139,639 152,534
264,723 215,490 176,987
29,105
1,909
(90,259 )
Consolidated sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,332,525 $1,231,676 $1,187,143
8,840
2,356
(135,552 ) (109,752 )
—
2,313
6,160
8,241
Operating Income (Loss)
Upholstery segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Casegoods segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VIEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-down of long-lived assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
96,762 $
2,640
4,099
—
(2,715 )
—
(33,159 )
67,627 $
81,753 $
5,540
(7,819 )
959
(281 )
—
(30,521 )
49,631 $
72,743
6,698
(15,078 )
(4,949 )
(487 )
(4,471 )
(28,547 )
25,909
Depreciation and Amortization
Upholstery segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Casegoods segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VIEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . $
14,452 $
1,338
2,676
—
4,674
23,140 $
12,696 $
1,575
2,832
149
6,234
23,486 $
13,260
1,655
3,174
942
5,271
24,302
61
(Amounts in thousands)
Capital Expenditures
Upholstery segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Casegoods segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VIEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4/27/2013
4/28/2012
4/30/2011
10,385 $
1,058
4,251
—
10,218
25,912 $
5,510
7,406 $
689
897
141
1,848
395
543
4,969
3,805
15,663 $ 10,540
Assets
Upholstery segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 296,108 $ 303,537 $ 305,363
Casegoods segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
76,724
Retail segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
46,773
VIEs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,022
Unallocated assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280,620 258,496 159,573
Consolidated assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 720,371 $ 685,739 $ 593,455
73,888
49,818
—
70,147
73,496
—
Long-Lived Assets by Geographic Location
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 133,208 $ 114,979 $ 119,445
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,418
Consolidated long-lived assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 141,376 $ 123,324 $ 129,863
8,345
8,168
Sales by Country
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
87 %
8 %
5 %
100 %
87 %
8 %
5 %
100 %
87 %
9 %
4 %
100 %
Note 17: Income Taxes
Income before income taxes consists of the following (for the fiscal years ended):
(Amounts in thousands)
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4/27/2013
4/28/2012
4/30/2011
63,218 $
7,492
70,710 $
60,538 $
6,319
66,857 $
21,331
4,635
25,966
Income tax expense applicable to continuing operations consists of the following components (for the fiscal
years ended):
(Amounts in thousands)
Federal – current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
– deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State – current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign – current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4/27/2013
4/28/2012
4/30/2011
14,392 $
16,873 $
(38,396 )
1,524
3,663
2,718
(1,843 )
493
2,040
739
1,181
(1,907 )
23,528 $ (22,051) $
5,935
—
930
700
1,848
(820 )
8,593
62
Our effective tax rate differs from the U.S. federal income tax rate for the following reasons:
4/27/2013
4/28/2012
4/30/2011
35.0 %
35.0 %
(% of pre-tax income)
Statutory tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (reduction) in income taxes resulting from:
State income taxes, net of federal benefit . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. manufacturing benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in value of life insurance contracts. . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit associated with VIE acquisition. . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Miscellaneous items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35.0 %
3.0
(2.0 )
(0.3 )
(0.4 )
—
(1.6 )
(0.4 )
33.3 %
5.0
(2.3 )
(69.1 )
—
—
—
(1.6 )
(33.0 )%
4.1
(1.9 )
13.5
(0.6 )
(17.6 )
—
0.6
33.1 %
For our Asian operating units, we continue to permanently reinvest the earnings and consequently do not record
a deferred tax liability relative to the undistributed earnings. We have reinvested approximately $7.5 million of
the earnings. The potential deferred tax attributable to these earnings would be approximately $2.0 million.
The primary components of our deferred tax assets and (liabilities) were as follows:
(Amounts in thousands)
Assets
Deferred and other compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State income tax – net operating losses, credits and other . . . . . . . . . . . . .
Pension. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Workers’ compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign net operating loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital loss carryover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4/27/2013
4/28/2012
19,510 $
9,567
6,542
4,632
5,937
4,697
3,804
759
—
5,128
(6,619 )
53,957
15,043
9,547
5,911
11,220
5,436
4,590
3,485
914
3,202
4,213
(8,258 )
55,303
(2,745 )
51,212 $
(2,573 )
52,730
The deferred tax assets associated with loss carry forwards and the related expiration dates are as follows:
(Amounts in thousands)
Various U.S. state net operating losses (excluding federal tax effect). . . $
Foreign net operating losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign capital losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount
Expiration
10,064 Fiscal 2014 – 2033
759 Fiscal 2018 – 2029
Indefinite
23
We evaluate our deferred taxes to determine if a valuation allowance is required. Accounting standards require
that we assess whether a valuation allowance should be established based on the consideration of all available
evidence using a “more likely than not” standard with significant weight being given to evidence that can be
objectively verified.
During fiscal 2012 we concluded that certain valuation allowances totaling $46.2 million associated with certain
U.S. federal, state and Canadian deferred tax assets should be reversed because we believed that it had become
more likely than not that the value of those deferred tax assets would be realized. The reduction in the valuation
allowance was primarily the result of the following factors at the point we reduced the allowance: (i) our
63
cumulative three-year pre-tax income position, (ii) our most recent operating results, which had exceeded both
our operating plan and prior year results, and (iii) our then-current forecasts, all of which caused us to temper
our concerns at that time regarding the economic environment.
The evaluation of the amount of net deferred tax assets expected to be realized necessarily involves forecasting
the amount of taxable income that will be generated in future years. We have forecasted future results using
estimates management believes to be reasonable, which are based on objective evidence such as expected trends
resulting from certain leading economic indicators. Based upon our net deferred tax asset position at April 27,
2013, we estimate that about $136 million of future taxable income would need to be generated to fully recover
our net deferred tax assets. The realization of deferred income tax assets is dependent on future events. Actual
results inevitably will vary from management’s forecasts. Such variances could result in adjustments to the
valuation allowance on deferred tax assets in future periods, and such adjustments could be material to the
financial statements.
During fiscal 2013, we recorded a $1.6 million decrease in our valuation allowance for deferred tax assets that
are now considered more likely than not to be realized. A summary of the valuation allowance by jurisdiction is
as follows:
Jurisdiction
(Amounts in thousands)
U.S. federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
U.S. state . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4/28/2012
Valuation
Allowance
2,114 $
6,121
23
8,258 $
Change
4/27/2013
Valuation
Allowance
—
6,464
155
6,619
(2,114) $
343
132
(1,639) $
The remaining valuation allowance of $6.6 million primarily related to certain U.S. state and foreign deferred
tax assets. The U.S. state deferred taxes are primarily related to state net operating losses.
As of April 27, 2013, we had a gross unrecognized tax benefit of $3.2 million related to uncertain tax positions
in various jurisdictions. A reconciliation of the beginning and ending balance of these unrecognized tax benefits
is as follows:
(Amounts in thousands)
Balance at the beginning of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Additions:
Positions taken during the current year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Positions taken during the prior year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions:
Positions taken during the current year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Positions taken during the prior year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decreases related to settlements with taxing authorities . . . . . . . . . . . . .
Reductions resulting from the lapse of the statute of limitations. . . . . .
Balance at the end of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4/27/2013
4/28/2012
4/30/2011
3,909 $
4,492 $
4,805
338
—
147
—
—
(28 )
—
(971 )
3,248 $
—
(202 )
(166 )
(362 )
3,909 $
100
229
—
(359 )
(202 )
(81 )
4,492
We recognize interest and penalties associated with uncertain tax positions in income tax expense. Accrued interest
and penalties decreased by $0.2 million during fiscal 2013. We had approximately $0.4 million accrued for interest
and penalties as of April 27, 2013, and $0.6 million accrued for interest and penalties as of April 28, 2012.
If recognized, $0.8 million of the total $3.2 million of unrecognized tax benefits would decrease our effective
tax rate. It is reasonably possible that $0.2 million of this amount will be settled within the next 12 months. The
remaining balance will be settled or released as tax audits are effectively settled, statutes of limitation expire or
other new information becomes available.
64
Our U.S. federal income tax returns for fiscal years 2010 and subsequent are still subject to audit. In addition,
we conduct business in various states. The major states in which we conduct business are subject to audit for
fiscal years 2009 and subsequent. Our businesses in Canada and Thailand are subject to audit for fiscal years
2003 and subsequent, and in Mexico, calendar years 2007 and subsequent.
Cash paid for taxes (net of refunds received) during the fiscal years ended April 27, 2013, April 28, 2012, and
April 30, 2011, were $20.5 million, $15.2 million and $9.1 million, respectively.
Note 18: Earnings per Share
Certain share-based payment awards that entitle their holders to receive non-forfeitable dividends prior to
vesting are considered participating securities. We grant restricted stock awards that contain non-forfeitable
rights to dividends on unvested shares; as participating securities, the unvested shares are required to be
included in the calculation of our basic earnings per common share, using the two-class method.
A reconciliation of the numerators and denominators used in the computations of basic and diluted earnings per
share were as follows:
(Amounts in thousands)
Numerator (basic and diluted):
Net income attributable to La-Z-Boy Incorporated. . . . . . . . . . . . . . . . . . $
Income allocated to participating securities . . . . . . . . . . . . . . . . . . . . . . . .
Net income available to common shareholders. . . . . . . . . . . . . . . . . . . . $
(Amounts in thousands)
Denominator:
Basic weighted average common shares outstanding. . . . . . . . . . . . . . . .
Add:
Contingent common shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock option dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted weighted average common shares outstanding. . . . . . . . . . .
4/27/2013
Year Ended
4/28/2012
4/30/2011
46,389 $
(639 )
45,750 $
87,966 $
(1,650 )
86,316 $
24,047
(472 )
23,575
4/27/2013
Year Ended
4/28/2012
4/30/2011
52,351
51,944
51,849
812
522
53,685
—
534
52,478
—
430
52,279
Contingent common shares reflect the dilutive effect of common shares that would be issued under the terms of
performance-based share grants made to employees, assuming the reporting period was the performance period.
We had outstanding options to purchase 0.2 million, 0.4 million and 1.2 million shares for the years ended April
27, 2013, April 28, 2012, and April 30, 2011, respectively, with a weighted average exercise price of $20.74,
$19.97, and $15.21, respectively. We excluded the effect of these options from the diluted share calculation
since, for each period presented, the weighted average exercise price of the options was higher than the average
market price, and including the options’ effect would have been anti-dilutive.
Note 19: Fair Value Measurements
Accounting standards require the categorization of financial assets and liabilities, based on the inputs to the
valuation technique, into a three-level fair value hierarchy. The various levels of the fair value hierarchy are
described as follows:
• 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.
65
Accounting standards require the use of observable market data, when available, in making fair value
measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within
which the fair value measurement is categorized is based on the lowest level input that is significant to the fair
value measurement. Transfers between levels are recognized at the end of the reporting period in which they occur.
In addition to assets and liabilities that are recorded at fair value on a recurring basis, we are required to record
assets and liabilities at fair value on a non-recurring basis. Non-financial assets such as trade names, goodwill,
and other long-lived assets are measured at fair value when there is an indicator of impairment and recorded at
fair value only when an impairment loss is recognized. During fiscal 2013 and fiscal 2012 we recorded trade
names at fair value based upon the relief from royalty method.
The following table presents the fair value hierarchy for those assets measured at fair value on a recurring basis
as of April 27, 2013, and April 28, 2012:
Fair Value Measurements
Level 2 (a)
Level 3
Level 1 (a)
Available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,217 $
—
1,217 $
38,747 $
1,126
39,873 $
—
—
—
(a) There were no transfers between Level 1 and Level 2 during fiscal 2013.
Fiscal 2013
(Amounts in thousands)
Assets
Fiscal 2012
(Amounts in thousands)
Assets
Fair Value Measurements
Level 2 (b)
Level 3
Level 1 (b)
Available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,886 $
—
2,886 $
7,364 $
950
8,314 $
—
—
—
(b) There were no transfers between Level 1 and Level 2 during fiscal 2012.
At April 27, 2013, we held available-for-sale marketable securities intended to enhance returns on our cash and
to fund future obligations of our non-qualified defined benefit retirement plan, as well as trading securities to
fund future obligations of our executive deferred compensation plan. At April 28, 2012, we held available-for-
sale marketable securities designated to fund future obligations of our executive deferred compensation plan.
The fair value measurements for our securities are based upon quoted prices in active markets, as well as
through broker quotes and independent valuation providers, multiplied by the number of shares owned
exclusive of any transaction costs.
Note 20: Income from Continued Dumping and Subsidy Offset Act
The Continued Dumping and Subsidy Offset Act of 2000 (“CDSOA”) provides for distribution of duties
collected by U.S. Customs and Border Protection from antidumping cases to domestic producers that supported
the antidumping petition. We received $18.0 million during fiscal 2012 and $1.1 million during fiscal 2011 in
CDSOA distributions related to the antidumping order on wooden bedroom furniture from China. Certain
domestic producers who did not support the antidumping petition (“Non-Supporting Producers”) filed actions in
the U.S. Court of International Trade challenging the CDSOA’s “support requirement” and seeking a share of
the distributions. As a result, Customs withheld a portion of those distributions pending resolution of the Non-
Supporting Producers’ actions. Between October 2011 and February 2012, the Court of International Trade
entered judgments against the Non-Supporting Producers and dismissed their actions. On January 1, 2012,
Customs announced that it would distribute the withheld distributions. The Non-Supporting Producers then filed
motions in the Court of International Trade and, later, in the U.S. Court of Appeals for the Federal Circuit to
enjoin such distributions pending their appeal of the Court of International Trade’s judgments. On March 5,
66
2012, the Federal Circuit denied the Non-Supporting Producers’ motions for injunction “without prejudicing the
ultimate disposition of these cases.” If the Federal Circuit were to reverse the judgments of the Court of
International Trade and determine that the Non-Supporting Producers are entitled to CDSOA distributions, it is
possible that Customs may seek to have us return all or a portion of our company’s share of the distributions.
Based on what we know today, we do not expect this will occur. The $18.0 million we received in fiscal 2012
included $16.3 million of previously withheld distributions received in the fourth quarter of fiscal 2012. In
November 2012, Customs determined to withhold CDSOA distributions pending resolution of the Federal
Circuit appeals. As a result, we did not receive any CDSOA distributions in fiscal 2013.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures. As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of our management, including our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls
and procedures, as such term is defined in Rule 13a-15(e) of the Exchange Act. Based upon that evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that such disclosure controls and procedures are
effective to ensure that information required to be disclosed in our periodic reports filed under the Exchange
Act is recorded, processed, summarized and reported within the time periods specified by the Securities and
Exchange Commission's rules and forms and is accumulated and communicated to our management, including
our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding
required disclosure.
Management’s Annual Report on Internal Control over Financial Reporting. Our management's report on
internal control over financial reporting is included in Item 8 of this report.
Attestation Report of the Registered Public Accounting Firm. Our registered public accounting firm’s
attestation report on our internal control over financial reporting is included in Item 8 of this report.
Changes in Internal Control over Financial Reporting. We are implementing an enterprise resource planning
(“ERP”) system in our largest operating unit. The implementation is expected to occur in phases over the next
several years. The implementation of an ERP system will affect the processes that constitute our internal control
over financial reporting and will require testing for effectiveness as the implementation progresses. There were
no changes in our internal controls over financial reporting during our fourth quarter of fiscal 2013 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
None.
67
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
We have adopted a Code of Business Conduct, which applies to all of our officers, directors, and employees. A
current copy of the code is posted at our website www.la-z-boy.com.
We provide some information about our executive officers in Part I of this report, under the heading “Executive
Officers of Registrant.” All other information required to be reported under this item will be included in our
proxy statement for our 2013 annual meeting, and all of that information is incorporated in this item by
reference.
ITEM 11. EXECUTIVE COMPENSATION.
All information required to be reported under this item will be included in our proxy statement for our 2013
annual meeting, and all of that information is incorporated in this item by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS.
The information required to be reported under Item 201(d) of Regulation S-K is contained in Item 5 of this
report. All other information required to be reported under this item will be included in our proxy statement for
our 2013 annual meeting, and all of that information is incorporated in this item by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
All information required to be reported under this item will be included in our proxy statement for our 2013
annual meeting, and all of that information is incorporated in this item by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
All information required to be reported under this item will be included in our proxy statement for our 2013
annual meeting, and all of that information is incorporated in this item by reference.
68
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a) The following documents are filed as part of this report:
(1) Financial Statements:
Management’s Report to Our Shareholders
Report of Independent Registered Public Accounting Firm
Consolidated Statement of Income for each of the three fiscal years ended April 27, 2013, April 28,
2012, and April 30, 2011
Consolidated Statement of Comprehensive Income for each of the three fiscal years ended April 27,
2013, April 28, 2012, and April 30, 2011
Consolidated Balance Sheet at April 27, 2013, and April 28, 2012
Consolidated Statement of Cash Flows for the fiscal years ended April 27, 2013, April 28, 2012, and
April 30, 2011
Consolidated Statement of Changes in Equity for the fiscal years ended April 27, 2013, April 28, 2012,
and April 30, 2011
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules:
Report of Independent Registered Public Accounting Firm on Financial Statement Schedule
Schedule II — Valuation and Qualifying Accounts for each of the three fiscal years in the period ended
April 27, 2013
The Report of Independent Registered Public Accounting Firm and Schedule II immediately following
this item.
All other schedules are omitted because they are not applicable or not required because the required
information is included in the financial statements or notes thereto.
Note: For all exhibits incorporated by reference, the SEC file number is 1-9656. Exhibits not incorporated by
reference are being filed or furnished with this report.
(3) Exhibits:
The following exhibits are filed or furnished as part of this report:
Exhibit
Number
(2)
(3.1)
(3.2)
(3.3)
(3.4)
(3.5)
Description
Not applicable
La-Z-Boy Incorporated Restated Articles of Incorporation (Incorporated by reference to an exhibit
to Form 10-Q for the quarter ended October 26, 1996)
La-Z-Boy Incorporated Amendment to Restated Articles of Incorporation effective August 21,
1998 (Incorporated by reference to an exhibit to Form 10-Q for the quarter ended October 27,
2012)
La-Z-Boy Incorporated Amendment to Restated Articles of Incorporation effective August 22,
2008 (Incorporated by reference to an exhibit to Form 10-Q for the quarter ended October 27,
2012)
La-Z-Boy Incorporated Amendment to Restated Articles of Incorporation effective August 24,
2012 (Incorporated by reference to an exhibit to Form 10-Q for the quarter ended October 27,
2012)
La-Z-Boy Incorporated Amended and Restated Bylaws (as of May 3, 2011) (Incorporated by
reference to an exhibit to Form 8-K filed May 6, 2011)
69
Exhibit
Number
(4.1)
(9)
(10.1)*
(10.2)*
(10.3)*
(10.4)*
(10.5)*
(10.6)*
(10.7)*
(10.8)*
(10.9)*
(10.10)*
(10.11)*
(10.12)*
(10.13)*
(10.14)*
(10.15)*
(10.16)*
(11)
(12)
(13)
(14)
(16)
(18)
(21)
Description
Amended and Restated Credit Agreement dated as of October 19, 2011, among La-Z-Boy
Incorporated, certain of its subsidiaries, the lenders named therein, and Wells Fargo Capital
Finance, LLC, as administrative agent for the lenders (Incorporated by reference to an exhibit to
Form 8-K filed October 21, 2011)
Not applicable
La-Z-Boy Incorporated Restricted Stock Plan for Non-Employee Directors, amended and restated
through August 12, 2003 (Incorporated by reference to an exhibit to definitive proxy statement
dated July 9, 2003)
La-Z-Boy Incorporated Deferred Stock Unit Plan for Non-Employee Directors (Incorporated by
reference to an exhibit to Form 10-Q for the quarter ended October 25, 2008)
La-Z-Boy Incorporated 1997 Incentive Stock Option Plan (Incorporated by reference to an exhibit
to definitive proxy statement dated June 27, 1997)
Form of Change in Control Agreement in effect for: Kurt L. Darrow. Similar agreements are in
effect for Steven M. Kincaid, Louis M. Riccio, Jr., Otis Sawyer and Mark S. Bacon, Sr., except the
provisions related to the periods for protection and benefits are twenty-four months (Incorporated
by reference to an exhibit to Form 10-K for the fiscal year ended April 24, 2010)
Form of Indemnification Agreement (covering all directors, including employee-directors)
(Incorporated by reference to an exhibit to Form 8-K, filed January 22, 2009)
2005 La-Z-Boy Incorporated Executive Deferred Compensation Plan, amended and restated as of
November 18, 2008 (Incorporated by reference to an exhibit to Form 10-Q for the quarter ended
October 24, 2009)
La-Z-Boy Incorporated 2004 Long-Term Equity Award Plan as amended through June 13, 2008
(Incorporated by reference to an exhibit to Form 10-K for the fiscal year ended April 26, 2008)
First 2009 Amendment to La-Z-Boy Incorporated 2004 Long-Term Equity Award Plan effective
June 11, 2009 (Incorporated by reference to an exhibit to Form 10-K for the fiscal year ended
April 25, 2009)
Second 2009 Amendment to La-Z-Boy Incorporated 2004 Long-Term Equity Award Plan
effective June 15, 2009 (Incorporated by reference to an exhibit to Form 10-K for the fiscal year
ended April 25, 2009)
Sample award agreement under the 2004 Long-Term Equity Award Plan (Incorporated by
reference to an exhibit to Form 10-K for the fiscal year ended April 29, 2006)
La-Z-Boy Incorporated 2010 Omnibus Incentive Plan (Incorporated by reference to Annex A to
definitive proxy statement for annual meeting of shareholders held August 18, 2010)
La-Z-Boy Incorporated 2010 Omnibus Incentive Plan Sample Award Agreement (Incorporated by
reference to an exhibit to Form 10-Q for the quarter ended October 23, 2010)
La-Z-Boy Incorporated 2010 Omnibus Incentive Plan Revised Sample Award Agreement
effective July 9, 2012 (Incorporated by reference to an exhibit to Form 8-K filed July 9, 2012)
First 2010 Amendment to La-Z-Boy Incorporated 2004 Long-Term Equity Award Plan effective
June 11, 2010 (Incorporated by reference to an exhibit to Form 10-K for the fiscal year ended
April 24, 2010)
La-Z-Boy Incorporated Severance Plan for Named Executive Officers (Incorporated by reference
to an exhibit to Form 10-K for the fiscal year ended April 24, 2010)
La-Z-Boy Incorporated Performance Compensation Retirement Plan effective April 27, 2013
Statement regarding computation of per share earnings (See Note 18 to the Consolidated Financial
Statements included in Item 8)
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
List of subsidiaries of La-Z-Boy Incorporated
70
Exhibit
Description
Number
Not applicable
(22)
Consent of PricewaterhouseCoopers LLP (EDGAR filing only)
(23)
(24)
Not applicable
Certifications of Chief Executive Officer pursuant to Rule 13a-14(a)
(31.1)
Certifications of Chief Financial Officer pursuant to Rule 13a-14(a)
(31.2)
Certifications pursuant to 18 U.S.C. Section 1350
(32)
(33)
Not applicable
(34)
Not applicable
(35)
Not applicable
(95)
Not applicable
(99)
Not applicable
(100)
Not applicable
(101.INS) XBRL Instance Document
(101.SCH) XBRL Taxonomy Extension Schema Document
(101.CAL) XBRL Taxonomy Extension Calculation Linkbase Document
(101.LAB) XBRL Taxonomy Extension Label Linkbase Document
(101.PRE) XBRL Taxonomy Extension Presentation Linkbase Document
(101.DEF) XBRL Taxonomy Extension Definition Linkbase Document
*
Indicates a management contract or compensatory plan or arrangement under which a director
or executive officer may receive benefits.
71
Report of Independent Registered Public Accounting Firm on Financial Statement Schedule
To the Board of Directors and Shareholders of La-Z-Boy Incorporated:
Our audits of the consolidated financial statements and of the effectiveness of internal control over financial
reporting referred to in our report dated June 18, 2013 appearing in this Form 10-K also included an audit of the
financial statement schedule listed in Item 15(a)(2) of this Form 10-K. In our opinion, this financial statement
schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with
the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
Detroit, Michigan
June 18, 2013
72
LA-Z-BOY INCORPORATED
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
Description
Allowance for doubtful accounts, deducted
Additions
Balance at
Beginning of
Year
Charged to
Costs and
Expenses
Charged to
Other
Accounts
Deductions
Balance at
End of Year
from accounts receivable:
April 27, 2013 . . . . . . . . . . . . . . . . . . . . . . . $
April 28, 2012 . . . . . . . . . . . . . . . . . . . . . . .
April 30, 2011 . . . . . . . . . . . . . . . . . . . . . . .
Allowance for deferred tax assets:
April 27, 2013 . . . . . . . . . . . . . . . . . . . . . . . $
April 28, 2012 . . . . . . . . . . . . . . . . . . . . . . .
April 30, 2011 . . . . . . . . . . . . . . . . . . . . . . .
22,254 $
23,435
19,621
495 $
3,508
5,612
$
—
—
—
(1,142)(a) $
(4,689)(a)
(1,798)(a)
21,607
22,254
23,435
8,258 $
52,613
57,976
131 $
160
4,582
(1,572)(c) $
1,687 (c)
(8,391)(c)
(198)(d) $
(46,202)(d)
(1,554)(b)
6,619
8,258
52,613
(a) Deductions represented uncollectible accounts written off less recoveries of accounts receivable written off
in prior years.
(b) Represents utilization of loss carryovers.
(c) Represents impact of adjusting gross deferred tax assets.
(d) Valuation allowance release.
73
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has
duly caused this Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
DATE: June 18, 2013
LA-Z-BOY INCORPORATED
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below, as of
June 18, 2013, by the following persons on behalf of the Registrant and in the capacities indicated.
BY
/s/ Kurt L. Darrow
Chairman, President and Chief Executive Officer
/s/K.L. Darrow
K.L. Darrow
Chairman, President and Chief Executive Officer,
Director
/s/J.H. Foss
J.H. Foss
Director
/s/R.M. Gabrys
R.M. Gabrys
Director
/s/H.G. Levy
H.G. Levy
Director
/s/W.A. McCollough
W.A. McCollough
Director
/s/J.E. Kerr
J.E. Kerr
Director
/s/D.K. Hehl
D.K. Hehl
Director
/s/E.J. Holman
E.J. Holman
Director
/s/N.R. Qubein
N.R. Qubein
Director
/s/J.L. Gurwitch
J.L. Gurwitch
Director
/s/M.L. Mueller
M.L. Mueller
Vice President, Corporate Controller and Chief
Accounting Officer
/s/L.M. Riccio, Jr.
L.M. Riccio, Jr.
Senior Vice President, Chief Financial Officer
74
BOARD OF DIRECTORS
Kurt L. Darrow
Chairman, President and Chief Executive Officer,
La-Z-Boy Incorporated
John H. Foss
Retired Manufacturing Financial Executive
Director of United Bancorp, Inc.
Richard M. Gabrys
Lead Director
Retired Vice Chairman of Deloitte & Touche LLP
Director of CMS Energy Corp.
Director of TriMas Corporation
Janet L. Gurwitch
Operating Partner of Castanea Partners, Inc.
Director of Drybar Holdings, LLC
CORPORATE EXECUTIVES
W. Alan McCollough
Former Chairman and CEO, Circuit City Stores, Inc.
Director of The Goodyear Tire & Rubber Company
Director of VF Corporation
Nido R. Qubein
President, High Point University
Chairman, Great Harvest Bread Company
Director of BB&T Corporation
Director of Dots, LLC
David K. Hehl
Member, Cooley Hehl Wohlgamuth & Carlton, PLLC
Edwin J. Holman
Chairman of the Board, The Pantry, Inc.
Janet E. Kerr
Professor of Law and Executive Director, The Palmer
Center for Entrepreneurship and the Law at
Pepperdine University School of Law
Director of Tilly’s, Inc.
Director of TCW Strategic Income Fund, Inc.
Director of TCW Funds, Inc.
Dr. H. George Levy
Otorhinolaryngologist
Kurt L. Darrow
Chairman, President and Chief Executive Officer
Greg A. Brinks
VP and Treasurer
Steven P. Rindskopf
Corporate VP Human Resources
Louis M. Riccio, Jr.
Senior VP and Chief Financial Officer
J. Douglas Collier
Chief Marketing Officer and President International
R. Rand Tucker
VP and General Counsel
Mark S. Bacon, Sr.
Senior VP/President La-Z-Boy Branded Business
Daniel F. Deland
Chief Information Officer
OTHER EXECUTIVES
Steven M. Kincaid
Senior VP/President Casegoods and
President, Kincaid
Otis S. Sawyer
Senior VP/President Non-Branded Upholstery
and President, England, Inc.
James P. Klarr
Secretary and Corporate Counsel
Britt Allred
President, Bauhaus
Margaret L. Mueller
VP, Corporate Controller and Assistant Treasurer
Daniel E. King
Vice President, Retail Division
INVESTOR INFORMATION
Shareholder Services
Inquiries regarding the Dividend Reinvestment Plan,
dividend payments, stock transfer requirements, address
changes and account consolidations should be addressed to
the company’s stock transfer agent and registrar:
American Stock Transfer & Trust Company
6201 15th Avenue
Brooklyn, NY 11219
800-937-5449
www.amstock.com/main
Stock Exchange
La-Z-Boy Incorporated common shares are traded on the
New York Stock Exchange under the symbol LZB.
Corporate Headquarters
La‑Z‑Boy Incorporated
1284 North Telegraph Road
Monroe, MI 48162
734-242-1444
www.la-z-boy.com
Investor Relations and Financial Reports
We will provide the Form 10-K to any shareholder who
requests it. Security analysts, shareholders and investors
may request information from:
Investor Relations
La‑Z‑Boy Incorporated
1284 North Telegraph Road
Monroe, MI 48162
investorrelations@la-z-boy.com
734-241-2438
©2013 La-Z-Boy Incorporated Except as noted, all designated trademarks and service marks utilized in this report are owned by La-Z-Boy Incorporated or its subsidiary companies.
1284 North Telegraph Road • Monroe, Michigan 48162 USA
la-z-boy.com • americandrew.com • bauhaususa.com • englandfurniture.com • hammary.com • kincaidfurniture.com • leafurniture.com • lazboykidz.com
Printed in the USA