La-Z-Boy cuts value of brands
By Powell Slaughter -- Furniture Today, May 10, 2004
MONROE, Mich. — MONROE, Mich. — La-Z-Boy Inc. said it will take a $71.9 million pretax charge to write down the value of some of its trade names and goodwill, mainly in its case goods group.
"The values of our case goods businesses have been negatively impacted by the onslaught of import competition, primarily from China, and the severe downturn in the hospitality industry since Sept. 11, 2001," said Kurt Darrow, president and CEO.
"This charge is non-cash and will not negatively impact any of our debt covenants," he said
La-Z-Boy assesses its goodwill and intangible assets each year in its fourth quarter, which this year ended April 24.
La-Z-Boy didn't break down the impairment charge among its case goods operating companies. Some are doing better than others, said Treasurer Mark Stegeman. Contract producer American of Martinsville has been particularly hard hit, he said, and rising imports are affecting several residential companies.
"In talking with analysts, this (charge) has really come as no surprise," Stegeman said. "It's a pretty good measure of some of the damage done to our business."
La-Z-Boy got into case goods in a big way when it acquired Ladd in January 2000 in a deal valued at $238 million. Since then it has sold Pilliod, a former Ladd company, to Michels Co.
In addition to American of Martinsville, La-Z-Boy's case goods group includes American Drew, Hammary, Kincaid/Alexvale, Lea and Pennsylvania House.
While imports have hurt the value of La-Z-Boy's wood companies, they have helped the bottom line in the past. In fiscal 2003, while total sales in the case goods group were off 13.9%, operating margin rose to 6.1% from 1.7% in the prior year. Management credited the increased use of imports for much of the margin improvement.
In another financial move, La-Z-Boy's board has voted to increase the company's quarterly cash dividend by 10%, to 11 cents per share of common stock.
The next dividend is payable June 10 to shareholders of record on May 28.
