La-Z-Boy Inc (LZB) 2003 Q4 法說會逐字稿

Good morning. My name is Cassidy and I will be your conference facilitator today. At this time I would like to welcome everyone to the La-Z-Boy Incorporated fourth quarter and full year operating conference call. All lines have been placed on mute to prevent any background noise.

After the speakers' remarks there will be a question and answer period. If you would like to ask a question during this time simply press star, then the number one on your telephone key pad. If you would like to withdraw your question press the pound key. Thank you.

I would now like to introduce Mr. Mark Stegeman, Treasurer of La-Z-Boy Incorporated. Sir, you may begin your conference.

Thank you. Good morning, I am Mark Stegeman, treasurer of La-Z-Boy Incorporated. Thank you for joining our fourth quarter conference call. With us today are Jerry Kiser, La-Z-Boy's President and CEO, and David Risley, La-Z-Boy's Chief Financial Officer. Also joining us is Pat Norton, our Chairman.

Today's call will cover the financial results of our 2003 fourth quarter and full FY. Jerry and Dave will begin with some prepared remarks about the company's performance for the quarter and the year just ended, as well as the current business environment and what we see ahead at this point.

We would like to try and end the call by noon but we'll be happy to extend beyond that if you still have unanswered questions. This call is being webcast live and the replay will be available on our Web site beginning this afternoon. A telephone replay of the call will also be available from early this afternoon through June 5, which is next Thursday.

These regular, quarterly investor conference calls are one of the our primary vehicles for providing guidance to and communicating with investors and the investment community about the current operations and the future prospects of La-Z-Boy Incorporated. We will be making forward-looking statements during this call so I will repeat our usual caveat that these statements reflect the best judgment of management at the present time.

However, they are subject to certain risks and uncertainties as detailed in our regular filings with the SEC and they may differ materially from actual results due to a wide variety of factors. We undertake no obligation to update any forward-looking statements made during this call.

And with that, let me now introduce our President and Chief Executive Officer, Jerry Kiser.

Thanks, Mark. Good morning. I'd also like to welcome you to our fourth quarter conference call. I hope had you a chance to look over our numbers for the April quarter and the full fiscal 2003 year. The news release went out last night along with our 8(K). I would like to make some brief general comments about our recent results and highlight a few things and then Dave Risley will cover the financials in a little more detail for the quarter and the year. Following Dave's remarks, we will open it up for your questions.

The quarter we just completed was another tough one for La-Z-Boy. As was true in the prior quarter, this was partly due to a very difficult business climate which included several severe bouts of winter weather, and the initiation of the War in Iraq. Equally as important, we were comparing against strong comparable numbers in the year ago quarter, when our upholstery businesses turned in a combined year over year sales increase of 11%.

So due to a higher than expected degree of consumer retrenchment, our fourth quarter upholstery sales decline was larger than we had been anticipating. We were quite pleased, though, with our ability to maintain relatively strong upholstery margins despite the lower sales. This was largely a function of our upholstery management team keeping their eye on the ball with respect to business conditions, and also the result of previously taken action of ceasing the HickoryMark operations, reducing capacity at one of our companies and the continued pursuit of cost competitive globally source sourced products and components.

On the top line, they continued to strengthen our distribution through a variety of channels, including our proprietary or dedicated retail floor space for our product. I will touch on that in a little later in greater detail.

For the full FY, upholstery sales rose an adjusted 4%, adjusted for HickoryMark and the retail stores we acquired. And the Upholstery Group operating margin for the year rose nicely to 9.7%, from a normalized 8.9% in fiscal 2002. While I'm talking about the Upholstery Group, I want to mention how delighted that we are that we've been able to attract Mike Delgatti who most recently ran Broyhill's upholstery to run the Clayton Marcus operation. Mike is a tremendously talented, and well respected upholstery executive with a lot of hands-on upholstery experience and we are expecting great thing from him at Clayton Marcus.

In the case goods area, which represents just under 25% of our business sales were down 14% for the quarter and off 10% for the full year excluding our former subsidiary, Pilliod. As we noted in our news release this was disappointing to us. Case goods in general in upper middle to higher price case goods in particular, have continued to be a more difficult business to be in than upholstery for the same reasons we've discussed before.

But in addition to that, I think it can be said that some of our case goods product offerings haven't been as fresh and as exciting as they might have been. We feel strongly that we've addressed this with the outstanding new groups we introduced at last April's Home Furnishings Market. I'm referring here to American Drew's Bob Mackie Two, Pennsylvania House's New Standards, and Kincaid's addition to its Laura Ashley group, a collection named Cotswold. These new introductions received high praise during market and generated the kind of excitement among our dealers that we haven't seen for awhile.

In addition, substantial new consumer advertising investments are being made this year by both Kincaid and Pennsylvania House along with carefully targeted new merchandising programs in all our companies. In short, we feel that the case goods segment of our business is poised for a substantial rebound when the general economy decides to cooperate.

I am pleased that just before the call this morning we announced a new president for Pennsylvania House, Michael Foster. Michael has spent the last two years with Schnadig as Director of wood merchandising, and prior to that was with Masco's Home Furnishings overseeing upholstery merchandising before spending several years with Lexington as VP of Sales and Merchandising, among other responsibilities. Lexington as you know in the mid '90s had a reputation for bringing some of the most innovative wood products to the marketplace. Michael has a very well rounded set of experiences, which includes an extensive background in global sourcing. I am very confident he will have a very positive impact on Pennsylvania House's growth and profitability. He also has a leg up since the team there is outstanding, as evidenced by their successful product introductions over the last several markets.

At the same time we have continued to evaluate our domestic production facilities. And in light of the significant decline we've experienced in case goods volume and the growing proportion of imported case goods products as a percent of the total, we anticipate possibly announcing a further consolidation of our case goods facilities in the next few weeks. We haven't yet determined the exact implications and fully evaluated the results that such a move will have but we will communicate that at the earliest possible time to both our employees and our investors.

Recent sales trends in our industry have been erratic and difficult to predict. One leading indicator for the upholstery part of our business is the retail sales of our mostly independently owned La-Z-Boy Furniture Galleries stores. A year ago these stores were racking up solid double-digit percentage increases in same store sales. For the March, 2002 calendar quarter, for instance, the store showed a gain of 11.8% in same store sales.

In this year’s March calendar quarter, same store sales were down 6.3%, partly due to the strong year earlier results but really underscoring the general malaise that is affecting the retail environment right now. At the same time, when you take into account new stores, total La-Z-Boy Furniture Galleries sales for this year's March calendar quarter, we are up 1%, reflecting the continued expansion and success of the system. We don't disclose monthly sales numbers for the La-Z-Boy Furniture Galleries stores, but I can tell you in general terms that their business in April did not improve markedly.

I know one of your first questions is probably going to be about whether or not we saw any sort of pick up at retail during the just ended Memorial Day Weekend. Quite frankly, we've heard mixed results. From what we've seen so far and heard from some retailers, the weather was lousy on the East Coast which was good for us as it resulted in consumer shopping. In fact, one large retailer saw sales up over 10% over a year ago.

However, I would tell you that we also heard from many retailers that if they had not had a good Memorial Day Weekend, they would not have gotten even closer for the month to their prior year numbers. All in all, May did seem to be mostly better than April. Unfortunately, we are entering the slowest few months in the furniture industry.

Let me give you a La-Z-Boy stores update. We ended fiscal 2003 with a total of 314 stand alone La-Z-Boy Furniture Galleries stores. Of these, 29 are company owned and 46 feature the exciting and highly productive new generation format. During the FY, we opened 26 new stores, relocated another 5, remodeled 3, and closed 6, for a net addition of 20 new stores this year.

For the coming year we are planning to open another 40 to 45 new generation furniture gallery stores, of which 20 to 25 will be new stores and the remainder either relocations or remodels of existing locations. We will also close several old locations as we continuously refine and improve the system.

During the quarter our England upholstery business added another nine Custom Comfort Center galleries through its independently owned and operated proprietary distribution network. At the end of the year there were 134 England Custom Comfort Center locations in operation with a combined dedicated retail floor space of about 500,000 square feet. Clayton Marcus has also focused on continuing to grow their gallery program, and has opened 6 home store galleries and 106 color studio presentations since October. This is in keeping with our overall strategy of developing proprietary floor space with many of our upholstery companies.

Business continues to be erratic, choppy, and unpredictable and above all else, consumer confidence will most likely continue to play the leading role in our industry's near term fortunes. In this respect the further increase reported this week in the conference board’s consumer confidence index for May, on top of April's strong rebound, is encouraging as is the increase in new and existing home sales. But we continue to face a lot of uncertainty and we are already largely through the important spring season for our industry. A strong recovery over the summer months has rarely if ever occurred.

As a result, we feel it is only prudent to maintain a very cautious stance until such time as there is more concrete evidence things are indeed picking up. In this regard, we feel that attempting to provide specific earnings guidance is basically an exercise in futility. So we are suspending our guidance at this time as noted in our news release. We do anticipate lower sales in the current quarter, versus a very strong year earlier number, and as a result may take more than the normal amount of summer downtime. If we do this would of course penalize earnings for the quarter. It is our intention to reinstate financial guidance at such time as we view there is additional clarity in the marketplace.

And now I would like to turn things over to Dave Risley for his comments. Dave?

Thank you, Jerry. You all have the details so I am just going to cover some of the highlights. Needless to say our fourth quarter earnings of 45 cents per share, while not as good as last year, they were in the middle of our guidance range and we solidly beat the streets pessimistic consensus of 39 cents. Last year at this time, we had provided guidance for the year at $1.60 to $1.75, and we finished the year absent the special non-cash charge for the intangibles, of $1.04, we finished the year at $1.67, right in the middle of that range. So we felt pretty good about our ability to predict.

Sales for the quarter were weak by comparison to the year ago period, which had been up rather sharply. Accordingly, upholstery sales were up a normalized 7.1%. And case goods continues to experience difficult and was down 13.8%. In spite of the sales decline, we were able to maintain a very respectable level of margin with upholstery at 10.3%, case goods at 4.8% and 8% overall.

Sales for the year reflect the tale of two halves. The first up and the second down. Overall, normalized sales were flat for the year. More importantly, however, margins improved 120 basis points over last year on normalized earnings. Upholstery was up 80 basis points and case goods 190 basis points. Our goal is still 10%, but in a difficult sales environment we felt we made solid progress toward that goal. We feel we are very well-positioned to capitalized on any upturn when it comes.

We've had to make a lot of tough decisions to improve our cost structure in the fast changing dynamic environment and we have another to announce in coming weeks. These additions, however, have made us stronger and will allow us to reach our financial goal and create shareholder value.

Cash flow from operations for the year was $125m slightly down from last year's $133m. Our only real negative was a build in inventory generated primarily by an increase in imported product just as volume started to edge off. We are comfortable that we will be able to manage this inventory back to levels that are more acceptable. CAPEX for the year totaled $33m and it was essentially equal with last year.

We continue to repurchase our stock during the quarter, a total of almost 1m shares. For the year we used $130m in cash flow to repurchase a total of 5.5m shares, almost 10% of the shares outstanding. We still have authorization of up to 4.2m shares and I would suggest that we would continue to be opportunistic in our purchase program, repurchase program, but we are not committed to any particular amount at this point in time.

We also paid $23m in dividends and, believe it or not, our stock yield at 2% is above the money market rates if that enthuses anybody. Debt to total cap at this time stands at 26.9%, which is well within our announced targeted range.

With regards to the coming quarter, we did not make the decision to suspend guidance lightly. There are clearly no discernible trends to hang your hat on. Consumer confidence has ridden a roller coaster and seems to be coming up at this point. Housing related industries have continue to be very strong. Unemployment has seemingly leveled out for the moment. And opinions on the benefit of the tax relief go both ways. The potential for an upturn seems to be improving and yet our industry is experience ago shortfall in volumes.

The current situation is very different from the one we had a year ago, when we did 32 cents. The first part of 2002 had been a very strong period with volumes in a number of arenas in the double-digits improvement area. That also created a very strong backlog for us when we moved into the first quarter of our 2003 FY. Plants were working off of that backlog, and then moving toward a period of time in making product for the coming fall season. In other words, the plants were operating at above normal capacity throughout that first quarter.

We don't have that situation this year. Historically, our first quarter is always our weakest quarter in terms of both sales and margin. At this point, we are scheduling a more extended summer shut down period than normal. Additionally, in a restructuring effort that we will have will probably not provide any benefit and will in fact more likely cause some disruption as would normally be the case.

All in all, we are expecting a decline in sales and earnings that is significant. If appropriate, we will elect to provide guidance later in the quarter.

That's all I have.

Okay. Operator, if you'd like to go ahead and repeat the instructions for asking questions we will get that underway.

Thank you. At this time I would like to remind everyone, in order to ask a question please press star one on your telephone key pad. We will pause for just a moment to compile the Q&A roster.

Your first question comes from Keith Hughes of SunTrust Robinson.

Thank you. I want to talk about case goods for a minute. You were talking last conference call, I think you had been moving away from some product lines, and even some accounts where you weren't getting the presence you felt. Did that play a role in this quarter as well or was the business, volume shipments just soft all around?

Keith I think it related more to just the market in general. We continued to evaluate where we're positioned in the marketplace. I think we had talked at that particular time about summary merchandising that we needed to do so we continue to be conscious of that. We did have an excellent spring market as I mentioned. The only down side of that is those orders will not ship until early fall. So that addition to the backlog is not going to contribute in the near term but we feel very strongly about the prospects of the fall season if we get that tick up in consumer confidence with some of the backlog we feel on new product.

The new products that you've introduced, was there one brand that had the most introductions or was it across the board?

It was pretty evenly spread across the board but we did get excellent response as I mentioned to the Pennsylvania House Kincaid and American Drew collections.

On the inventory issue, given the amount of source that you are doing now and moving up to in the future what level of inventory are we tag targeting?

I think we would expect to get back to a more normal turn situation in that seven to eight range. It is going to require higher inventory level as we increase our percentage of source goods. But as you know when business turns down it is extremely hard to get that faucet turned off as difficult as it is to get it turned off when it starts moving in the opposite direct. So we feel very comfortable that we will be able to manage that through the summer months and get it at the level we think it needs to be headed into the fall.

Okay. Thank you.

Your next question comes from Todd Swartzman.

Good morning. I'm wondering if you could tell us what percentage of sales were in imported finished goods for the quarter? And I also wanted to ask about the guidance for the quarter?

Well, we don't track the exact number as a percentage of the sales. Really our case goods number for the last year was running at a rate for the year at 30%, about 30.5% of the total case goods volume. And, of course, with case goods only being 25% of our total corporate volume, that number falls dramatically as it relates to the corporate totals.

Any sense of a sequential change from Q3, on case goods and on (inaudible).

We are up dramatically from our fiscal '02 and then our projections for fiscal '04 are expected to increase in the case goods arena to around a 40% number. Then as it relates to guidance I think we will refer back to the press release that just is an indication that we think we are really facing a very difficult situation in this first quarter going up against very strong comps from a years ago with what is historically the weakest quarter of the year in the furniture industry--that May, June, July time frame.

Specifically regarding the press release, when you talk about earnings being down significantly, I’m assuming you are talking EPS as opposed to net income and year over year as opposed to sequential?

The year over year and -- yes we are referring to both sales and the EPS.

And lastly, what base are you using for the years ago quarter? In other words, what normalized number if in fact that's what you are using, are you working off of?

Normalized numbers for last year would have been around $490m total.

Okay. Thanks.

Thank you. Your next question comes from Laura Champine.

Good morning. I've got a question about the health of your retail network, your nonproprietary retail network. Specifically are there any distressed retailers out there asking for better terms?

Well, at this stage when you are in this kind of economic situation I am sure there's several out there that might be struggling a little bit. I don't know that we have seen a significant increase in that number from where we were a couple of years ago when we had the very visible failure of several major retailers at that particular time.

On a broad basis the answer would be no.

So there's no material risk to your receivables at this time as far as you can tell?

No.

And also with imports at such a low percentage of your total product, I'm a little surprised by the magnitude of the inventory build. Can you parse it out by what percentage testimony 21% year over year increase would be attributed to higher in stock position of imports, and what might be demand related?

Not specifically. Like I said, most of the uptick was relative to imported product. There was a little bit on the upholstery side, from the fact that again we had very good demands last year we expected some inventory was down on a comparative basis last year to this year.

Okay. Thank you.

Thank you. Your next question comes from Joel Havard.

Hi, good morning, guys. Dave, you referenced the backlog position at the end of the year versus the previous quarter versus a year ago. Could you put some sort of number to that?

We don't really disclose that, Joel. I just use that as a point of reference for understanding why our last quarter was so good.

Then I will try and sneak the answer out a different way. Can you give a percent change maybe year over year that would.

As a matter of fact I really don't if I even gave you the sneaky answer I don't have it in front of me, Joel.

Okay. I wonder if you could give us a picture of the debt structure at year end? Your interest expense was a little higher than we were expecting in the quarter. I wonder what that will imply for next year?

Well, the debt structure is pretty well set. If you read the notes, the new debt came in at, what, Mark, 1.5 and 5.7 and ten-year.

That's that the private placement?

That's on the private placement, sure. And so this should be a normal quarters worth of expense if you, that you would typically see.

It will go down at the, at the end of the year we do have a swap.

I thought there was a swap.

At the end of the calendar year. Right.

Okay. Just I guess one point, is the revolver balanced in most of the swing? Is it down much from Q3? Or is it kind of flat from Q3? If I remember right that was kind of a pull back.

It's pretty flat, Joel.

Really Joel the difference in the interest expense from what you may have forecasted really relates to inter month borrowings on line of credit, the ups and downs of our normal cash flow, what we are borrowing overnight.

With the swap in place does that mean that expense for the year could wind up being a little lower than it was for '03 in total? Or will we--

Yes, yes because that rate is 6.47%. So if you look at our structure and what we've kind of targeted as our mix between fixed and floating, we probably would let the debt float at this point that we would have on the revolver. The floating rate down right now is probably around two and a quarter to 2.5% versus 6.5%. So--

Okay. All right. We'll work through that. On the CAPEX side, you pointed out that this year was pretty flat, or I should say last year was pretty flat with the year prior. Can we think about the plant closures you made and the addition for additional plant closures reducing the actual CAPEX for '04 versus '03 or should we kind of flat line it?

It should be pretty flat. I would flat line it I think based on our protections for some new equipment and our upholstery area as well as our continued efforts on the retail side that that $33m to $35m is probably a pretty good number.

Okay. And I guess we will just kind of think about that going forward. What it looks like, guys, we are freeing up, we have quite a bit of free cash, you are talking about staying opportunistic on share repurchases and there's not a lot of debt coming out. So your opportunities are pretty substantial. Have you all thought about extending on increasing the authorization at this point or are you more liking to work through whatever is there before you do anything?

I would think we would work through whatever is there before we do anything else.

Okay. Fair enough. I'm sure we will all ask more questions about the demand environment although it sounds like you kind of shrug along with the rest of us for the near term but good luck, guys.

Thank you.

Next question, Budd Dugott.

Good morning. I'm trying to put together kind of a model that just says what are the elements of going to earnings over the next couple of quarters. We obviously had a good year in the first quarter last year, a good first quarter last year and upholstery these numbers show 19% or so and now we are talking about being down. And I know you said significantly.

I would love to you tell me what that means? I was note into the old HP 12 C. and it comes up E. What's the marginal contribution dollar at the GM level or even at the operating margin level of upholstery sales?

You are talking about number of units each of which has a different marginal contribution. If you were to talk about how, the department store market these are dramatically different. These operate on a much larger GM than let's say La-Z-Boy residential. England would be the same case. So, you know, it depends on where the dollars are located.

There's a weighted average, David, somehow. And we can deal with ranges. Are we looking at, I would think the marginal has to be in the 40% GM kind of number, 40% to 50%. You tell me if.

That would be dramatically overstated.

What about in case goods? What are we there?

Again we've got varying differences between the two, the various companies that we do have, Budd. I think the other side want you are trying to do is, is hurt a little worse in the first quarter because of the plant shut down. If it were a normal quarter that variable margin that you would get certainly would have an impact. I think what you probably, if you are looking for an overall take the GM, Oh, we don’t give that. I’m sorry.

Budd Dugott If you want to give us an idea of GM differential by segment that would be great.

I was about to and I realize we don't get that to start with.

We can start a precedent here. Let's go at it this way. The fourth quarter you were down 345 basis points year over year GM from the fourth quarter of last year. What were the causes there, if you were writing MDNA today, you had some pick up, because you had a higher import product, that has to have some couple hundred basis points of improvement. So where is the leak?

Let me catch up to where you are looking, Budd. All I get is a total GM number I get 27% last year and 23.5% this year. You have 23.4 this year and 24.5 last year. How about 90 basis points?

No. In the fourth quarter last year?

I'm talking about YTD, I'm sorry.

I'm looking at the fourth quarter last year of 27% and the fourth quarter last year of 23.5.

David Risley I have 23.5 for this year correct and last year would be 24.4. So it's again 90 basis points.

That must be after the restructuring. That must have numbers in it that we don't have right here. On a comparable basis.

We only had 1% difference in the operating profit margin on the SG&A side. You can't relate the difference on the GM side.

Well, we are going to have to examine that number. Anyway, the question still remains, what causes this year, you got the imports giving you the better margin. Where is the leak in the GM? Is it in case goods? Is it in upholstered?

A lot of it is just overhead absorption. At this time last year with the backlog we had and the, we were running at a much better capacity utilization than we are currently running at and a lot of that.

What are you running at now?

: Casegoods is in the 65% to 75% range and upholstery is in the 85% to 90% range.

All right. That's very helpful. What about, what about units this year? Do you see any deflation on your business in terms of--

There has not been significant change in the upholstery sector. Case goods continue to feel pressures of lower cost products coming in. And as I said, on a couple of occasions, we are continuing to look at our overall merchandising efforts and how we price bids (inaudible) in relation to case goods. So all of those issues do have an effect and I am sure that we will continue to see some lower prices on the wood side of the business. I think the American consumers is going to ultimately determine what they pay for product.

When will you make a decision on how you merchandise that?

We started that, it just takes awhile to work through those issues. Our folks in some of the high-end companies have been working on it through a couple of markets now. And some they can deal with on a really a promotion kind of basis to insure that we are being competitive as it relates to certain products.

If you outsource more of that product versus straight case I would think that you change the cost structure in a plant, right?

Right.

Okay. My last question and I will let some others ask. Can you give us kind of what the comp hurdle rate is for the June quarter and maybe for the September quarter? I don't know that we got those numbers.

I'm not sure I understand what the question was.

You gave us what your comps were for this quarter and for the March quarter, minus 6.3% versus 11.8% last year.

Oh, for the comparable stores?? Yes, comparable stores. What's the June quarter hurdle rate and what's the September quarter hurdle rate?

We are going to have to look it up for a minute, Budd. In the meantime, back to your first question, the adjusted GM for the fourth quarter of last year exclusive of restructuring was 24.4.

I gotcha.

Versus the 23.5.

All right. So we've given up 90 basis points there.

Correct.

And you had a plus, you should have had a lift from imports and a drop because of absorption. Do we get an idea of what the import lift is? Can you give us kind of an order of magnitude of what your lift was from imports?

No, I really couldn't.

Budd Dugott I lied. One last question. The audit has been completed, right?

Yes. Because in the press release on the 8(K) it says unaudited numbers but there is no any change to those.

No, there will not be any change to our knowledge but they are never official until it's filed with the SEC.

Isn't the 8(K) official?

No, the 10(K) our annual report.

The comparable, did it get that, Mark?

Budd, I am going to have to get back to you. I have it in a different format than you wanted so I am going to have to get back to you on that.

Thank you.

Next question comes from Margaret Whelan.

Good morning, folks.

Good morning, Margaret.

Trying to understand the GM a little bit better, I know you don't want to give the specifics. Maybe just looking at the fourth quarter, it came in higher than we expected. Can you just talk about going forward what the costs are going to be for closing the factories and what the gross margin might be, the benefit or are you going to take charges and run it through the P&L, I guess?

No, when we announce it we will have the information.

Are you going to change take a charge or run it through the P&L?

We will probably take the charge. There are new accounting rules out that specify how that is to occur. I mean, some of it is allowed up front and others are to be recorded as incurred. So it will be different than it was before.

When you say earnings will be down significantly, that's including or excluding any additional charges?

Excluding.

Okay. Can you give us an idea of your sales month to date for May?

We don't provide that.

Has it decelerated, I guess?

It's a continuation of the same.

Okay. Have you thought about giving us a unit break set of sales on a quarterly basis so we can try to quantify the deflation?

It's a little harder to convert our numbers since so much of our business is upholstery and we look at it in seats as compared to just in units.

Even seats will be better, though.

We will track that, we will give that consideration.

That would be great on a quarterly basis. Okay. Thanks, folks.

Your final question comes from Joel Havard.

Hi, just a follow up on the earnings guidance. I just want to get clear on this because of the potential impact of share buy backs. If you are talking about EPS as opposed to net income, are you using as an earnings base for the years ago quarter the 32 cents, or is that, are you adding back anything for amortization or any other adjustments to that number?

No, that was just the reported number. It would be, what, 3 cents additional -- no, it wouldn't. There was no amortization last year.

So that 32 is what you are referring to in the press release basically?

Yes, right.

Great. Thanks.

Thank you for participating in today's La-Z-Boy Incorporated fourth quarter and full year operating results conference call. This call will be available beginning at two o'clock p.m. eastern time today through 11-59 p.m. eastern time on June 6, 2003. The conference I.D. number for the replay is 191820. Again, the conference I.D. number is 191820. Your number is dial for the replay is 1(800)642-1687, or (706)645-9291. Thank you.

Thank you Cassidy.