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Sales, earnings increase for most

Facing a choppy economy, companies make changes to engineer a rebound

By Jay McIntosh -- Furniture Today, August 31, 2003

High Point — Successfully negotiating through an up-and-down economy, most of the industry's publicly held companies improved their financial performance in the latest fiscal years.

It wasn't easy. Revenue gains were small for most, and several companies were grappling with the shift in demand from American-made products to imports.

Of the 26 retailers, manufacturers and suppliers analyzed in Furniture/Today's annual scorecard for U.S. companies that report their numbers publicly, net earnings compared with the previous year improved for 19.

Of the rest, all but one blamed the negative news on big noncash charges they were required to take because of a change in accounting rules, mainly to write off the value of goodwill.

Only Keller, the midpriced case goods producer hard-hit by import competition, reported a larger loss due mainly to operating troubles. The company's sales fell 17.1% in 2002 and its loss grew to $4.3 million.

More typical of the group was manufacturer Bassett Furniture, whose revenues grew 5.8% in the fiscal year ended Nov. 30. Bassett rebounded from a loss the previous year to a $6.7 million profit, mainly because of the early success of its effort to build its business around the Bassett Furniture Direct store chain. The stores, most of them dealer-owned, accounted for 45% of the company's sales last year and the percentage is continuing to grow.

Masco, which owns furniture makers Mill's Pride, Tvilum-Scanbirk and d-Scan but derives most of its sales from plumbing and cabinetry products, lengthened its lead as the industry's most profitable company in total dollars, nearly tripling its earnings despite paying $146.8 million to settle legal actions involving its Behr paint subsidiary.

The comparison with 2001 was an easy one, since that year's earnings were held down by a $530 million noncash writeoff of the value of securities, mainly its holdings in defunct furniture manufacturing conglomerate LifeStyle Furnishings International.

Among other industry heavyweights, components kingpin Leggett & Platt and finish supplier Valspar also posted rising sales and healthy gains in earnings.

Leggett's sales rose just 3.8% but its earnings climbed 24.3%, adding to its reputation as one of the industry's most consistently profitable companies. Valspar, meanwhile, increased sales by 10.7% and more than doubled earnings — although the 2001 number was held down by a $21.9 million pretax charge for restructuring.

Revenues jumped 26.8% to $2.4 billion for Furniture Brands International, the largest U.S. furniture manufacturer, mainly because it acquired Henredon, Drexel Heritage and Maitland-Smith at the end of 2001. Excluding those companies, sales were up 6.4%. But despite a drag from Drexel, the company said, earnings last year doubled to $118.8 million.

Revenues in the fiscal year ended April 26 slipped 2% at La-Z-Boy, the No. 2 manufacturer, and net earnings declined sharply because of the accounting-change writeoff. The company's operating income for the year actually improved by 50%, even though business softened somewhat in the fiscal fourth quarter.

The five retailers on the scorecard all enjoyed better years, with sales gains ranging from 3.8% at Havertys to 21.8% at discounter Cost Plus. Much of the gain at Cost Plus came with new store openings, although same-store sales also rose a respectable 5.6%. Earnings improved for all five companies.

One of the industry's biggest financial turnarounds is taking shape at The Bombay Company, the Fort Worth, Texas-based specialty retailer, which reported a 12.9% revenue gain and nearly doubled its earnings in its fiscal year ended Feb. 1. The once-struggling company's gains accelerated in the first half of the current year, with revenues up 30.7% and the net loss — the mall-based chain makes its money in the second half — down by two-thirds to $2 million.

Making an even bigger rebound is airbed manufacturer and retailer Select Comfort. Backed by a successful advertising and marketing effort, the company made a nearly perfect about-face from a $37.2 million loss two years ago in 2000 to a $37.1 million profit in 2002. Last year's earnings, however, did receive a $17.8 million income tax benefit based on the previous years' losses.

Select Comfort kept the trend going in the first half of the current year, with sales up 28.7% and earnings climbing 53.1%, even though the company has to pay income tax again.

Manufacturer and importer Hooker Furniture also posted sharp gains in sales and earnings in its last year and has continued the trend in the first half of the current year, helped by its January acquisition of upholstery producer Bradington-Young.

Furniture/Today's annual scorecard

Dollar amounts in thousands
Company	Fiscal year ended	2002	Revenues 2001	% change	2002	Net income 2001	% change	2002 total debt/total assets
1. Includes credit service charge income of $9.1 million in 2002 and $11.1 million in 2001. 2. After preferred shareholder dividends of $358,000 in 2002 and preferred shareholder dividends and beneficial conversion charges of $2.8 million in 2001; includes pretax charges for the change in fair value of warrants of $278,000 in 2002 and $2.7 million in 2001 and income tax benefits of $8.5 million in 2002 and $8.9 million in 2001. 3. Includes a $15.6 million pretax credit for the planned disposition of businesses, a $146.8 million net charge for litigation settlement and a $92.4 million extraordinary charge, the cumulative effect of an accounting change. 4. Includes a $18 million pretax asset impairment charge. 5. Includes the results of Pilliod Furniture prior to its Nov. 30, 2001 divestiture. 6. Includes a $59.8 million extraordinary charge, the cumulative effect of an accounting change. 7. Includes a $11.7 million pretax loss on divestiture. 8. Includes a $771,000 pretax charge for stock-based compensation, a $2.8 million pretax restructuring charge, $11.2 million in net royalty income and a $18.6 million after-tax charge for common stock liquidation. 9. Includes a $2.7 million pretax credit for stock-based compensation, a $1.2 million pretax restructuring charge, a $4.4 million pretax asset impairment charge, $11.7 million in net royalty income, a $679,000 extraordinary loss on the early extinguishment of debt, a $152,000 extraordinary gain, the cumulative effect of an accounting change and a $16.9 million after-tax charge for common stock liquidation. 10. Includes a $15.6 million pretax charge for stock compensation expense and a $19,000 foreign currency translation loss. 11. Includes a $2.8 million pretax ESOP charge, a $14.8 million pretax charge for stock compensation expense, a $6.6 million income tax benefit and a $61,000 foreign currency translation loss. 12. Includes a $201.2 million extraordinary charge, the cumulative effect of an accounting change. 13. Includes a $2.4 million extraordinary charge, the cumulative effect of an accounting change. 14. Includes pretax charges for store closings and asset impairments of $233,000 in 2002 and $1.4 million in 2001. The 2002 year also includes a $17.8 million income tax benefit and a $380,000 extraordinary loss on the early extinguishment of debt. 15. Includes a $2.4 million pretax charge for retail restructuring and other charges and a $654,000 fair market adjustment loss on derivatives. 16. Includes a $2.9 million income tax benefit and a $1.5 million fair market adjustment loss on derivatives. 17. Includes pretax restructuring and asset impairment charges of $1.3 million in 2002 and $7 million in 2001 and net income from investments of $2.3 million in 2002 and $7.5 million in 2001. 2001 also includes a $1 million income tax benefit and a $5.3 million net gain on the sale of property and equipment. 18. Includes an $881,000 pretax restructuring charge. 19. Includes pretax restructuring charges of $3.5 million in 2002 and $3 million in 2001. 2001 also includes a $2.8 million pretax unusual charge. 20. Includes a $26.7 million extraordinary charge, the cumulative effect of an accounting change. 21. Includes income tax benefits of $2.5 million in 2002 and $1.3 million in 2001. 2002 also includes a $695,759 pretax restructuring charge. 22. Includes a $21.9 million pretax restructuring charge. 23. Includes pretax restructuring charges of $4.8 million in 2002 and $36.1 million in 2001, income from equity interest in joint venture of $1.7 million in 2002 and $1.6 million in 2001. 2002 also includes an $85.7 million income tax benefit, a $1.8 million extraordinary charge and a $70.6 million extraordinary charge, the cumulative effect of an accounting change. 24. After preferred dividends. 25. After preferred dividends; includes a $19.9 million pretax restructuring and asset impairment charge, a $12.1 million income tax benefit and a $13.3 million net loss from discontinued operations. 26. 2002 is 53 weeks; 2001 is 52 weeks. 27. Includes a $500,000 non-recurring after-tax charge for costs related to a potential acquisition. 28. Includes pretax charges for restructuring and asset impairments of $13 million in 2002 and $10.4 million in 2001 and income tax benefits of $1.6 million in 2002 and $2.7 million in 2001. 2002 also includes a $24.2 million extraordinary charge, the cumulative effect of an accounting change. 29. Includes a $54,554 income tax benefit.
RETAILERS
Pier 1 Imports	3/1/2003	$1,754,867	$1,548,556	13.3%	$129,386	$100,209	29.1%	33.4%
Haverty Furniture	12/31/2002	703,959	678,112	3.8	24,315¹	22,710¹	7.1	44.5
Cost Plus	2/1/2003	692,301	568,472	21.8	28,386	20,202	40.5	39.7
The Bombay Company	2/1/2003	494,000	437,457	12.9	7,217	3,724	93.8	28.3
Restoration Hardware	2/1/2003	400,337	366,473	9.2	(3,961)²	(35,373)²	—	58.1
Medians				12.9%			34.8%	39.7%
MANUFACTURERS
Masco	12/31/2002	$9,419,400	$8,284,000	13.7%	$589,700³	$198,500	197.1%	56.1%
Furniture Brands Intl.	12/31/2002	2,397,709	1,891,313	26.8	118,831	58,030⁴	104.8	44.5
La-Z-Boy⁵	4/26/2003	2,111,830	2,153,952	-2.0	36,316⁶	61,751⁷	-41.2	45.7
Sealy	12/1/2002	1,189,168	1,154,053	3.0	(1,679)⁸	(37,675)⁹	—	112.8
Simmons	12/28/2002	670,390	612,995	9.4	24,356¹⁰	(1,193)¹¹	—	114.3
Brown Jordan	12/31/2002	354,670	286,154	23.9	(199,722)¹²	(3,964)	—	111.8
Bush Inds.	12/28/2002	340,170	345,806	-1.6	(1,458)¹³	257	—	56.1
Select Comfort	12/28/2002	335,795	261,687	28.3	37,122¹⁴	(12,066)¹⁴	—	49.7
Rowe Furniture	12/1/2002	334,610	325,438	2.8	2,108¹⁵	(7,358)¹⁶	—	72.0
Bassett Furniture	11/30/2002	323,487	305,676	5.8	6,741¹⁷	(2,642)¹⁷	—	21.1
Hooker Furniture	11/30/2002	248,346	221,289	12.2	15,391	6,510¹⁸	136.4	32.6
Stanley Furniture	12/31/2002	239,485	234,322	2.2	12,571¹⁹	8,321¹⁹	51.1	42.2
Chromcraft Revington	12/31/2002	214,186	228,492	-6.3	(15,989)²⁰	10,543	—	54.4
Keller Manufacturing	12/31/2002	35,869	43,283	-17.1	(4,266)²¹	(2,250)²¹	—	19.0
Medians				4.4%			104.8%	52.1%
SUPPLIERS
Leggett & Platt	12/31/2002	$4,271,800	$4,113,800	3.8%	$233,100	$187,600	24.3%	43.5%
Valspar	10/25/2002	2,126,853	1,920,970	10.7	120,121	51,500²²	133.2	69.5
Foamex International	12/29/2002	1,328,094	1,252,904	6.0	(9,699)²³	(5,612)²³	—	123.3
Cone Mills	12/29/2002	445,600	449,908	-1.0	7,241²⁴	(40,596)²⁵	—	70.6
Quaker Fabric²⁶	1/4/2003	365,445	331,105	10.4	11,556	9,548²⁷	21.0	44.0
Culp	4/27/2003	339,646	382,574	-11.2	(24,887)²⁸	(3,440)²⁸	—	56.1
CFC International	12/31/2002	61,878	61,995	-0.2	2,279	(75)²⁹	—	55.0
Medians				3.8%			24.3%	56.1%

Return on Assets
	2002	2001
Return on assets = net income divided by total assets
RETAILERS
Pier 1 Imports	13.4%	11.6%
Cost Plus	7.6	6.4
Haverty Furniture	6.0	4.9
The Bombay Company	3.1	1.8
Restoration Hardware	-1.8	-17.1
Medians	6.0%	4.9%
MANUFACTURERS
Select Comfort	34.3%	-17.9%
Hooker Furniture	10.3	5.0
Furniture Brands Intl.	7.6	3.9
Stanley Furniture	7.3	5.1
Simmons	6.3	-0.3
Masco	4.9	2.2
La-Z-Boy	3.2	5.3
Bassett Furniture	2.3	-0.9
Rowe Furniture	1.2	-4.7
Sealy	-0.2	-4.2
Bush Inds.	-0.5	0.1
Keller Manufacturing	-14.0	-6.3
Chromcraft Revington	-15.9	7.1
Brown Jordan	-66.1	-0.7
Medians	2.8%	-0.1%
SUPPLIERS
Leggett & Platt	6.7%	5.5%
Valspar	5.0	2.3
Quaker Fabric	4.0	3.5
CFC International	3.9	-0.1
Cone Mills	2.3	-12.1
Foamex International	-1.2	-0.7
Culp	-11.4	-1.2
Medians	3.9%	-0.1%

Return on Equity
	2002	2001
Return on equity = net income divided by equity
RETAILERS
Pier 1 Imports	20.1%	17.1%
Cost Plus	12.6	10.2
Haverty Furniture	10.8	11.3
The Bombay Company	4.3	2.3
Restoration Hardware	-4.2	-39.5
Medians	10.8%	10.2%
MANUFACTURERS
Select Comfort	68.1%	-178.2%
Hooker Furniture	15.2	8.4
Furniture Brands Intl.	13.7	7.6
Stanley Furniture	12.6	9.5
Masco	11.1	5.0
La-Z-Boy	6.0	8.7
Rowe Furniture	4.3	-15.8
Bassett Furniture	2.9	-1.1
Bush Inds.	-1.1	0.2
Keller Manufacturing	-17.2	-7.1
Chromcraft Revington	-34.9	8.7
Simmons	-44.1	—
Sealy	—	—
Brown Jordan	—	-2.4%
Medians	5.1%	2.6%
SUPPLIERS
Valspar	16.3%	7.9%
Leggett & Platt	11.8	10.1
CFC International	8.6	-0.3
Cone Mills	7.7	-46.9
Quaker Fabric	7.1	6.4
Culp	-26.0	-2.9
Foamex International	—	—
Medians	8.2%	3.1%

Return on Sales
	2002	2001
Return on sales = net income divided by sales
RETAILERS
Pier 1 Imports	7.4%	6.5%
Cost Plus	4.1	3.6
Haverty Furniture	3.5	3.3
The Bombay Company	1.5	0.9
Restoration Hardware	-1.0	-9.7
Medians	3.5%	3.3%
MANUFACTURERS
Select Comfort	11.1%	-4.6%
Masco	6.3	2.4
Hooker Furniture	6.2	2.9
Stanley Furniture	5.2	3.6
Furniture Brands Intl.	5.0	3.1
Simmons	3.6	-0.2
Bassett Furniture	2.1	-0.9
La-Z-Boy	1.7	2.9
Rowe Furniture	0.6	-2.3
Sealy	-0.1	-3.3
Bush Inds.	-0.4	0.1
Chromcraft Revington	-7.5	4.6
Keller Manufacturing	-11.9	-5.2
Brown Jordan	-56.3	-1.4
Medians	1.9%	-0.1%
SUPPLIERS
Valspar	5.6%	2.7%
Leggett & Platt	5.5	4.6
CFC International	3.7	-0.1
Quaker Fabric	3.2	2.9
Cone Mills	1.6	-9.0
Foamex International	-0.7	-0.4
Culp	-7.3	-0.9
Medians	3.2%	-0.1%

Stock Turns
	2002	2001
Stock turns = cost of goods sold divided by ending inventory
RETAILERS
The Bombay Company	3.4x	3.5x
Haverty Furniture	3.2	3.4
Pier 1 Imports	3.0	3.3
Restoration Hardware	3.0	4.8
Cost Plus	2.6	2.8
Medians	3.0x	3.4x
MANUFACTURERS
Simmons	15.3x	15.0x
Select Comfort	14.0	13.3
Sealy	12.7	11.4
Brown Jordan	9.3	7.1
La-Z-Boy	6.4	8.1
Masco	6.1	6.4
Rowe Furniture	5.9	5.4
Bassett Furniture	5.9	7.9
Bush Inds.	4.4	4.6
Chromcraft Revington	4.1	4.1
Furniture Brands Intl.	4.0	3.8
Keller Manufacturing	3.5	2.8
Stanley Furniture	3.3	3.7
Hooker Furniture	3.3	5.1
Medians	5.9x	5.9x
SUPPLIERS
Foamex International	12.1x	12.0x
Cone Mills	7.8	6.6
Valspar	7.1	7.3
Culp	5.7	5.5
Quaker Fabric	5.7	5.4
Leggett & Platt	5.5	5.5
CFC International	3.6	4.0
Medians	5.7x	5.5x

Gross Margin %
	2002	2001
Gross Margin = gross profit divided by net sales
RETAILERS
Haverty Furniture	48.2%	47.7%
Pier 1 Imports	42.9	42.0
Cost Plus	34.9	34.4
Restoration Hardware	29.3	19.8
The Bombay Company	29.2	28.3
Medians	34.9%	34.4%
MANUFACTURERS
Select Comfort	62.5%	59.0%
Simmons	46.8	40.4
Sealy	42.8	42.1
Rowe Furniture	34.5	32.4
Masco	31.5	29.9
Furniture Brands Intl.	28.2	26.6
Hooker Furniture	27.7	23.2
Bush Inds.	27.2	27.0
Brown Jordan	25.9	30.3
Stanley Furniture	24.5	22.6
La-Z-Boy	23.4	21.5
Chromcraft Revington	23.1	21.0
Bassett Furniture	21.2	16.8
Keller Manufacturing	3.6	10.7
Medians	27.4%	26.8%
SUPPLIERS
CFC International	37.8%	33.8%
Valspar	32.8	29.9
Quaker Fabric	21.9	21.2
Leggett & Platt	19.2	19.9
Culp	17.0	16.4
Cone Mills	14.2	9.0
Foamex International	10.6	14.4
Medians	19.2%	19.9%

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