Forward Looking
Information. This report and the exhibits hereto contain
statements that may be deemed “forward-looking statements” within the meaning of
the federal securities laws, including the Private Securities Litigation Reform
Act of 1995 (Section 27A of the Securities Act of 1933 and Section 27A of the
Securities and Exchange Act of 1934). Such statements are inherently
subject to risks and uncertainties. Further, forward-looking
statements are intended to speak only as of the date on which they are
made. Forward-looking statements are statements that include
projections, expectations or beliefs about future events or results or otherwise
are not statements of historical fact. Such statements are often but
not always characterized by qualifying words such as “expect,” “believe,”
“estimate,” “plan” and “project” and their derivatives, and include but are not
limited to statements about the company’s future operations, production levels,
sales, SG&A or other expenses, margins, gross profit, operating income,
earnings or other performance measures. Factors that could influence
the matters discussed in such statements include the level of housing starts and
sales of existing homes, consumer confidence, trends in disposable income, and
general economic conditions. Decreases in these economic indicators
could have a negative effect on the company’s business and
prospects. Likewise, increases in interest rates, particularly home
mortgage rates, and increases in consumer debt or the general rate of inflation,
could affect the company adversely. Changes in consumer tastes or preferences
toward products not produced by the company could erode demand for the company’s
products. Strengthening of the U.S. dollar against other currencies
could make the company’s products less competitive on the basis of price in
markets outside the United States, and strengthening of currencies in Canada and
China can have a negative impact on the company’s sales in the U.S. of products
produced in those countries. Also, economic and political instability
in international areas could affect the company’s operations or sources of goods
in those areas, as well as demand for the company’s products in international
markets. Finally,
unanticipated delays or costs in executing restructuring actions could cause the
cumulative effect of restructuring actions to fail to meet the objectives set
forth by management. Other factors that could affect the matters
discussed in forward-looking statements are included in the company’s
periodic reports filed with the Securities and Exchange Commission, including
the “Risk Factors” section in the company’s most recent annual report of Form
10-K filed with the Securities and Exchange Commission on July 16, 2009 for the
fiscal year ended May 3, 2009.
Item
2.02 – Results of Operations and Financial Condition
On
December 1, 2009, the company issued a news release to announce its financial
results for the second quarter ended November 1, 2009. The news
release is attached hereto as Exhibit 99(a).
Also
on December 1, 2009, the company released a Financial Information Release
containing additional financial information and disclosures about the company’s
second quarter ended November 1, 2009. The Financial Information
Release is attached hereto as Exhibit 99(b).
The
news release and Financial Information Release contain disclosures about free
cash flow, a non-GAAP liquidity measure that the company defines as net cash
provided by operating activities, less cash capital expenditures and capital
lease expenditures, plus any proceeds from sales of fixed assets, and
the
effects of exchange rate changes on cash and cash equivalents. Management
believes the disclosure of free cash flow provides useful information to
investors because it measures our available cash flow for potential debt
repayment, stock repurchases and additions to cash and cash
equivalents. We note, however, that not all of the company’s free
cash flow is available for discretionary spending, as we have mandatory debt
payments and other cash requirements that must be deducted from our cash
available for future use. In operating our business, management uses
free cash flow to make decisions about what commitments of cash to make for
operations, such as capital expenditures (and financing arrangements for these
expenditures), purchases of inventory or supplies, SG&A expenditure levels,
compensation, and other commitments of cash, while still allowing for adequate
cash to meet known future commitments for cash, such as debt
repayment. Also, free cash flow is used by the company as a financial
goal for purposes of determining management incentive bonuses.
The
news release and Financial Information Release contain adjusted income statement
information, which reconciles reported and projected income statement
information with adjusted results, on a pre-tax basis, which exclude
restructuring and related charges. This information constitutes a
non-GAAP performance measure. The company has included this adjusted
information in order to show operational performance excluding the effects of
restructuring and related charges that occur on an irregular
basis. We have presented pre-tax results because the company’s income
tax provisions and percentages have been volatile and unpredictable in recent
periods. Management believes these presentations aid in the
comparison of financial results among comparable financial
periods. We note, however, that the usefulness of earnings before
income taxes and excluding restructuring and related charges is limited in that
these performance measures do not necessarily indicate the likely future
financial results of the company and that the excluded income tax and
restructuring charges can and do relate to liabilities or charges that reflect
reductions in income, future expenditures, or lower values for our assets and
business. Adjusted income statement information is used by management
to make operational decisions about our business and to evaluate the financial
success of the company or its individual segments, especially when comparing
results among various periods, is used in certain financial covenants in our
loan agreements, and is used by the company as financial goals for purposes of
determining management incentive bonuses.
The
news release and Financial Information Release contain disclosures about return
on capital, both for the entire company and for individual business
segments. We define return on capital as operating income (on an
annualized basis if at a point other than the end of the fiscal year) divided by
average capital employed. Operating income excludes restructuring and
related charges, and average capital employed is calculated over rolling two –
five fiscal periods, depending on which quarter is being
presented. Details of these calculations and a reconciliation to
information from our GAAP financial statements is set forth in the Financial
Information Release. We believe return on capital is an accepted
measure of earnings efficiency in relation to capital employed, but it is a
non-GAAP performance measure that is not defined or calculated in the same
manner by all companies. This measure should not be considered in
isolation or as an alternative to net income or other performance measures, but
we believe it provides useful information to investors by comparing the
operating income we produce to the asset base used to generate that
income. Also, annualized operating income does not necessarily
indicate results that would be expected for the full fiscal year. We
note that, particularly for return on capital measured at the segment level, not
all assets are allocated to our operating segments, and there are assets held at
the corporate (unallocated) level that may provide support to a segment’s
operations and yet are not included in the asset base used to calculate that
segment’s return on capital. Thus, the average return on capital for
the company’s segments will generally be higher than the company’s overall
return on capital. Management uses return on capital to evaluate the
company’s earnings efficiency and the relative performance of its segments, and
return on capital is also used as a financial goal for purposes of determining
certain management incentive compensation awards.
Item
9.01 (d) -- Exhibits
99(a)
News Release dated December 1, 2009
99(b)
Financial Information Release dated December 1, 2009