La-Z-Boy Incorporated - University of Oregon Investment Group

UNIVERSITY OF OREGON
INVESTMENT GROUP
April 30, 2010
Consumer Goods
La-Z-Boy Incorporated
BUY
Stock Data
Price (52 weeks)
Symbol (Exchange)
Beta
Standard Error of Beta
Shares Outstanding
Average daily volume
(3 month average)
$1.81 – $15.46
LZB (NYSE)
2.05
.335
51.55 million
771,965
Current market cap
$748.96 million
Valuation (per share)
DCF Analysis
Comparables Analysis
Target Price
Current Price
(as of 4/29/10)
17.17
17.31
17.24
14.01
Summary Financials
Revenue
Net Income
Operating Cash Flow
Earnings/Diluted
Share
Q3 Ended 1/23/10
305.09 million
10.97 million
22.69 million
$0.21
BUSINESS OVERVIEW
La-Z-Boy Incorporated (LZB) is the most recognized name in the furniture industry. The Company manufactures,
markets, imports, distributes and sells upholstery products and casegoods (wood) furniture. LZB operates in three
segments—the Upholstery Group, the Casegoods Group and the Retail Group—and is the largest reclining-chair
manufacturer in the world and one of North America’s largest manufacturers of upholstered furniture. According to
the May, 2009 top 100 ranking by industry trade publication Fortune Today, the La-Z-Boy Furniture Galleries®
network of stores comprises the industry’s largest single-branded upholstered furniture retailer in North America, as
well as the third largest manufacturer/distributor of residential furniture, as measured by annual sales volume. The
Covering Analyst: Adam Block
Email: ablock@uoregon.edu
The University of Oregon Investment Group (UOIG) is a student run organization whose purpose is strictly educational.
Member students are not certified or licensed to give investment advice or analyze securities, nor do they purport to be.
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addition, members of UOIG may attempt to obtain employment positions with firms held in UOIG’s portfolio.
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Company owns 68 La-Z-Boy Furniture Galleries® retail locations, plus another 222 La-Z-Boy Furniture Galleries®
stores which are independently owned and operated. In addition, LZB supports certain independent dealers who
cannot sufficiently carry out their business activities without the Company’s financial support. These dealers are
referred to as Variable Interest Entities (VIE). Floral City Furniture was founded in 1927, incorporated in Michigan
in 1941, and was renamed to La-Z-Boy Incorporated in 1996. The Company is based in Monroe, Michigan.
BUSINESS MODEL AND REVENUE BREAKDOWN
In addition to the Furniture Galleries®, the Company also sells their products through proprietary distribution spaces
called ComfortStudios, which are areas within a larger retailer that are dedicated to showcasing La-Z-Boy furniture. At
the end of fiscal 2009, LZB had 466 ComfortStudios and they expect to open approximately 30 more during fiscal
2010. A few of La-Z-Boy’s smaller operating segments—Kincaid, England and Lea—also have similar in-store gallery
spaces.
The company’s principal operating segments are the Upholstery Group, the Casegoods Group, and the Retail Group.
Upholstery Group. In terms of revenue, the
Company’s largest segment is the Upholstery
Group, which entails the manufacturing and
sales of upholstered furniture to furniture
retailers and proprietary stores. This group
includes La-Z-Boy, the Company’s largest
operating unit, as well as Bauhaus and
England. Upholstered furniture includes
recliners and motion furniture, sofas,
loveseats, chairs, ottomans, sleeper sofas,
sectionals and modulars.
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Casegoods Group. This group primarily markets and distributes manufactured or imported wood furniture to furniture
retailers. Products include tables, chairs, entertainment centers, headboards, dressers, accent pieces and some
coordinated upholstered furniture. Operations in the Casegoods Group are American Drew/Lea, Hammary and
Kincaid.
Retail Group. The Retail Group primarily sells upholstered furniture to end consumers through the company’s retail
network. Operations in the Retail Group consist of 68 company-owned La-Z-Boy Furniture Galleries® located in
eight markets throughout the Midwest and East Coast of the United States.
BUSINESS AND GROWTH STRATEGIES
La-Z-Boy is committed to greatly reducing manufacturing costs and to improving their speed to market. In the fourth
quarter of fiscal 2008, the Company enacted a restructuring plan to consolidate all of their North American cutting
and sewing operations in Mexico and transfer production from their Tremonton, Utah plant to their five La-Z-Boy
manufacturing facilities. Their Utah facility ceased operations during the first quarter of fiscal 2009 and production at
their Mexican facility began in January 2009. By the end of fiscal 2010 the Company expects 75% to 80% of their
domestic cutting and sewing operations to be shifted to their Mexican facility, with the remainder in 2011. All of the
Company’s cut and sewn parts will be supplied from their Mexican facility or from suppliers in China given the lower
labor costs in these areas. LZB hopes these cost saving moves will improve their competitiveness and expects to see
the full benefit of this plan beginning in fiscal 2011.
In addition, LZB also reduced their employment by approximately 850 people company-wide to be more in line with
sales volume and the current economic environment. The Company believes the reduction in employment alone will
result in savings of $25 million to $30 million annually. They are also concentrated on keeping inventories in line
with today’s demand to further reduce operating expenses.
RECENT NEWS
March 1, 2010 (Yahoo!Finance)—Manufacturing Dips But Still Strong
A manufacturing survey by The Institute for Supply Management (ISM) lists industries that are doing well and ones
that are not doing so well in the manufacturing economy. The ISM reports that two industries consistently show up
as being weak: wood products and furniture. With a slowdown in the rate of both new and used home sales, the
furniture industry has lost one of its main drivers. When people purchase a home, they tend to decorate. Weak home
sales mean slow sales for firms like La-Z-Boy and Ethan Allen.
February 17, 2010 (Forbes)—Profits Rouse La-Z-Boy Shares
La-Z-Boy posted better-than-expected third-quarter performance. The Company beat the estimates of analysts polled
by Thomson Reuters, who predicted profits of 19 cents per share on sales of $301.4 million. The Company said it
earned $11 million, or 21 cents per share, in its fiscal third quarter, compared with a loss of $64.5 million, or $1.25 per
share in the year-ago period when the earnings were negatively impacted by a $60.5 million charge for asset
impairments and restructuring. Earnings in the most recent quarter included a 1 cent per share restructuring charge,
and a $4.4 million, or 5 cents per share, gain on anti-dumping duties received on imports of wood bedroom furniture
from China. Sales for the quarter ending Jan. 23, 2010 hit $305.09 million, up 5.7% from $288.6 million. Shares rose
96 cents, or 8.3%, to $12.60. The company’s fastest-growing division in the third quarter was its upholstery segment,
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with sales rising 11% year-over-year. Raymond James analyst Budd Bugatch says he increased his 2010 expectations
for La-Z-Boy after the company's surprisingly solid results. Bugatch expects a 7.7% sales increase, incorporating
expected savings from the company's Mexican cut and sew operation.
INDUSTRY
PRIMARY INFLUENCES
Disposable Income. The Household Furniture Manufacturing in the US
PER CAPITA DISPOSABLE INCOME & FORECASTS
industry is highly influenced by the condition of the economy.
In particular, consumer spending is the most important
influence to industry performance. A number of economic
conditions affect the level of consumer spending, including
general business conditions, uncertainty in the housing and
credit markets, consumer debt, interest rates, taxation,
unemployment levels, and disposable income. Household
disposable income is a key demand determinant for the quantity
and quality of home furniture purchases. The subprime
mortgage collapse and high unemployment have caused
economic uncertainty and a decline in discretionary spending,
resulting in a drop in demand for household furniture and an
overall decline in industry performance. Fortunately, based on
data from the Bureau of Economic Analysis, analysts expect per capita disposable income in the US to improve by
1.3% in 2011 and will continue to annually increase over the next five years at an average rate of 1.5%. This positive
change will improve consumer confidence and promote demand for furniture items.
Consumer Sentiment.
Consumer sentiment affects
consumers' perceptions of economic wellbeing. When
sentiment is high, the overall demand for consumer
goods improves, including the demand for furniture
products. Due to the current economic environment,
consumers have become pessimistic, reducing retail sales
overall, but especially for more expensive and high-end
items like furniture. The University of Michigan—
collectively with Reuters—conducts a monthly telephone
survey of consumer confidence called the Michigan
Consumer Sentiment Index (MCSI) that gathers
information on consumer expectations regarding the
overall state of the economy. The MCSI Surveys of
Consumers website reports that the survey ―is a rotating
panel survey based on a nationally representative sample that gives each household in the coterminous U.S. an equal
probability of being selected.‖ As the chart above indicates, consumer sentiment weakened significantly from middle
2007 to middle 2009, but appears to be recovering. Overall, the data seems to indicate that consumers anticipate the
economy to improve. Surveys of Consumers chief economist Richard Curtin expects inflation adjusted personal
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consumption expenditures to increase by 1.9% in 2010. Despite the small scale of these economic improvements, the
rise in consumer confidence will help increase demand for products offered by LZB and will benefit industry
performance overall.
Housing Market.
The housing market is another significant demand determinant for furniture products.
Expectations of a slow housing market recovery should translate to slightly increasing demand for furniture products.
As homeownership continues to rise, sales in the furniture industry will also improve.
Imports. Industry revenue has significantly decreased due to increasing penetration of low-priced imports, particularly
from China. This price competition with international producers has reduced the profitability of many manufacturers
by forcing them to keep prices low and to absorb more costs. LZB is in a good position to cope with the overseas
competition by consolidating their manufacturing processes to Mexico and China, which will lower their costs, help
them remain competitive and improve their profitability.
The success of La-Z-Boy’s business depends on the same factors that influence the industry as a whole. The current
economic conditions have created an unprecedented weakness in the retail environment, which is having a negative
impact on the Company’s Retail Group. To counteract the loss of
revenue from poor retail sales, LZB continues to modify their cost
structure in their Retail division to reduce their operating expenses.
The industry is predicted to experience a slight recovery in 2011 and 2012
as economic conditions improve. The increasing competition from
imports will force many small businesses to exit the market. Over the five
years to 2015, revenue is anticipated to decrease at an average annualized
rate of 0.1% and the number of firms is expected to drop at an average
annualized rate of 1%.
As one of the most established firms in the industry, I expect La-Z-Boy to
weather the storm and ultimately benefit from the reduction in
competition. As more furniture manufacturers are forced to leave the
market, LZB’s market share will grow.
KEY PLAYERS
Competition in the industry is high and the domestic
market is fully saturated. Ashley Furniture Industries,
Inc. and Furniture Brands International, Inc. are the two
biggest players in the industry, accounting for slightly
more than 16% of revenue. Other relatively large players
in the industry are La-Z-Boy and Ethan Allen Interiors,
Inc. which combine for an estimated 7% of market share.
Due to falling sales and pinched profits, many smaller
furniture producers are left with little opportunity and are
being acquired by larger corporations as an alternative to
exiting the market altogether.
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S.W.O.T. ANALYSIS
STRENGTHS
Brand Awareness. La-Z-Boy is the most recognized name in the furniture industry and is the leading reclining-chair
manufacturer in the world. Their reputation makes them a familiar and trusted name worldwide.
Freight Contracts. The company has contracts with freight forwarders (companies that organize shipments for
individuals or other companies) that permit favorable shipping rates based on volume.
Exchange Rate Forwards. The Company has historically entered into forward foreign currency exchange contracts to
limit their exposure to changes in exchange rates. However, LZB had no forward contracts as of April 25, 2009.
WEAKNESSES
Luxury Products. Furniture is a high-end luxury good, so demand for the Company’s products can be highly volatile,
especially during times of economic turmoil.
Lack of Diversification. The Company’s only business is producing and distributing furniture, so they have little to no
diversification to mitigate the losses that occur during times of decreased demand for luxury goods.
OPPORTUNITIES
Disposable Income Improvement. As the economy recovers, the unemployment rate will decrease and per capita
disposable income will likely improve as well. When this occurs, consumers will be more willing to spend their money
on LZB’s products.
Mergers. Due to increasing competition and reduced profits, many smaller furniture producers face little opportunity,
creating a high potential for mergers. As a well established producer with the third highest market share, LZB could
benefit from the acquisition of a smaller firm.
∙Note: The Company 10-K does not mention any plans for acquisitions. However, this may change if the
opportunity arises.
Housing Market Improvement. As housing starts begin to increase with the recovery of the economy, demand for
furniture products will improve.
THREATS
Foreign Government Regulation. Due to increased reliance on foreign sourcing of their products, the company is more
vulnerable to potentially adverse actions by foreign governments. Changes to laws, regulations and policies related to
trade barriers, taxation and labor would significantly impact the Company’s operations.
Commodity Price Fluctuations. Fluctuations in the price and availability of wood, fabrics, leathers, upholstered filling
material, steel, and other raw materials used in manufacturing could increase cost of sales. LZB has a higher
concentration in upholstery sales (73%) than most of their competitors, making them more vulnerable to price and
quantity fluctuations of steel, polyurethane foam and fabric than most other furniture companies.
Limited Suppliers. The Company relies on a limited number of major suppliers for their raw materials. The majority of
the Company’s cut and sewn leather sets are purchased from one supplier in China. If any of these suppliers
encounter financial or other difficulties LZB could experience temporary disruptions in their manufacturing process.
Increasing Competition. During the past couple of years there has been an increase in competition in the Company’s
retail markets. Companies such as Costco, Home Depot, IKEA, Sam’s Club, Target, and Wal-Mart are now offering
products that compete with some of LZB’s product lines.
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PORTER’S 5 FORCES ANALYSIS
Supplier Power
Considering the majority of the Company’s cut and sewn leather sets are purchased from one supplier in China, the
degree of supplier power is high. Importing materials from abroad is an effective way of cutting costs; however,
depending on one supplier presents significant disadvantages. With few suppliers for furniture producers to choose
from, the bargaining power of the single Chinese supplier is very high, leaving LZB vulnerable to price manipulation.
At the same time, the high number of firms in the industry presents Chinese exporters with plenty of alternatives if
business with one firm goes sour. This independence further strengthens supplier power.
Barriers to Entry
Barriers to entry in this industry are high. The time and resources that is required to establish an effective distribution
network between suppliers, retailers, etc. may deter potential producers from entering the market. Producers must
form relationships with manufactures and suppliers of a vast variety of materials, including lumber, fiberboard, metals,
adhesive, fabrics, leathers, filling materials, etc. These relationships take time, patience and reputation to establish. In
addition, the top five players account for over 30% of industry revenue, posing a significant challenge for new
producers trying to gain market share. Entering this market also requires significant start-up capital for manufacturing
facilities.
Buyer Power
The bargaining power of customers is fairly low. The high number of furniture producers in the industry presents the
consumers with many alternatives to choose from. However, La-Z-Boy has the advantage of strong brand identity.
As the largest reclining-chair manufacturer in the world and one of North America’s largest manufacturers of
upholstered furniture, the Company has an established reputation which affords them power and mitigates much of
the customers’ buying power. In this industry, customers are generally price takers.
Threat of Substitutes
The threat of substitutes is high in this industry. The industry is saturated with furniture producers and product
differentiation between firms is relatively insignificant.
Degree of Rivalry
Taking the industry forces into account, the degree of rivalry in the furniture manufacturing industry is high.
COMPARABLES ANALYSIS
Companies used in the comparables analysis share similar exposure in the home furniture products industry and either
closely or directly compete with La-Z-Boy. La-Z-Boy, Ethan Allen Interiors Inc. (ETH), Furniture Brands
International Inc. (FBN), Hooker Furniture Corp. (HOFT), and Bassett Furniture Industries Inc. (BSET) are five
publicly traded competitors that directly compete for market share. All five of these companies offer similar products
and have comparable characteristics. Despite varying market caps, debt positions and beta coefficients, these
companies compete with LZB for the same customers and face very similar risks and opportunities. After closely
reviewing these companies, I found ETH, FBN, and HOFT to be La-Z-Boy’s purest competitors due to very similar
business operations and decided to weight them equally at 30%. In contrast, Bassett Furniture Industries also
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operates in an investment/real estate segment uncommon to LZB and its other competitors, which led me to weight
BSET less heavily at 10%.
COMPANIES
(company information obtained from Yahoo!Finance)
ETHAN ALLEN INTERIORS INC. (ETH: NYSE) WEIGHT: 30%
―Ethan Allen Interiors Inc., together with its subsidiaries, engages in the design, manufacture,
sourcing, sale, and distribution of various home furnishings and accessories, as well as related
marketing and brand awareness efforts in the United States. The company also markets home
furnishings and accessories to consumers through a network of company-owned design
centers. Its products include beds, dressers, armoires, tables, chairs, buffets, entertainment
units, home office furniture, and wood accents. The company also offers upholstery home
furnishing items, such as sleepers, recliners, chairs, sofas, loveseats, cut fabrics, and leather, as well as home accessory
and other items, including window treatments, wall decor, lighting, clocks, bedding and bedspreads, decorative
accessories, area rugs, and home and garden furnishings. As of June 30, 2009, Ethan Allen Interiors Inc. operated
through 293 retail design centers comprising 159 company-owned and operated centers, and 134 independentlyowned and operated centers. The company was founded in 1932 and is headquartered in Danbury, Connecticut.‖
FURNITURE BRANDS INTERNATIONAL INC. (FBN: NYSE) WEIGHT: 30%
―Furniture Brands International, Inc. designs, manufactures, sources, and
retails home furnishings. It offers case goods, including bedroom, dining room,
and living room furniture products; stationary upholstery products comprising
sofas, loveseats, sectionals, and chairs; motion upholstered furniture products consisting of recliners and sleep sofas;
occasional furniture products, such as accent pieces, home entertainment centers, and home office furniture products,
as well as wood, metal, and glass tables; and decorative accessories. The company markets its products under the
Broyhill, Lane, Thomasville, Drexel Heritage, Henredon, Hickory Chair, Pearson, Laneventure, and Maitland-Smith
brand names. Furniture Brands International sells its products through a network of independently owned furniture
retailers, national and regional department stores and chains, and trade showrooms, as well as through various retail
channels, including mass merchant stores, single-branded stores, independent dealers, and specialized interior
designers. As of December 31, 2009, it operated 37 stores. The company was founded in 1836 and is headquartered in
St. Louis, Missouri.‖
HOOKER FURNITURE CORP. (HOFT: NYSE) WEIGHT: 30%
―Hooker Furniture Corporation, together with its subsidiaries, designs, imports,
develops, and markets residential wood, metal, and upholstered furniture products
in North America. The company offers wood furniture products, including home
entertainment, home office, accent, dining, bedroom, and bath furniture under the
Hooker Furniture brand; and youth furniture under the Opus Designs by Hooker brand. It also offers motion and
stationary leather furniture, and occasional chairs. The company also offers various residential leather and fabric
upholstered furniture under the Bradington-Young upholstery brand; specializes in leather reclining and motion
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chairs, sofas, club chairs, and executive desk chairs; and offers upscale occasional chairs under the Sam Moore
upholstery brand. It serves retailers of residential home furnishings, including independent furniture stores, specialty
retailers, department stores, catalog merchants, interior designers, and national and regional retail chains. The
company was founded in 1924 and is headquartered in Martinsville, Virginia.‖
BASSETT FURNITURE INDUSTRIES INC. (BSET: NYSE) WEIGHT: 10%
―Bassett Furniture Industries, Incorporated, together with its subsidiaries, engages in the
manufacture, marketing, and retail of branded home furnishings in the United States. It
operates in three segments: Wholesale, Retail, and Investments/Real Estate. The Wholesale
segment designs, manufactures, sources, sells, and distributes furniture products to a network of Bassett Furniture
Direct (BFD) or Bassett Home Furnishings (BHF) stores, including independently-owned stores, company-owned
retail stores, and partnership licensees; and independent furniture retailers. This segment also involves in wood and
upholstery operations. The Retail segment operates 43 company-owned stores and 61 licensee-owned stores in
Arizona, Alabama, Arkansas, Florida, Georgia, Maryland, Massachusetts, Missouri, Mississippi, Illinois, New Mexico,
New York, North Carolina, South Carolina, Tennessee, Texas, and Virginia. The Investments/Real Estate segment
holds interest in the Bassett Industries Alternative Asset Fund, a portfolio of marketable securities; an investment in
the International Home Furnishings Center; and retail real estate utilized by licensee operated BFD and BHF stores.
The company was founded in 1902 and is based in Bassett, Virginia.‖
METRICS
In my comparables analysis I used EV/Gross Profit, EV/Revenue, and EV/OCF as my metrics. EV/Revenue was
chosen to compare total revenue streams generated by each firm, while accounting for overall company size.
Assuming that the four companies that I have chosen are indeed comparable to LZB, this will tell me what LZB’s
EV/Revenue metric is actually worth. I decided to use EV/Gross Profit to evaluate how efficiently management uses
labor and materials in the production process. Finally, EV/OCF was used to compare how well each company
produces operating cash flows. Again, these ratios should indicate what La-Z-Boy’s EV/Gross Profit and EV/OCF
metrics should be trading at. After applying these metrics in the evaluation of LZB, I came to an implied price of
$17.31. With a current price of $14.00, my comparables analysis determined LZB is undervalued by 23.61%.
DISCOUNTED CASH FLOW ANALYSIS
BETA
An initial beta of 2.30 was derived using a standard five-year monthly regression against the S&P 500. However, this
derivation yielded a standard error of .810, which I felt was unsatisfactory. In response, 2- and 3-year weekly
regressions were run. After considering the results of both regressions, I adopted the 2-year weekly regression, which
yielded a beta coefficient of 2.05 with a standard error of .335. I am confident this beta is an accurate implication of
the company’s sensitivity to fluctuations in the market.
REVENUES
After extensive research, it was determined that the Company’s revenue is greatly influenced by per capita disposable
income, housing starts and overall industry revenue. These three variables, in addition to historical revenues for LZB,
were used for a multi-variable regression analysis to produce a model to be used for revenue forecasts. To forecast
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the Company’s yearly revenue, yearly data projections on per capita disposable income, housing starts and overall
industry revenue was obtained from various sources and applied to the model. Relevant documents used to construct
my revenue model are included in the appendix.
COST OF DEBT
The Company is able to select interest rates based on LIBOR or the prime rate. Their LIBOR spread fluctuates
between 1.75% and 2.25% based on liquidity. During fiscal 2009 this spread was 2.0%. Their prime rate spread
fluctuates between 0.0% and 0.5%, also based on liquidity. During fiscal year 2009 this spread was 0.25%. At April 25,
2009 the Company’s borrowing rates ranged from 2.5% to 3.5%.
The 1 year LIBOR rate as of April 25, 2010 was .94%. Applying their fiscal 2009 spread, the company could
reasonably barrow at a LIBOR-adjusted rate of 2.94%. The prime rate—as reported by the Wall Street Journal's bank
survey—is 3.25%. Applying their fiscal 2009 spread, the company could reasonably barrow at a prime rate-adjusted
rate of 3.5%. For my projections, I averaged these LIBOR- and prime rate-adjusted rates to determine the Company’s
cost of debt. By doing so, I settled with a rate of 3.22%.
TAX RATE
Despite fluctuations in the Company’s effective tax rate over the past few years, I had no basis to change their tax rate
from the statutory rate of 35%.
CAPITAL EXPENDITURES
Capital expenditures consist primarily of the expansion of production facilities. However, LZB is aggressively
consolidating their operations in Mexico and explicitly states that the Company will limit capital expenditures to those
necessary to improve productivity. They do not expect any major land or building additions will be needed to
increase capacity in the foreseeable future. This was my basis for carrying a 1 percent capital expenditure growth rate
through 2020.
RECOMMENDATION
My final recommendation is based on equal DCF and comparables analyses weightings. My DCF and comparables
analyses yielded implied prices of $17.17 and $17.31, respectively. Using the 50/50 weighting, I reached a final target
price of $17.24. The current market price for LZB as of market close April 29, 2010 was $14.01. This variance from
my target price suggests the market has undervalued the company by 23.05%. Factors that influence the furniture
industry—such as per capita disposable income, consumer sentiment and housing upstarts—are expected to slightly
improve in the coming years. Though industry performance as a whole is anticipated to decrease until 2015 at an
average annualized rate of 0.1%—despite brief recovery in 2011 and 2012—this loss in industry revenue is miniscule
and I expect it will be fairly inconsequential to La-Z-Boy’s performance. As suggested previously, the pinching of
profits during these years may even prove opportunistic for LZB as firms are forced to leave the market, creating
room for La-Z-Boy to increase its market share. In addition, LZB may look to acquire struggling firms if the right
opportunity presents itself. Based on my quantitative and qualitative analysis, I anticipate a promising future for La-ZBoy and recommend a BUY for all portfolios.
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APPENDIX 1 – COMPARABLES ANALYSIS
¹EV = MARKET CAP + DEBT + PREFERRED SHARES – CASH AND EQUIVALENTS
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APPENDIX 2 – DISCOUNTED CASH FLOWS ANALYSIS
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APPENDIX 3 – DISCOUNTED CASH FLOWS ANALYSIS ASSUMPTIONS
APPENDIX 4 – BETA SENSITIVITY ANALYSIS
APPENDIX 6 – BETA REGRESSION
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APPENDIX 7 – REVENUE
REVENUE vs. INDUSTRY
2400000
Revenue Back Testing
2400000
2000000
REVENUE
2000000
1600000
1200000
1600000
1200000
800000
800000
400000
1994 1996 1998 2000 2002 2004 2006 2008
REVENUEF
REVENUE
400000
14
2.00E+07 2.50E+07 3.00E+07 3.50E+07 4.00E+07
INDUSTRY
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FURNATURESPENDING
1700
INDUSTRY
4.00E+07
1600
3.60E+07
1500
3.20E+07
1400
2.80E+07
1300
2.40E+07
1200
1100
2.00E+07
1994 1996 1998 2000 2002 2004 2006 2008
1994 1996 1998 2000 2002 2004 2006 2008
REVENUE
UPSTARTS
2400000
2400
2000000
2000
1600000
1600
1200000
1200
800000
800
400000
400
1994 1996 1998 2000 2002 2004 2006 2008
1994 1996 1998 2000 2002 2004 2006 2008
APPENDIX 8 – SOURCES
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∙FactSet
∙Reuters
∙Sec.gov
∙Yahoo!Finance
∙ IBISWorld
∙Investopedia.com
∙―Surveys of Consumers—Thomson Reuters, University of Michigan‖
www.sca.isr.umich.edu/main.php
∙Bureau of Labor Statistics –Consumer Price Index
www.bls.gov/cpi/
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