Note 9: Variable Interest Entities

Our financial statements include the accounts of certain entities in which we hold a controlling interest based on exposure to economic risks and potential rewards (variable interests) for which we are the primary beneficiary. Accounting guidance states that a variable interest entity (“VIE”) must be consolidated if the enterprise has both (a) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance, and (b) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

We have a special operating agreement in place with one independent dealer that is a VIE which causes us to be considered its primary beneficiary. Through January 31, 2011, we consolidated a second independent dealer because of a similar operating agreement. During the fourth quarter of fiscal 2011 we acquired the fifteen stores of this VIE, and those stores are now included in our Retail Group. As a result, our VIEs’ results included eight stores during the first quarter of fiscal 2012 and 23 stores during the first quarter of fiscal 2011.

The table below shows the amount of assets and liabilities of our single remaining VIE included in our Consolidated Balance Sheet as of July 30, 2011, and April 30, 2011:

	As of
(Unaudited, amounts in thousands)	7/30/11		4/30/11
Cash and equivalents	$	1,029	$	1,642
Receivables, net		18		20
Inventories, net		2,353		2,719
Other current assets		74		79
Property, plant and equipment, net		301		374
Other long-term assets, net		204		188
Total assets	$	3,979	$	5,022

Accounts payable	$	143	$	278
Accrued expenses and other current liabilities		1,935		2,198
Other long-term liabilities		359		339
Total liabilities	$	2,437	$	2,815

In addition to our consolidated VIE, we had significant interests in three independent La-Z-Boy Furniture Galleries® dealers for which we are not the primary beneficiary. Our total exposure to losses related to these dealers as of July 30, 2011 and April 30, 2011 was $4.7 million and $5.0 million, respectively, which consists primarily of past due accounts receivable as well as notes receivable, net of reserves and collateral on inventory and real estate. We have not provided additional financial or other support to these dealers during fiscal 2012 and have no obligations or commitments to provide further support.