Published:
La-Z-Boy Reports Fiscal 2009 First-Quarter Results
MONROE, Mich., Aug. 19 /PRNewswire-FirstCall/ -- La-Z-Boy Incorporated
(NYSE: LZB) today reported its operating results for the fiscal first quarter
ended July 26, 2008.
Net sales for the quarter were $322 million, down 6.6% compared with the
prior-year period. The company reported a loss from continuing operations of
$8.5 million, or a loss of $0.17 per share. For the same period last year,
the company posted a loss from continuing operations of $8.5 million, or $0.17
per share. The fiscal 2009 first-quarter results include a $0.09 per share
restructuring charge, primarily related to the closure of the company's
Tremonton, Utah andUnited Kingdom operations and a $0.03 per share intangible
write-down related to the goodwill associated with the company's U.K.
operation. Last year's first quarter included a restructuring charge of $0.04
related to the closure of various manufacturing facilities and retail
locations.
Kurt L. Darrow, La-Z-Boy's President and Chief Executive Officer, said:
"In what remains a difficult environment for the home furnishings industry,
due to significant macroeconomic pressures, we continue to be diligent in
improving the efficiencies of our operations. Although our fiscal first
quarter is historically our weakest, we strengthened our operating performance
during the period and expanded our margins on a 6.6% decline in sales. While
we anticipate it being some time before we see an across-the-board industry
improvement, we believe our balance sheet and the strength of our business
model will carry us through this period."
Upholstery
For the fiscal 2009 first quarter, sales in the company's upholstery
segment decreased 6.9% to $237.1 million compared with $254.8 million in the
prior year's first quarter. The operating margin, however, increased to 4.2%
from 3.5% in last year's comparable quarter. Darrow stated, "With the
cellular conversion at our La-Z-Boy manufacturing facilities complete, we are
realizing the anticipated efficiencies throughout our production process. In
addition to the overall decline in volume, the furniture industry, including
La-Z-Boy, typically takes a one-week plant shutdown for vacation in July,
which hampers the ability to absorb fixed overhead costs comparable to other
quarters." The decline in sales volume was positively impacted by a change in
contractual relationships with some third-party freight carriers that resulted
in the recognition of revenue at the shipping point rather than at delivery
(see reference in the company's fiscal 2008 Form 10-K).
During the quarter, the company incurred restructuring charges related to
the closure of itsTremonton, Utah facility and began the liquidation of its
United Kingdom import and distribution operation, as it transitions to a
licensing agreement with a new partner. There was also an intangible write-
down of goodwill associated with the company's U.K. operation. The company's
newMexico cut-and-sewn operation is on schedule to be completed in time for
production to begin in February 2009.
For the fiscal 2009 first quarter, the La-Z-Boy Furniture Galleries(R)
store system, which includes both company-owned and independent-licensed
stores, opened one new store, relocated and/or remodeled two and closed three,
bringing the total store count to 333, of which 217 are in the New Generation
format. For the remainder of fiscal 2009, the network plans to open 12 New
Generation format La-Z-Boy Furniture Galleries(R) stores (four new stores and
eight will be either remodels or relocations) and will close nine to 12. In
the second quarter of fiscal 2009, the network plans to open one new store,
relocate one and close three stores.
System-wide, for the second calendar quarter of 2008, including company-
owned and independent-licensed stores, same-store written sales, which the
company tracks as an indicator of retail activity, were down 1.9%. Total
written sales, which include new stores, were down 1.6%.
Casegoods
For the 2009 first quarter, casegoods sales were $48.1 million, down 10.2%
from $53.6 million in the prior year's first quarter. The segment's operating
margin decreased to 2.9% from 4.9% in last year's fiscal first quarter.
Darrow commented, "Our casegoods business continues to face significant
challenges in this environment. With bedroom and dining room group purchases
typically higher-ticket transactions than upholstered furniture, it is
apparent the consumer is postponing these purchases to a greater extent than
they are other furniture categories. Our team remains committed to running
the business with a cost structure aligned with the current lower-volume
environment and is focused on expanding its distribution to other channels."
Retail
For the quarter, retail sales were $42.4 million, down 6.2% compared with
the prior-year period. The retail group posted an operating loss for the
quarter, and its operating margin was (23.6%). Darrow stated, "On a decline
in sales, our operating loss was flat against last year as we improved our
gross margin in the segment. With the costs of consolidating our warehouse
and IT systems behind us, we have the ability to operate more efficiently
throughout the year, although we remain concerned about weaker consumer
discretionary spending impacting our volume. We continue to examine all
aspects of the segment's cost structure and are focused on improving its
performance."
During the first quarter, the company's retail segment did not open,
remodel or relocate any company-owned stores and it closed one store. At the
end of the first quarter, the company owned 69 stores, including 56 in the New
Generation format, or 81% versus 69 company-owned stores last year at this
time, of which 48, or 70%, were in the new format. For the second quarter of
fiscal 2009, the company-owned segment plans to open one new store and
relocate one.
Balance Sheet
The company's debt-to-capitalization ratio stood at 18.5% at the end of
the first quarter compared with 24.4% a year ago. Additionally, the company
reduced its inventories and receivables by $31 million since the end of fiscal
2008, which was offset by a decline in other current liabilities.
Business Outlook
Commenting on the company's business outlook, Darrow said: "The overall
macroeconomic environment continues to be challenging. Increased oil prices,
higher interest rates and a depressed housing market, combined with low
consumer confidence levels, are having an effect on the home furnishings
industry across the board. We remain committed to running our business with
the greatest efficiency possible and believe we have the opportunity to
improve our performance. As we announced last quarter, due to seasonality
issues and the way in which our fiscal year (May through April) rolls out, we
anticipate the second half of our fiscal year to be operationally stronger
than the first half."
Forward-looking Information
Any forward-looking statements contained in this news release are based on
current information and assumptions and represent management's best judgment
at the present time. Actual results could differ materially from those
anticipated or projected due to a number of factors. These factors include,
but are not limited to: (a) changes in consumer confidence; (b) changes in
demographics; (c) further changes in the housing market; (d) the impact of
terrorism or war; (e) continued energy price changes; (f) the impact of
logistics on imports; (g) the impact of interest rate changes; (h) changes in
currency exchange rates; (i) competitive factors; (j) operating factors, such
as supply, labor or distribution disruptions including changes in operating
conditions or costs; (k) effects of restructuring actions; (l) changes in the
domestic or international regulatory environment; (m) ability to implement
global sourcing organization strategies; (n) fair value changes to our
intangible assets due to actual results differing from projected; (o) the
impact of adopting new accounting principles; (p) the impact from natural
events such as hurricanes, earthquakes and tornadoes; (q) the ability to
procure fabric rolls and leather hides or cut and sewn fabric sets
domestically or abroad; (r) continued decline in the credit market and
potential impacts on our customers; (s) those matters discussed in Item 1A of
our fiscal 2008 Annual Report and factors relating to acquisitions and other
factors identified from time to time in our reports filed with the Securities
and Exchange Commission. We undertake no obligation to update or revise any
forward-looking statements, either to reflect new developments or for any
other reason.
Additional Information
This news release is just one part of La-Z-Boy's financial disclosures and
should be read in conjunction with other information filed with the Securities
and Exchange Commission, which is available at http://www.la-z-
boy.com/about/investorRelations/sec_filings.aspx. Investors and others
wishing to be notified of future La-Z-Boy news releases, SEC filings and
quarterly investor conference calls may sign up at:
http://www.la-z-boy.com/about/investorRelations/IR_email_alerts.aspx .
Background Information
La-Z-Boy Incorporated is one of the world's leading residential furniture
producers, marketing furniture for every room of the home. The La-Z-Boy
Upholstery Group companies are Bauhaus,England and La-Z-Boy. The La-Z-Boy
Casegoods Group companies are American Drew/Lea, Hammary and Kincaid.
The corporation's proprietary distribution network is dedicated
exclusively to selling La-Z-Boy Incorporated products and brands, and includes
333 stand-alone La-Z-Boy Furniture Galleries(R) stores, 21 La-Z-Boy In-Store
Galleries and 387 Comfort Studios, in addition to in-store gallery programs at
the company's Kincaid,England and Lea operating units. According to industry
trade publication In Furniture, the La-Z-Boy Furniture Galleries retail
network isNorth America's largest single-brand furniture retailer. Additional
information is available at http://www.la-z-boy.com/.
LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF OPERATIONS
First Quarter Ended
(Unaudited, amounts in thousands, except
per share data) 7/26/08 7/28/07
Sales $321,652 $344,396
Cost of sales
Cost of goods sold 235,115 259,143
Restructuring 5,795 2,561
Total cost of sales 240,910 261,704
Gross profit 80,742 82,692
Selling, general and administrative 91,837 94,508
Write-down of intangibles 1,292 -
Restructuring 781 1,120
Operating loss (13,168) (12,936)
Interest expense 1,495 2,097
Interest income 932 882
Other income, net 143 566
Loss from continuing operations before
income taxes (13,588) (13,585)
Income tax benefit (5,044) (5,043)
Loss from continuing operations (8,544) (8,542)
Loss from discontinued operations (net of tax) -- (152)
Net loss $(8,544) $(8,694)
Basic average shares 51,428 51,380
Basic loss from continuing operations per share $(0.17) $(0.17)
Discontinued operations per share (net of tax) -- --
Basic net loss per share $(0.17) $(0.17)
Diluted average shares 51,428 51,380
Diluted loss from continuing operations per share $(0.17) $(0.17)
Discontinued operations per share (net of tax) -- --
Diluted net loss per share $(0.17) $(0.17)
Dividends paid per share $0.04 $0.12
LA-Z-BOY INCORPORATED
CONSOLIDATED BALANCE SHEET
(Unaudited, amounts in thousands) 7/26/08 4/26/08
Current assets
Cash and equivalents $11,110 $14,982
Receivables, net 180,311 200,422
Inventories, net 167,455 178,361
Deferred income taxes-current 12,306 12,398
Assets of discontinued operations -- --
Other current assets 25,907 21,325
Total current assets 397,089 427,488
Property, plant and equipment, net 170,235 171,001
Deferred income taxes-long term 25,853 26,922
Goodwill 45,941 47,233
Trade names 9,006 9,006
Other long-term assets 84,805 87,220
Total assets $732,929 $768,870
Current liabilities
Current portion of long-term debt $9,086 $4,792
Accounts payable 49,973 56,421
Accrued expenses and other current liabilities 88,655 102,700
Total current liabilities 147,714 163,913
Long-term debt 90,618 99,578
Other long-term liabilities 54,553 54,783
Contingencies and commitments -- --
Shareholders' equity
Common shares, $1 par value 51,428 51,428
Capital in excess of par value 202,562 209,388
Retained earnings 187,289 190,215
Accumulated other comprehensive income (1,235) (435)
Total shareholders' equity 440,044 450,596
Total liabilities and shareholders' equity $732,929 $768,870
LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
First Quarter Ended
(Unaudited, amounts in thousands) 7/26/08 7/28/07
Cash flows from operating activities
Net loss $(8,544) $(8,694)
Adjustments to reconcile net loss
to cash provided by (used for)
operating activities
(Gain)/loss on sale of discontinued
operations (net of tax) (2,066) 52
Write-down of intangibles 1,292 --
Restructuring 6,576 3,681
Provision for doubtful accounts 4,203 2,114
Depreciation and amortization 5,954 6,220
Stock-based compensation expense 869 861
Change in receivables 14,170 22,597
Change in inventories 10,906 (6,071)
Change in payables (6,448) (15,473)
Change in other assets and liabilities (23,632) (23,298)
Change in deferred taxes 1,161 (1,475)
Total adjustments 12,985 (10,792)
Net cash provided by (used for)
operating activities 4,441 (19,486)
Cash flows from investing activities
Proceeds from disposals of assets 4,981 6,415
Capital expenditures (7,372) (9,629)
Purchases of investments (5,449) (6,622)
Proceeds from sales of investments 5,794 6,792
Change in other long-term assets 71 20
Net cash used for investing activities (1,975) (3,024)
Cash flows from financing activities
Proceeds from debt 14,635 705
Payments on debt (18,857) (900)
Stock issued for stock and employee
benefit plans (2) (22)
Dividends paid (2,075) (6,209)
Net cash used for financing activities (6,299) (6,426)
Effect of exchange rate changes on cash
and equivalents (39) 1,001
Change in cash and equivalents (3,872) (27,935)
Cash and equivalents at beginning of period 14,982 51,721
Cash and equivalents at end of period $11,110 $23,786
Cash paid (net of refunds) during period -
income taxes $923 $3,135
Cash paid during period - interest $1,126 $1,910
LA-Z-BOY INCORPORATED
Segment Information
(Unaudited, amounts in thousands)
First Quarter Ended
(Unaudited amounts in thousands) 7/26/08 7/28/07
(13 weeks) (13 weeks)
Sales
Upholstery Group $237,118 $254,757
Casegoods Group 48,121 53,574
Retail Group 42,427 45,231
VIEs/Eliminations (6,014) (9,166)
Consolidated $321,652 $344,396
Operating income (loss)
Upholstery Group $9,857 $8,867
Casegoods Group 1,377 2,600
Retail Group (10,010) (10,074)
Corporate and Other* (6,524) (10,648)
Restructuring (6,576) (3,681)
Intangible Write-down (1,292) --
$(13,168) $(12,936)
* Variable Interest Entities ("VIEs") are included in corporate and
other.
SOURCE La-Z-Boy Incorporated
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