MONROE, Mich., Aug. 14 /PRNewswire-FirstCall/ -- La-Z-Boy
Incorporated (NYSE:LZB) today reported its operating results for
the first fiscal quarter ended July 28, 2007. Net sales for the
quarter were $344.4 million, down 12.6% compared with the
prior-year period. The company posted a loss of $8.7 million, or
$0.17 per share, which includes a restructuring charge of $0.04 per
share, related to the previously announced closure and
consolidation of various facilities and retail locations. In last
year's first quarter, the company posted earnings of $2.3 million,
or $0.04 per share. This included $0.02 from discontinued
operations, primarily resulting from a gain on the sale of a
division, as well as a tax benefit from a change in Canadian tax
law, which reduced the effective income tax rate for the period.
Kurt L. Darrow, La-Z-Boy's President and Chief Executive Officer,
said: "Against the backdrop of ongoing challenging business
conditions pervasive throughout the furniture industry, our results
reflect a significant drop in volume, which made it difficult to
absorb our current fixed costs. Additionally, our first quarter is
typically our slowest reporting period, due to seasonality factors,
including the scheduled vacation shutdown in July at our plants,
and is not indicative of our expectations for the full fiscal
year." Upholstery For the fiscal 2008 first quarter, sales in the
company's upholstery segment decreased 13.8% to $254.8 million
compared with $295.4 million in the prior year's first quarter. The
segment's operating margin decreased to 3.5% from 6.0% in the
year-ago period. Darrow stated, "We are continuing to address our
cost structure and are executing on our strategic plan to convert
our La-Z-Boy branded facilities to the cellular production process.
The conversion is on schedule and will be completed in our fiscal
fourth quarter." Darrow continued, "Our incoming order rate in July
improved versus the first two months of the quarter and,
importantly, we believe today's order rate is more reflective of
actual demand as retailers have worked through their high inventory
levels. In the meantime, however, we further aligned our capacity
this quarter, by closing four facilities. While our capacity today
more closely matches the industry's overall dampened demand, we did
experience manufacturing inefficiencies in the quarter as we
shifted production to other plants." For the quarter, the La-Z-Boy
Furniture Galleries(R) store system, which includes both
company-owned and independent-licensed stores, opened three new
stores, relocated and/or remodeled three and closed six, bringing
the total store count to 333, of which 196 are in the New
Generation format. For the second quarter 2008, the network plans
to open 11 New Generation format La-Z- Boy Furniture Galleries(R)
stores, of which five will be new stores and six will be store
remodels or relocations. System-wide, for the second calendar
quarter, including company-owned and independent-licensed stores,
same-store written sales, which the company tracks as an indicator
of retail activity, as well as total sales, were down 7%. Casegoods
For the first quarter, casegoods sales were $53.6 million, down
12.2% from the prior year's first quarter. The segment's quarterly
operating margin was down slightly to 4.9% versus 5.3% in last
year's comparable period. Darrow commented, "On a double-digit
sales decline, our operating margin decreased only slightly,
reflecting the higher variable cost structure in the business
combined with greater efficiencies at our domestic operations.
However, in an effort to control inventory, our domestic facilities
took additional down days beyond the normal vacation shutdown. As
we move into the Fall, we are focused on increasing revenues
through new product introductions and expanding our channels of
distribution." Retail For the quarter, retail sales were $45.2
million, down 13.4% compared with last year's comparable period.
The retail group posted an operating loss for the quarter and its
operating margin was (22.3%). The segment's results were primarily
impacted by significantly lower sales, which made it difficult to
cover fixed costs, particularly the higher occupancy costs
associated with the company's new stores. Darrow stated, "We are
making ongoing changes to our retail business model. We are
removing significant costs through the consolidation of our
warehouses and IT systems and are opening additional stores to
garner better penetration in each market. However, for our
performance to improve to an acceptable range, our current base of
stores needs to perform at higher volume levels." During the first
quarter, the company's retail segment opened one new company-owned
store, and closed two. At the end of the first quarter, the company
owned 69 stores, including 48 in the New Generation format, or
about 70%, versus 68 company-owned stores last year at this time,
of which 31, or 45%, were in the new format Restructuring During
the quarter, a pre-tax restructuring charge of $3.7 million was
recorded. The charge is primarily related to expenses associated
with the closure and consolidation of manufacturing and retail
facilities, including related contract termination costs for
leases, severance and benefits and the write-off of certain
leasehold improvements. Balance Sheet At the end of the fiscal 2008
first quarter, the company's debt to capitalization ratio was
24.1%. Inventories stood at $202.8 million, down from $238.8 in the
prior-year quarter and up slightly from fiscal year end 2007. Cash
used for operations during the quarter was $19.4 million mainly as
a result of significantly lower payables and accrued liabilities
which relate to the lower sales volume. The company did not
repurchase shares in the fiscal first quarter and has authorization
to purchase approximately 5.4 million additional shares. Business
Outlook Commenting on the company's business outlook, Darrow said:
"The external environment for home furnishings remains challenging,
although it is important to note that we do not believe today's
revenue stream is indicative of the run rate for the next 12 to 18
months. We will continue to adjust our cost structure based on
anticipated future demand while focusing on superior levels of
service to our customers. As we announced last quarter, we expect
sales for the fiscal 2008 year to be down 5% to 10% compared with
fiscal 2007 and expect earnings per share to be in the range of
$0.45 to $0.60 per share compared with $0.38 per share from
continuing operations in fiscal 2007. This estimated range does not
include restructuring charges, potential income from any
anti-dumping monies or gains/losses on the sale of discontinued
operations." 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) changes in
housing sales; (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 those projected; (o) the impact of
adopting new accounting principles; (p) the impact from natural
events such as hurricanes, earthquakes and tornadoes; (q) the
impact of retail store relocation costs, the success of new stores
or the timing of converting stores to the New Generation format;
(r) the ability to procure fabric rolls or cut and sewn fabric sets
domestically or abroad; (s) the ability to sell the discontinued
operations for their recorded fair value; (t) those matters
discussed in Item 1A of the company's 10K 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, La-Z-Boy and La-Z-Boy, U.K. The La-Z-Boy
Casegoods Group companies are American Drew, Hammary, Kincaid and
Lea. The corporation's proprietary distribution network is
dedicated exclusively to selling La-Z-Boy Incorporated products and
brands, and includes 336 stand-alone La-Z-Boy Furniture
Galleries(R) stores and 281 La-Z-Boy In- Store Galleries, 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 is North 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 Percent of Sales (Unaudited, amounts in thousands,
except % Over per share data) 7/28/07 7/29/06 (Under) 7/28/07
7/29/06 Sales $344,396 $393,923 -12.6 % 100.0 % 100.0 % Cost of
sales Cost of goods sold 259,143 296,008 -12.5 % 75.2 % 75.1 %
Restructuring 2,561 - N/M 0.7 % - Total cost of sales 261,704
296,008 -11.6 % 76.0 % 75.1 % Gross profit 82,692 97,915 -15.5 %
24.0 % 24.9 % Selling, general and administrative 94,508 94,683
-0.2 % 27.4 % 24.0 % Restructuring 1,120 - N/M 0.3 % - Operating
income (loss) (12,936) 3,232 -500.2 % -3.8 % 0.8 % Interest expense
2,097 2,526 -17.0 % 0.6 % 0.6 % Other income, net 1,448 270 436.3 %
0.4 % 0.1 % Income (loss) from continuing operations before income
taxes (13,585) 976 N/M -3.9 % 0.2 % Income tax benefit (5,043)
(116) N/M 37.1 %* -11.9 %* Income (loss) from continuing operations
(8,542) 1,092 -882.2 % -2.5 % 0.3 % Income (loss) from discontinued
operations (net of tax) (152) 1,203 -112.6 % - % 0.3 % Net income
(loss) $(8,694) $2,295 -478.8 % -2.5 % 0.6 % Basic average shares
51,380 51,787 Basic income (loss) from continuing operations per
share $(0.17) $0.02 Discontinued operations per share (net of tax)
- 0.02 Basic net income (loss) per share $(0.17) $0.04 Diluted
average shares 51,380 51,971 Diluted income (loss) from continuing
operations per share $(0.17) $0.02 Discontinued operations per
share (net of tax) - 0.02 Diluted net income (loss) per share
$(0.17) $0.04 Dividends paid per share $0.12 $0.12 *As a percent of
pretax income, not sales. N/M = not meaningful LA-Z-BOY
INCORPORATED CONSOLIDATED BALANCE SHEET Increase/(Decrease)
(Unaudited, amounts in 7/28/07 7/29/06 Dollars Percent 4/28/07
thousands) Current assets Cash and equivalents $23,786 $28,393
$(4,607) -16.2% $51,721 Receivables, net 207,142 230,385 (23,243)
-10.1% 230,399 Inventories, net 202,763 238,758 (35,995) -15.1%
197,790 Deferred income taxes-current 13,857 14,491 (634) -4.4%
17,283 Assets of discontinued operations 22,613 - 22,613 N/M 24,278
Other current assets 22,732 26,928 (4,196) -15.6% 19,327 Total
current assets 492,893 538,955 (46,062) -8.5% 540,798 Property,
plant and equipment, net 181,590 208,343 (26,753) -12.8% 183,218
Deferred income taxes- long term 21,417 1,893 19,524 N/M 15,380
Goodwill 55,659 62,236 (6,577) -10.6% 55,659 Trade names 9,006
18,794 (9,788) -52.1% 9,472 Other long-term assets 74,830 79,958
(5,128) -6.4% 74,164 Total assets $835,395 $910,179 $(74,784) -8.2%
$878,691 Current liabilities Current portion of long-term debt
$37,910 $2,974 $34,936 N/M $37,688 Accounts payable 52,515 74,368
(21,853) -29.4% 68,089 Liabilities of discontinued operations 4,005
- 4,005 N/M 3,843 Accrued expenses and other current liabilities
97,445 116,686 (19,241) -16.5% 118,590 Total current liabilities
191,875 194,028 (2,153) -1.1% 228,210 Long-term debt 111,238
158,110 (46,872) -29.6% 111,714 Income taxes payable - long term
8,091 - 8,091 N/M - Other long-term liabilities 55,284 53,590 1,694
3.2% 53,419 Contingencies and commitments - - - - Shareholders'
equity Common shares, $1 par value 51,380 51,578 (198) -0.4% 51,377
Capital in excess of par value 205,603 208,128 (2,525) -1.2%
208,283 Retained earnings 210,009 240,545 (30,536) -12.7% 223,896
Accumulated other comprehensive income 1,915 4,200 (2,285) -54.4%
1,792 Total shareholders' equity 468,907 504,451 (35,544) -7.0%
485,348 Total liabilities and shareholders' equity $835,395
$910,179 $(74,784) -8.2% $878,691 LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS First Quarter Ended
(Unaudited, amounts in thousands) 7/28/07 7/29/06 Cash flows from
operating activities Net income (loss) $(8,694) $2,295 Adjustments
to reconcile net income (loss) to cash used for operating
activities Gain on sale of discontinued - (1,280) operations (net
of tax) Restructuring 3,681 - Change in allowance for doubtful
1,229 275 accounts Depreciation and amortization 6,220 7,080
Stock-based compensation expense 861 871 Change in receivables
23,482 22,172 Change in inventories (6,071) (17,990) Change in
payables (15,414) (7,319) Change in other assets and liabilities
(23,246) (6,947) Change in deferred taxes (1,475) (3,656) Total
adjustments (10,733) (6,794) Net cash used for operating activities
(19,427) (4,499) Cash flows from investing activities Proceeds from
disposals of assets 6,415 21,329 Proceeds from sale of discontinued
- 29,982 operations Capital expenditures (9,629) (9,243) Purchases
of investments (6,622) (5,632) Proceeds from sales of investments
6,792 5,697 Change in other long-term assets 20 505 Net cash
provided by (used for) investing activities (3,024) 42,638 Cash
flows from financing activities Proceeds from debt 646 22,399
Payments on debt (900) (47,414) Stock issued for stock and employee
benefit plans (22) 1,108 Repurchases of common stock - (3,686)
Dividends paid (6,209) (6,249) Net cash used for financing
activities (6,485) (33,842) Effect of exchange rate changes on cash
and equivalents 1,001 7 Change in cash and equivalents (27,935)
4,304 Cash and equivalents at beginning of period 51,721 24,089
Cash and equivalents at end of period $23,786 $28,393 Cash paid
(net of refunds) during $3,135 $208 period - income taxes Cash paid
during period - interest $1,910 $2,912 LA-Z-BOY INCORPORATED
Segment Information (Unaudited, amounts in thousands) First Quarter
Ended 7/28/07 7/29/06 (Unaudited amounts in thousands) (13 weeks)
(13 weeks) Sales Upholstery Group $254,757 $295,397 Casegoods Group
53,574 61,026 Retail Group 45,231 52,204 VIEs/Eliminations (9,166)
(14,704) Consolidated $344,396 $393,923 Operating income (loss)
Upholstery Group $8,867 $17,625 Casegoods Group 2,600 3,242 Retail
Group (10,074) (7,715) Corporate and Other* (10,648) (9,920)
Restructuring (3,681) - $(12,936) $3,232 *Variable Interest
Entities ("VIEs") are included in corporate and other. DATASOURCE:
La-Z-Boy Incorporated CONTACT: Kathy Liebmann of La-Z-Boy
Incorporated, +1-734-241-2438, Web site: http://www.la-z-boy.com/
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