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 and United
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 its
Tremonton, 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 new Mexico 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 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 (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. DATASOURCE: La-Z-Boy Incorporated
CONTACT: Kathy Liebmann, La-Z-Boy Incorporated, +1-734-241-2438,
Web site: http://www.la-z-boy.com/
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