MONROE, Mich., Nov. 17 /PRNewswire-FirstCall/ -- La-Z-Boy
Incorporated (NYSE:LZB) today reported its operating results for
the fiscal second quarter ended October 24, 2009. Fiscal 2010
second-quarter highlights: -- Net income was $0.11 per share,
including a $0.01 per-share restructuring charge, versus a loss in
last year's second quarter of $1.05 per share, which included a
$0.04 per-share restructuring charge; -- Sales for the second
quarter declined 9.4%, reflecting ongoing difficult macroeconomic
conditions; -- The upholstery segment posted a 10.9% operating
margin on a 6% decline in sales; -- The retail segment's
performance continued to improve, with the operating loss reduced
by 49%, or $5.1 million, on a 3.7% sales decline; -- The company
generated $22.2 million in cash from operating activities and
increased cash on its balance sheet to $59.0 million. Net sales for
the second quarter were $300.7 million, down 9.4% compared with the
prior year's second quarter. The company reported net income
attributable to La-Z-Boy Incorporated of $5.9 million, or $0.11 per
share, compared with a loss of $53.7 million, or a loss of $1.05
per share in the fiscal 2009 second quarter. The 2010
second-quarter results include a $0.01 per share restructuring
charge, primarily related to the consolidation of the company's
casegoods facilities and the previously announced store closures
within the company's retail segment. La-Z-Boy Incorporated's fiscal
2009 second-quarter results included a non-cash $0.74 per-share
charge for a valuation allowance against the company's deferred tax
assets and a $0.04 per-share restructuring charge, primarily
related to the closure of the company's Tremonton, Utah and United
Kingdom operations. Kurt L. Darrow, President and Chief Executive
Officer of La-Z-Boy, said, "In what continues to be a difficult
macroeconomic environment, La-Z-Boy has reported three consecutive
quarters of profitability. These results demonstrate the
effectiveness of strategic initiatives implemented over the past
several years, which have improved the efficiencies of our
operations, coupled with the decisive changes made to our cost
structure last fall when volumes dropped precipitously. Today,
La-Z-Boy Incorporated is operating from a more competitive platform
and, over the next 12 to 18 months, our operations will be further
strengthened by previously announced projects under way.
Additionally, we are encouraged that despite lower volumes, our
retail segment continues to make progress and has significantly
reduced year-over-year losses for each of the last four quarters."
Darrow continued, "We also strengthened our balance sheet this
quarter. During the period, we generated $22.2 million in cash from
operating activities and increased our cash position by over $20
million to $59.0 million. Our cash position is $10 million higher
than our total debt outstanding. At the same time during the
quarter, the availability on our revolving line of credit increased
to $87 million from $70.5 million at the end of the fiscal 2010
first quarter. Given the prevailing cautious consumer sentiment
existing in today's macroeconomic environment, our entire team is
working to drive sales and grow the top line of our company. With
the strength of our brand and balance sheet, a network of branded
outlets that numbers almost 800 between La-Z-Boy Furniture
Galleries® stores and ComfortStudios®, and a domestic manufacturing
footprint that gives us a speed-to-market advantage for delivering
custom-ordered furniture, we believe La-Z-Boy is well positioned to
emerge from this period as a stronger player in what will be a very
different industry landscape." Wholesale Segments For the fiscal
2010 second quarter, sales in the company's upholstery segment
decreased 6.1% to $232.8 million compared with $247.9 million in
the prior year's second quarter. On the $15.1 million decline in
sales, the segment's operating margin increased to 10.9% from 3.4%
in the prior year's quarter. In the casegoods segment, sales for
the fiscal second quarter were $37.3 million, down 23.0% from $48.5
million in the fiscal 2009 second quarter. The segment operated at
a break-even level versus a 1.6% operating margin in last year's
second quarter. Darrow commented, "Despite a 6% sales decline
versus a year ago, our upholstery group posted a 10.9% operating
margin, which was three times our run rate compared with last
year's second quarter. This is a testament to the significant
changes made to our cost structure across all upholstery
operations. The majority of the contribution stems from the
La-Z-Boy branded facilities which continue to generate efficiencies
through cellular production. Going forward, as we complete the
transition of our cutting-and-sewing operations from our domestic
La-Z-Boy branded facilities to our new facility in Mexico, we
expect to further improve the efficiencies of our upholstery
operation. With over 840 people working at the facility in Mexico,
the transition is going smoothly. As we initially stated, once
fully operational, we expect our move to Mexico will save us $20
million on an annual basis. We will begin to realize some of these
savings in the fourth quarter of fiscal 2010 with the remainder
flowing through to our results over the first nine months of fiscal
2011." System-wide, for the second quarter of fiscal 2010,
including company-owned and independent-licensed stores, same-store
written sales, which the company tracks as an indicator of retail
activity, were down 0.6%. Total written sales, which include new
and closed stores, were down 7.5%. At the end of the second
quarter, 311 stand-alone stores comprised the La-Z-Boy Furniture
Galleries® system. Darrow said, "In the casegoods segment, we
completed the consolidation of the production transfer to our
Hudson, NC facility after closing our North Wilkesboro, NC plant
last quarter. The transition to Hudson went smoothly and without
service delays to our customers. The North Wilkesboro facility will
be converted to a finished-goods warehouse when we vacate a leased
warehouse operation in Statesville, NC in the first half of
calendar 2010. These changes, once fully completed, are expected to
result in annual cost savings of approximately $5 to $6 million,
based on current volume. We expect to realize over one third of the
annual savings in the second half of this fiscal year. The
operating margin in the casegoods segment was negatively impacted
during the quarter by the significant reduction of volume in the
segment. As we have said in the past, higher ticket categories,
including bedroom and dining room, tend to be more challenged at
retail in an environment where consumers are delaying significant
discretionary purchases. "In our youth business, we had a very
successful introduction at the October High Point Furniture Market
of a new line of furniture licensed with Nickelodeon. It was very
well received by dealers and, based on feedback and written orders,
we believe the line has great potential." Retail For the quarter,
retail sales were $38.0 million, down 3.7% compared with the
prior-year period. The retail group posted an operating loss of
$5.3 million for the quarter, and its operating margin was (13.9%).
Darrow stated, "Our retail group continues to make changes
throughout its business which enabled it to decrease its operating
loss by $5.1 million in the face of a sales decline. While we are
pleased with the progress made over the course of the past year,
our team is focused on driving traffic into the stores, building
stronger relationships with the customer through various follow-up
programs, improving its close ratio and increasing the average
ticket to increase volume levels, which has been our biggest
challenge over the past year." Balance Sheet La-Z-Boy's
debt-to-capitalization ratio was 13.2% compared with 23.4% a year
ago and 13.5% at the end of the fiscal 2010 first quarter. During
the quarter, the company generated $22.2 million of cash from
operations, including a $13 million tax refund, increased its cash
position and maintained a very low debt level. The availability
under La-Z-Boy's revolving line of credit increased by $16.5
million to $87.0 million." Business Outlook Darrow stated,
"Although the magnitude of volume declines is not as great as we
experienced over the last several quarters, we remain concerned
about the overall macroeconomic environment and it is too early to
predict a recovery for our industry. We will continue to look for
ways to drive sales and operate our business in the most efficient
manner possible while continuing to make whatever changes are
necessary to our business model. We will also maintain a clear
focus on our balance sheet to ensure our company has the greatest
operating flexibility in the challenging environment." Conference
Call La-Z-Boy will hold a conference call with the investment
community on Wednesday, November 18, 2009, at 8:30 a.m. eastern
time. The toll-free dial-in number is 877.407.0778; international
callers may use 201.689.8565. 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 and demographics; (b) continued economic
recession and fluctuations in our stock price; (c) changes in the
real estate and credit markets and the potential impacts on our
customers and suppliers; (d) the impact of terrorism or war; (e)
continued energy and other commodity price changes; (f) the impact
of logistics on imports; (g) the impact of interest rate and
currency exchange rate changes; (h) operating factors, such as
supply, labor or distribution disruptions including changes in
operating conditions, product recalls or costs; (i) effects of
restructuring actions; (j) changes in the domestic or international
regulatory environment; (k) the impact of adopting new accounting
principles; (l) the impact from natural events such as hurricanes,
earthquakes and tornadoes; (m) the ability to procure fabric rolls
and leather hides or cut and sewn fabric and leather sets
domestically or abroad; (n) those matters discussed in Item 1A of
our fiscal 2009 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 311 stand-alone La-Z-Boy Furniture Galleries® stores
and 487 independent ComfortStudios®, 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 Second Quarter
Ended (Unaudited, amounts in thousands, except per
-------------------- share data) 10/24/09 10/25/08 --------
-------- Sales $300,707 $331,948 Cost of sales Cost of goods sold
204,962 243,090 Restructuring 663 2,236 --- ----- Total cost of
sales 205,625 245,326 Gross profit 95,082 86,622 Selling, general
and administrative 84,697 101,499 Write-down of goodwill - 408
Restructuring 520 687 --- --- Operating income (loss) 9,865
(15,972) Interest expense 831 1,651 Interest income 199 630 Other
income (expense), net 236 (685) --- ---- Earnings (loss) before
income taxes 9,469 (17,678) Income tax expense 3,762 36,032 -----
------ Net income (loss) 5,707 (53,710) Net (income) loss
attributable to noncontrolling interests 200 (34) --- --- Net
income (loss) attributable to La-Z-Boy Incorporated $5,907
$(53,744) ====== ======== Basic average shares 51,527 51,458 Basic
net income (loss) attributable to La-Z-Boy Incorporated per share
$0.11 $(1.05) Diluted average shares 51,755 51,458 Diluted net
income (loss) attributable to La-Z-Boy Incorporated per share $0.11
$(1.05) Dividends paid per share $- $0.04 LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF OPERATIONS Six Months Ended (Unaudited,
amounts in thousands, except per ---------------- share data)
10/24/09 10/25/08 -------- -------- Sales $563,378 $653,600 Cost of
sales Cost of goods sold 386,511 478,685 Restructuring 1,399 8,032
----- ----- Total cost of sales 387,910 486,717 Gross profit
175,468 166,883 Selling, general and administrative 162,153 192,770
Write-down of goodwill - 1,700 Restructuring 821 1,467 --- -----
Operating income (loss) 12,494 (29,054) Interest expense 1,810
3,146 Interest income 475 1,562 Other income (expense), net 945
(541) --- ---- Earnings (loss) before income taxes 12,104 (31,179)
Income tax expense 4,201 30,988 ----- ------ Net income (loss)
7,903 (62,167) Net (income) attributable to noncontrolling
interests (13) (121) --- ---- Net income (loss) attributable to
La-Z-Boy Incorporated $7,890 $(62,288) ====== ======== Basic
average shares 51,503 51,443 Basic net income (loss) attributable
to La-Z-Boy Incorporated per share $0.15 $(1.21) Diluted average
shares 51,551 51,443 Diluted net income (loss) attributable to
La-Z-Boy Incorporated per share $0.15 $(1.21) Dividends paid per
share $- $0.08 LA-Z-BOY INCORPORATED CONSOLIDATED BALANCE SHEET
(Unaudited, amounts in thousands) 10/24/09 4/25/09
-------------------------------- --------- --------- Current assets
Cash and equivalents $59,037 $17,364 Restricted cash 500 18,713
Receivables, net of allowance of $25,195 at 10/24/09 and $28,385 at
4/25/09 162,878 147,858 Inventories, net 138,946 140,178 Deferred
income taxes-current 795 795 Other current assets 15,956 22,872
------ ------ Total current assets 378,112 347,780 Property, plant
and equipment, net 142,704 150,234 Trade names 3,100 3,100 Other
long-term assets 48,183 51,431 ------ ------ Total assets $572,099
$552,545 ======== ======== Current liabilities Current portion of
long-term debt $2,067 $8,724 Accounts payable 46,318 41,571 Accrued
expenses and other current liabilities 86,167 75,733 ------ ------
Total current liabilities 134,552 126,028 Long-term debt 46,911
52,148 Deferred income taxes 724 724 Other long-term liabilities
67,950 63,875 Contingencies and commitments - - Equity La-Z-Boy
Incorporated shareholders' equity: Common shares, $1 par value
51,546 51,478 Capital in excess of par value 199,585 205,945
Retained earnings 87,342 70,769 Accumulated other comprehensive
loss (20,955) (22,698) ------- ------- Total La-Z-Boy Incorporated
shareholders' equity 317,518 305,494 Noncontrolling interests 4,444
4,276 ----- ----- Total equity 321,962 309,770 ------- -------
Total liabilities and equity $572,099 $552,545 ======== ========
LA-Z-BOY INCORPORATED CONSOLIDATED STATEMENT OF CASH FLOWS Second
Quarter Ended Six Months Ended (Unaudited, amounts
-------------------- ---------------- in thousands) 10/24/09
10/25/08 10/24/09 10/25/08 -------- -------- -------- -------- Cash
flows from operating activities Net income (loss) $5,707 $(53,710)
$7,903 $(62,167) Adjustments to reconcile net income (loss) to cash
provided by (used for) operating activities Gain on sale of assets
(75) (604) (88) (2,670) Write-down of long-lived assets 200 - 200 -
Write-down of goodwill - 408 - 1,700 Restructuring 1,183 2,923
2,220 9,499 Provision for doubtful accounts 2,152 4,797 4,514 9,000
Depreciation and amortization 6,135 5,989 12,244 11,943 Stock-based
compensation expense 1,621 986 2,628 1,855 Change in receivables
(26,484) (22,261) (17,586) (8,091) Change in inventories 3,329 (63)
1,231 10,843 Change in other assets 11,106 2,272 6,439 (529) Change
in payables 7,073 8,375 4,747 1,927 Change in other liabilities
10,282 (5,199) 11,553 (26,117) Change in deferred taxes (8) 41,677
- 42,838 -- ----- --- ------ Total adjustments 16,514 39,300 28,102
52,198 ------ ------ ------ ------ Net cash provided by (used for)
operating activities 22,221 (14,410) 36,005 (9,969) Cash flows from
investing activities Proceeds from disposals of assets 230 2,805
1,916 7,786 Capital expenditures (1,340) (2,618) (2,779) (9,990)
Purchases of investments (1,338) (3,516) (2,537) (8,965) Proceeds
from sales of investments 1,445 5,233 4,109 11,027 Change in
restricted cash - (2,668) 17,007 (2,956) Change in other long-term
assets 29 158 14 229 -- --- -- --- Net cash provided by (used for)
investing activities (974) (606) 17,730 (2,869) Cash flows from
financing activities Proceeds from debt 10,213 24,831 20,673 39,466
Payments on debt (10,408) (6,430) (32,567) (25,287) Dividends paid
- (2,074) - (4,151) --- ------ --- ------ Net cash provided by
(used for) financing activities (195) 16,327 (11,894) 10,028 Effect
of exchange rate changes on cash and equivalents (348) (604) (168)
(643) ---- ---- ---- ---- Change in cash and equivalents 20,704 707
41,673 (3,453) Cash and equivalents at beginning of period 38,333
10,317 17,364 14,477 ------ ------ ------ ------ Cash and
equivalents at end of period $59,037 $11,024 $59,037 $11,024
======= ======= ======= ======= Cash paid (net of refunds) during
period - income taxes $(13,348) $(719) $(13,082) $204 Cash paid
during period - interest $563 $1,287 $1,288 $2,413 LA-Z-BOY
INCORPORATED SEGMENT INFORMATION Second Quarter Ended Six Months
Ended -------------------- ---------------- (Unaudited, amounts in
10/24/09 10/25/08 10/24/09 10/25/08 thousands) (13 weeks) (13
weeks) (26 weeks) (26 weeks) --------- --------- ---------
--------- Sales Upholstery Group $232,780 $247,934 $429,472
$485,052 Casegoods Group 37,302 48,473 73,167 96,594 Retail Group
38,014 39,484 73,976 81,911 VIEs 12,248 11,793 23,987 25,871
Other/eliminations (19,637) (15,736) (37,224) (35,828) -------
------- ------- ------- Consolidated $300,707 $331,948 $563,378
$653,600 ======== ======== ======== ======== Operating income
(loss) Upholstery Group $25,359 $8,338 $41,649 $18,194 Casegoods
Group (184) 755 (305) 2,132 Retail Group (5,301) (10,391) (10,969)
(20,401) VIEs (402) (2,621) (137) (3,709) Corporate and Other
(8,424) (8,722) (15,524) (14,071) Goodwill write-down - (408) -
(1,700) Restructuring (1,183) (2,923) (2,220) (9,499) ------ ------
------ ------ $9,865 $(15,972) $12,494 $(29,054) ====== ========
======= ======== DATASOURCE: La-Z-Boy Incorporated CONTACT: Kathy
Liebmann, +1-734-241-2438, Web Site: http://www.la-z-boy.com/
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