Financial News Release


La-Z-Boy Incorporated Reports Lower First Quarter Results

MONROE, Mich., Aug. 15 /PRNewswire/ -- La-Z-Boy Incorporated (NYSE: LZB; PCX) today reported that sales for its first fiscal quarter ended July 28, 2001 were $459 million, down 11 percent compared to the same period last year. Net income for the first quarter was $2.8 million, or $0.05 per diluted share, which was at the low end of the company's previous earnings guidance, and down from $13.0 million, or $0.21 per diluted share, in the year-earlier period.

Commenting on these results, La-Z-Boy Incorporated president and chief executive officer Jerry Kiser said, "The business climate for our industry continues to be extremely challenging. On top of general softness in consumer furniture demand, our first quarter sales were negatively impacted by the bankruptcy of HomeLife Furniture. In fact, taken together, the bankruptcies of HomeLife, Montgomery Ward and Heilig-Meyers accounted for approximately $16 million of our $58 million year-over-year decline in first quarter sales. These major bankruptcies have been the most visible outward sign of our industry's financial distress, and it is unquestionably going to take time for the resulting void in retail selling space to be filled. But even ignoring this impact, our first quarter sales performance still compared favorably with many of our competitors, some of whom had been down as much as 27 percent. This reflects the strength of our brand names and our overall market position."

Kiser noted, "In the current environment, we are managing our business conservatively, controlling costs and maintaining production in line with current demand. Many of the actions we have taken to deal with this difficult period for our industry and our customers have been painful ones, including the closing of three of our casegoods plants and an overall reduction of about 10 percent in our workforce, or 2,170 employees, since July 29, 2000. Our asset base has also been carefully managed, by tightly controlling inventories and accounts receivable, allowing us to generate strong cash flows, some of which we used to reduce debt by $20 million during the quarter and $49 million over the last six months. Our balance sheet has further strengthened to reflect a ratio of total debt to capital of 21 percent at July 28, 2001, its lowest level in six quarters."

He continued, "The recent realignment of our corporate management team structure into just two business groups will allow us to achieve the underlying synergistic values of our multiple companies and brand names through more efficient marketing, manufacturing and logistics. John Case, who heads the new Upholstery Group and Don Mitchell, who heads the new Casegoods Group, both now report directly to me. Together with David Risley, who became our new CFO last April, this is a highly talented, effective management team intensely focused on taking La-Z-Boy Incorporated to new heights of success in the years immediately ahead."

Kiser added that, "The corporation's financial statements will now reflect only these two business segments, each of which will contain elements of the former Contract business segment. Sales of the company's Upholstery Group segment, which represent 67 percent of sales, were down 4 percent for the first quarter from a year ago, while sales of the Casegoods Group segment declined 22 percent. The operating performance of the two segments was reflective of the sales declines each segment experienced. Additionally, although furniture tends to be a postponable purchase, upholstered product sales tend to drop less than the overall industry. This is typically a lower dollar purchase, generally wears faster and needs to be replaced more frequently, is usually more fashion oriented, and is often purchased in single pieces. Conversely, casegoods products are generally higher dollar purchases, are in the home longer and involve multiple pieces of furniture."

"On the marketing side," Kiser said, "we continue to place strong emphasis on our proprietary retail distribution system, including both La-Z-Boy and our other brands, since we are convinced this network provides us with major and sustainable competitive advantages in the markets we serve. Illustrative of this is the 5 percent plus same store sales performance realized by the La-Z- Boy Furniture Galleries(R) during the June calendar quarter. It is precisely because of our strong belief in this proprietary retail network that we continue to aggressively advertise and promote our brands and products. Finally, we opened a total of 5 La-Z-Boy Furniture Galleries(R) and 4 La-Z-Boy in-store gallerys during the first quarter. We also unveiled an exciting new La-Z-Boy Furniture Galleries(R) store format which we expect will further enhance the already excellent productivity of these stores."

Kiser concluded, "Current economic reports continue to portray an ongoing slowing in the U.S. economy which has not yet shown any meaningful signs of recovery. The one bright spot has been housing, with U.S. home sales and home prices both holding near record high levels. Consumers seem convinced that their homes represent a solid investment for the future and, without question, this will generate a strong rebound in residential furniture demand at some point. Additionally, we have three powerful factors working to stimulate the economy: easier money, less burdensome taxes, and lower energy prices. Putting everything together, the economic downturn now is probably at its lowest point, when viewed on a year to year basis. Nevertheless, near-term business prospects remain quite uncertain and incoming order rates during our seasonally strong August-September period will play a key role in determining our operating performance for the rest of fiscal 2002. At this point, we are expecting our October second quarter results to be $0.22-$0.27 and we are tentatively looking for $1.00-$1.15 for our full fiscal year ending next April."

A conference call will be conducted at 11:00 a.m. EDT on Thursday, August 16, 2001 and is accessible at the company's website at .

La-Z-Boy Background information:

With annual sales in excess of $2 billion, La-Z-Boy Incorporated is the largest U.S. residential furniture producer, with approximately 20,000 employees and 54 manufacturing facilities in ten states and four foreign countries. The La-Z-Boy Incorporated family of companies -- Alexvale, American Drew, Bauhaus, Centurion, Clayton Marcus, England, Hammary, HickoryMark, Kincaid, La-Z-Boy, La-Z-Boy Contract Furniture Group, Lea, Pennsylvania House, Pilliod and Sam Moore -- produces furniture for every room of the home and office. And, under the American of Martinsville brand, La-Z- Boy Incorporated is also a leading supplier of contract furniture to the hospitality and assisted-living markets.

The corporation's vast proprietary distribution network includes 293 La-Z- Boy Furniture Galleries(R) and 324 La-Z-Boy In-Store Gallerys, as well as in- store gallery programs at Kincaid, Pennsylvania House and Clayton Marcus, England's Custom Comfort Centers and Lea's Kid's Generation displays, and is dedicated exclusively to selling La-Z-Boy Incorporated products and brands. According to industry trade publication Furniture/Today, the La-Z-Boy Furniture Galleries retail network by itself represents the industry's sixth largest U.S. furniture retailer. The corporation's stock is traded on the New York and Pacific stock exchanges under the trading symbol: LZB. Additional information is available at .

Forward-looking Information:

Any forward-looking statements contained in this report represent management's current expectations, based on present information and current assumptions. Actual results could differ materially from those anticipated or projected due to a number of factors. These factors include, but are not limited to: changes in consumer sentiment, the impact of interest rate changes, the impact of imports, changes in currency rates, competitive factors, operating factors, the effect of certain restructuring actions, and other factors identified from time to time in the company's reports filed with the Securities and Exchange Commission. The company undertakes 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, including the company's most recent Form 10-K report and its report on Form 8-K filed today. This information is available at .

                            LA-Z-BOY INCORPORATED
                (Amounts in thousands, except per share data)

                             FIRST QUARTER ENDED
                     7/28/01      7/29/00      % Over      Percent of Sales
                    (13 Weeks)   (13 Weeks)    (Under)   7/28/01      7/29/00

    Sales           $458,981     $516,707        -11%     100.0%       100.0%
    Cost of sales    361,117      400,366        -10%      78.7%        77.5%
       Gross profit   97,864      116,341        -16%      21.3%        22.5%

    S, G & A          90,887       91,761         -1%      19.8%        17.7%

        profit         6,977       24,580        -72%       1.5%         4.8%

    Interest expense   2,956        4,352        -32%       0.6%         0.8%
    Interest income      358          453        -21%       0.1%         0.0%
    Other income, net    263          616        -57%       0.0%         0.1%

       Pretax income   4,642       21,297        -78%       1.0%         4.1%

    Tax expense        1,811        8,294        -78%      39.0%*       38.9%*

       Net income     $2,831      $13,003        -78%       0.6%         2.5%

     Basic EPS         $0.05        $0.21        -76%

     Diluted avg.
      shares          61,021       61,280          0%

     Diluted EPS       $0.05        $0.21        -76%

     Dividends paid    $0.09        $0.08         13%

per share

  • As a percent of pretax income, not sales.

                            LA-Z-BOY INCORPORATED
                          CONSOLIDATED BALANCE SHEET

(Amounts in thousands) Unaudited Audited

                                  Increase/(Decrease)                4/28/01
                              7/28/01    7/29/00   Dollars  Percent
    Current assets
     Cash and equivalents     $42,447    $18,025   $24,422    135%    $23,565
        Receivables - net     306,005    348,067   (42,062)   -12%    380,867
            Raw materials      89,497    100,033   (10,536)   -11%     90,381
            Work-in-progress   62,793     67,813    (5,020)    -7%     62,465
            Finished goods    118,306    105,762    12,544     12%    115,425
             FIFO inventories 270,596    273,608    (3,012)    -1%    268,271
              Excess of FIFO
               over LIFO      (10,418)    (7,637)   (2,781)   -36%    (10,384)
                 inventories  260,178    265,971    (5,793)    -2%    257,887
        Deferred income taxes  23,281     21,005     2,276     11%     26,168
        Income taxes - current  2,944          -     2,944     N/M      2,944
        Other current assets   19,612     15,545     4,067     26%     17,345
            Total current
             assets           654,467    668,613   (14,146)    -2%    708,776
    Property, plant and
     equipment                227,672    226,810       862      0%    230,341
    Goodwill                  111,624    117,362    (5,738)    -5%    112,755
    Trade names               119,928    124,130    (4,202)    -3%    120,981
    Other long-term assets     52,602     55,753    (3,151)    -6%     49,650

             Total assets  $1,166,293 $1,192,668  ($26,375)    -2% $1,222,503

    Current liabilities
      Lines of credit         $20,750     $6,674   $14,076    211%    $10,380
      Current portion
       of long-term debt        3,154      2,730       424     16%      5,304
      Current portion of
       capital leases             541        457        84     18%        541
      Accounts payable         76,845     83,207    (6,362)    -8%     92,830
      Payroll and other
       compensation            56,260     54,935     1,325      2%     78,550
      Income taxes             10,488      5,492     4,996     91%     11,490
      Other current
       liabilities             49,619     51,635    (2,016)    -4%     50,820
            Total current
             liabilities      217,657   $205,130    12,527      6%    249,915
    Long-term debt            168,976    240,893   (71,917)   -30%    196,923
    Capital leases              2,359      3,002      (643)   -21%      2,496
    Deferred income taxes      46,281     52,317    (6,036)   -12%     45,709
    Other long-term
     liabilities               36,724     29,905     6,819     23%     32,314
    Contingencies and commitments   -          -
    Shareholders' equity
        Common shares,
         $1 par value          60,898     60,652       246      0%     60,501
        Capital in excess of
         par value            210,559    211,633    (1,074)    -1%    210,924
        Retained earnings     429,899    391,460    38,439     10%    427,616
        Accum. other
         comprehensive loss    (7,060)    (2,324)   (4,736)  -204%     (3,895)

            Total shareholders'
             equity           694,296    661,421    32,875      5%    695,146
              Total liabilities and
                equity     $1,166,293 $1,192,668  ($26,375)    -2% $1,222,503

                            LA-Z-BOY INCORPORATED
                            (Amounts in thousands)

                                                First Quarter Ended
                                             7/28/01            7/29/00
    Cash flows from operating
         Net income                           $2,831            $13,003

         Adjustments to reconcile net
          income to cash provided by operating
              Depreciation and
               amortization                   10,921             10,565
              Change in receivables           75,998             45,616
              Change in inventories           (2,291)           (20,168)
              Change in payables             (15,985)            (7,185)
              Change in other assets
               and liabilities               (33,180)           (26,988)
              Change in deferred taxes         3,459              3,406

                   Total adjustments          38,922              5,246

                    Cash provided by operating
                     activities               41,753             18,249

    Cash flows from investing
         Proceeds from disposals of
          assets                                 539                186
         Capital expenditures                 (6,085)            (7,395)
         Change in other long-term
          assets                               3,236              3,148

                    Cash used for
                     investing activities     (2,310)            (4,061)

    Cash flows from financing
         Proceeds from debt                   35,370             62,000
         Payment of debt                     (55,097)           (58,760)
         Capital leases                         (137)               846
         Stock issued for stock options
          & 401(k) plans                       4,948              2,420
         Repurchase of common stock                -            (12,008)
         Dividends paid                       (5,464)            (4,906)

                    Cash provided by
                     financing activities    (20,380)           (10,408)

    Effect of exchange rate changes on
     cash                                       (181)              (108)

    Change in cash and equivalents            18,882              3,672

    Cash and equivalents at beginning
     of period                                23,565             14,353

    Cash and equivalents at end of
     period                                  $42,447            $18,025

    Cash paid during
     period             -Income taxes         $6,097             $6,448
                        -Interest               $732             $2,257

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SOURCE La-Z-Boy Incorporated

CONTACT: Mark Stegeman of La-Z-Boy Incorporated, +1-734-241-4418, /