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 www.la-z-boy.com .
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 www.la-z-boy.com .
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.
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 www.la-z-boy.com .
LA-Z-BOY INCORPORATED CONSOLIDATED STATEMENT OF INCOME (Amounts in thousands, except per share data) (UNAUDITED)
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% Operating 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%
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 Inventories 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) Total 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 shareholders' equity $1,166,293 $1,192,668 ($26,375) -2% $1,222,503 LA-Z-BOY INCORPORATED CONSOLIDATED STATEMENT OF CASH FLOWS (Amounts in thousands)
(Unaudited) First Quarter Ended 7/28/01 7/29/00 Cash flows from operating activities Net income $2,831 $13,003 Adjustments to reconcile net income to cash provided by operating activities 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 activities 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 activities 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 MAKE YOUR OPINION COUNT - Click Here http://tbutton.prnewswire.com/prn/11690X78967074
SOURCE La-Z-Boy Incorporated
CONTACT: Mark Stegeman of La-Z-Boy Incorporated, +1-734-241-4418, firstname.lastname@example.org /