Financial News Release


La-Z-Boy Reports Fiscal 2018 Third-Quarter Results

MONROE, Mich., Feb. 20, 2018 (GLOBE NEWSWIRE) -- La-Z-Boy Incorporated (NYSE:LZB) today reported its operating results for the fiscal 2018 third quarter ended January 27, 2018. 

  • Consolidated sales increased 6.1% to $413.6 million;
  • Same-store written sales for the La-Z-Boy Furniture Galleries® network increased 2.6%;
  • Cash flow from operations was $40.0 million;
  • The company returned $21.1 million to shareholders through dividends and share purchases; and
  • Earnings per diluted share for the quarter were $0.25, including a $0.20 per share net charge related to tax reform and a $0.06 per share charge related to a previously announced legal settlement.

Sales for the fiscal 2018 third quarter were $413.6 million, up 6.1% compared with the prior year’s third quarter. Operating margin was 8.0% in the third quarter of fiscal 2018 versus 8.6% in the fiscal 2017 third quarter. The fiscal 2018 third quarter’s operating margin was reduced by 1.0% as a result of the charge for the previously announced settlement of a lawsuit regarding certain power products.

The company reported net income attributable to La-Z-Boy Incorporated of $12.1 million, or $0.25 per diluted share, which included a $0.20 per share net charge related to the 2017 Tax Cut and Jobs Act (tax reform) and a $0.06 per share charge related to the previously announced legal settlement, versus $23.3 million, or $0.47 per diluted share in the fiscal 2017 third quarter.

Sales in the company’s upholstery segment increased 6.0% to $321.0 million and the operating margin declined to 9.9% from 11.8% in last year’s third quarter. The charge for the settlement of a lawsuit regarding certain power products reduced operating margin in the segment by 1.3% in the fiscal 2018 third quarter. In the casegoods segment, sales increased 17.0% to $27.2 million and the operating margin increased to 10.3% from 6.8%. Sales in the retail segment increased 3.0% to $125.8 million for the third quarter and the segment’s operating margin increased to 5.6% from 5.2% in the prior-year period. On the core base of 138 stores included in last year’s third quarter, delivered sales declined 1.1% versus the prior-year quarter.

Kurt L. Darrow, Chairman, President and Chief Executive Officer of La-Z-Boy, said, “We experienced positive sales momentum for the quarter and, in addition to posting a 6.1% increase, each of our business segments operated at a high level during the period. Additionally, the La-Z-Boy Furniture Galleries® store network posted its fourth consecutive quarterly written same-store sales increase. The company also generated strong cash flow from operations enabling us to make the necessary strategic investments to grow our business in the dynamic marketplace and return value to shareholders.”

Darrow added, “In our upholstery segment, we are very pleased with the performance of our new duo product line which, thus far, is exceeding our expectations in the short time it has been on retail floors and is a testament to the innovative spirit that is the hallmark of our brand. During the period, ongoing inflationary pressures for raw materials impacted the upholstery segment’s operating margin in November and December until our price increase became effective on delivered orders in January. For the fourth quarter, raw material prices are not anticipated to be a drag on our margin as the full benefit of the price increase will be in effect on all sales.”

Darrow said, “Our casegoods business continues on an upward trajectory, with increased sales and earnings performance as the group expands floor space with retailers. New, on-trend product collections are resonating with consumers and our supply chain is providing excellent service to customers with quick shipping on our best-selling groups. In our retail segment, we opened one new La-Z-Boy Furniture Galleries® store during the quarter and acquired one store in Grand Rapids, Michigan, as part of our store build-out strategy. For the quarter, the retail segment’s operating margin improved, resulting from an increase in the average ticket primarily driven by increased design services and custom orders.”

Darrow continued, “With a strong brand, a vast distribution system, including the vibrant and growing La-Z-Boy Furniture Galleries® store network, a best-in-class global supply chain and a healthy balance sheet to support new initiatives, La-Z-Boy is pursuing a dual growth strategy to drive organic growth with our core consumer while attracting a new and younger consumer through our multi-faceted e-commerce approach. We are optimistic about the many opportunities that exist through our comprehensive strategy and look forward to growing our business with a new consumer group that exhibits different buying characteristics than the core La-Z-Boy consumer. La-Z-Boy will continue to evolve as we make strategic investments to drive growth and profitability in an ever-changing environment.”


  Total FY17 New Closed Acquired Total FY18 Remodel Relocation
Company-owned 143  6 (4) 1 146 - -
Dealer-owned 204 4 (3) (1) 204 7 4
Total 347 10 (7) - 350 7 4

2017 Tax Cuts and Jobs Act

Our results for the third quarter of fiscal 2018 included a $0.20 per share net charge related to tax reform, or $9.5 million. This included a $9.8 million charge for the provisional re-measurement of certain deferred taxes and related amounts, a provisional $1.9 million of income tax expense for the estimated effects of the transition tax on the deemed repatriation of foreign earnings, and a benefit of $2.2 million primarily related to the lower blended federal tax rate. Based on our current interpretation of the tax reform legislation, we made reasonable estimates to record provisional adjustments during the third quarter of fiscal 2018. Since we are still accumulating and processing data to finalize the underlying calculations and expect regulators to issue further guidance, among other things, we believe our estimates may change. We will continue to refine such amounts within the measurement period allowed, which is not to extend beyond one year of the enactment date.

Balance Sheet and Cash Flow

During the quarter, the company generated $40.0 million in cash from operating activities. La-Z-Boy ended the quarter with $135.3 million in cash and cash equivalents, $35.4 million in investments to enhance returns on cash, and $2.4 million in restricted cash. During the quarter, the company had $7.8 million in capital expenditures, paid $5.7 million in dividends, and spent $15.4 million purchasing 0.5 million shares of stock in the open market under its existing authorized share purchase program, leaving 7.0 million shares of purchase availability in the program.

Conference Call

La-Z-Boy will hold a conference call with the investment community on Wednesday, February 21, 2018, at 8:30 a.m. eastern time. The toll-free dial-in number is 877.407.0778; international callers may use 201.689.8565. 

The call will be webcast live, with corresponding slides, and archived on the Internet. It will be available at A telephone replay will be available for a week following the call. This replay will be accessible to callers from the U.S. and Canada at 877.481.4010 and to international callers at 919.882.2331. Enter Conference ID #10442.

Forward-looking Information

This news release contains, and oral statements made from time to time by representatives of La‑Z‑Boy may contain, “forward-looking statements.” With respect to all forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. 

Actual results could differ materially from those we anticipate or project due to a number of factors, including: (a) changes in consumer confidence and demographics; (b) the possibility of a recession; (c) changes in the real estate and credit markets and their effects on our customers, consumers and suppliers; (d) international political unrest, terrorism or war; (e) volatility in energy and other commodities prices; (f) the impact of logistics on imports and exports; (g) tax rate, interest rate, and currency exchange rate changes; (h) operating factors, such as supply, labor or distribution disruptions (e.g. port strikes); (i) changes in legislation, including the tax code, or changes in the domestic or international regulatory environment, including new or increased duties and termination or renegotiation of the North American Free Trade Agreement; (j) adoption of new accounting principles; (k) fires, severe weather or other natural events such as hurricanes, earthquakes, flooding, tornadoes and tsunamis; (l) our ability to procure or transport fabric rolls, leather hides or cut-and-sewn fabric and leather sets domestically or abroad; (m) information technology conversions or system failures and our ability to recover from a system failure; (n) effects of our brand awareness and marketing programs; (o) the discovery of defects in our products resulting in delays in manufacturing, recall campaigns, reputational damage, or increased warranty costs; (p) litigation arising out of alleged defects in our products; (q) unusual or significant litigation; (r) our ability to locate new La-Z-Boy Furniture Galleries® stores (or store owners) and negotiate favorable lease terms for new or existing locations; (s) the ability to increase volume through our e-commerce initiatives; (t) the impact of potential goodwill or intangible asset impairments; and (u) those matters discussed in Item 1A of our fiscal 2017 Annual Report on Form 10-K 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, whether to reflect new information or 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: . 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:

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 segment companies are England and La-Z-Boy. The casegoods segment consists of three brands: American Drew, Hammary, and Kincaid. The company-owned retail segment includes 147 of the 350 La-Z-Boy Furniture Galleries® stores.

The corporation’s branded distribution network is dedicated to selling La-Z-Boy Incorporated products and brands, and includes 350 stand-alone La-Z-Boy Furniture Galleries® stores and 532 independent Comfort Studio® locations, in addition to in-store gallery programs for the company’s Kincaid and England operating units. Additional information is available at


    Quarter Ended
(Unaudited, amounts in thousands, except per share data)   1/27/18     1/28/17  
Sales   $ 413,638     $ 389,992  
Cost of sales     251,140       233,185  
Gross profit     162,498       156,807  
Selling, general and administrative expense     129,403       123,235  
Operating income     33,095       33,572  
Interest expense     113       562  
Interest income     444       241  
Income from Continued Dumping and Subsidy Offset Act, net           273  
Other income (expense), net     (1,094 )     (52 )
Income before income taxes     32,332       33,472  
Income tax expense     20,047       9,830  
Net income     12,285       23,642  
Net income attributable to noncontrolling interests     (176 )     (356 )
Net income attributable to La-Z-Boy Incorporated   $ 12,109     $ 23,286  
Basic weighted average common shares     47,234       48,914  
Basic net income attributable to La-Z-Boy Incorporated per share   $ 0.26     $ 0.47  
Diluted weighted average common shares     47,757       49,384  
Diluted net income attributable to La-Z-Boy Incorporated per share   $ 0.25     $ 0.47  
Dividends declared per share    $ 0.12     $ 0.11  

    Nine Months Ended
(Unaudited, amounts in thousands, except per share data)   1/27/18     1/28/17  
Sales   $ 1,163,922     $ 1,107,354  
Cost of sales     707,369       666,942  
Gross profit     456,553       440,412  
Selling, general and administrative expense     372,891       350,524  
Operating income     83,662       89,888  
Interest expense     430       794  
Interest income     1,163       679  
Income from Continued Dumping and Subsidy Offset Act, net           273  
Gain on conversion of investment     2,204        
Other income (expense), net     (2,475 )     (1,783 )
Income before income taxes     84,124       88,263  
Income tax expense     36,889       29,508  
Net income     47,235       58,755  
Net income attributable to noncontrolling interests     (579 )     (830 )
Net income attributable to La-Z-Boy Incorporated   $ 46,656     $ 57,925  
Basic weighted average common shares     47,852       49,057  
Basic net income attributable to La-Z-Boy Incorporated per share   $ 0.97     $ 1.17  
Diluted weighted average common shares     48,325       49,532  
Diluted net income attributable to La-Z-Boy Incorporated per share   $ 0.96     $ 1.16  
Dividends declared per share    $ 0.34     $ 0.31  

(Unaudited, amounts in thousands, except par value)   1/27/18     4/29/17  
Current assets                
Cash and equivalents   $ 135,266     $ 141,860  
Restricted cash     2,354       8,999  
Receivables, net of allowance of $2,665 at 1/27/18 and $2,563 at 4/29/17     146,498       150,846  
Inventories, net     186,319       175,114  
Other current assets     43,242       40,603  
Total current assets     513,679       517,422  
Property, plant and equipment, net     174,877       169,132  
Goodwill     75,765       74,245  
Other intangible assets, net     18,510       18,489  
Deferred income taxes – long-term     28,823       40,131  
Other long-term assets, net     81,848       69,436  
Total assets   $ 893,502     $ 888,855  
Current liabilities                
Current portion of long-term debt   $ 231     $ 219  
Accounts payable     66,672       51,282  
Accrued expenses and other current liabilities     131,166       147,175  
Total current liabilities     198,069       198,676  
Long-term debt     249       296  
Other long-term liabilities     92,346       88,778  
Contingencies and commitments                
Shareholders’ equity                
Preferred shares – 5,000 authorized; none issued            
Common shares, $1 par value – 150,000 authorized; 47,068 outstanding
  at 1/27/18 and 48,472 outstanding at 4/29/17
    47,068       48,472  
Capital in excess of par value     297,408       289,632  
Retained earnings     271,912       284,698  
Accumulated other comprehensive loss     (26,509 )     (32,883 )
Total La-Z-Boy Incorporated shareholders’ equity     589,879       589,919  
Noncontrolling interests     12,959       11,186  
Total equity     602,838       601,105  
Total liabilities and equity   $ 893,502     $ 888,855  

    Nine Months Ended  
(Unaudited, amounts in thousands)   1/27/18     1/28/17  
Cash flows from operating activities                
Net income   $ 47,235     $ 58,755  
Adjustments to reconcile net income to cash provided by 
 (used for) operating activities
Gain on disposal of assets     (1,849 )     (103 )
Gain on conversion of investment     (2,204 )      
Deferred income tax expense     10,543       3,214  
Provision for doubtful accounts     198       (64 )
Depreciation and amortization     23,671       21,311  
Equity-based compensation expense     7,929       7,571  
Pension plan contributions     (2,000 )     (2,300 )
Change in receivables     5,057       (576 )
Change in inventories     (9,142 )     (5,929 )
Change in other assets     (3,304 )     (4,415 )
Change in payables     12,529       6,359  
Change in other liabilities     2,537       9,191  
Net cash provided by operating activities     91,200       93,014  
Cash flows from investing activities                
Proceeds from disposals of assets     620       273  
Proceeds from property insurance     1,807        
Capital expenditures     (24,138 )     (15,529 )
Purchases of investments     (24,124 )     (20,778 )
Proceeds from sales of investments     17,109       13,899  
Acquisitions, net of cash acquired     (16,495 )     (35,878 )
Net cash used for investing activities     (45,221 )     (58,013 )
Cash flows from financing activities                
Payments on debt     (203 )     (217 )
Payments for debt issuance costs     (220 )      
Stock issued for stock and employee benefit plans, net of
 shares withheld for taxes
    1,418       1,739  
Excess tax benefit on stock option exercises           1,924  
Purchases of common stock     (46,074 )     (25,062 )
Dividends paid     (16,343 )     (15,270 )
Net cash used for financing activities     (61,422 )     (36,886 )
Effect of exchange rate changes on cash and equivalents     2,204       (139 )
Change in cash, cash equivalents and restricted cash     (13,239 )     (2,024 )
Cash, cash equivalents and restricted cash at beginning of 
    150,859       121,335  
Cash, cash equivalents and restricted cash at end of period   $ 137,620     $ 119,311  
Supplemental disclosure of non-cash investing activities
 Capital expenditures included in payables 
  $ 3,926     $ 1,012  

    Quarter Ended     Nine Months Ended  
 (Unaudited, amounts in thousands)   1/27/18     1/28/17     1/27/18     1/28/17  
Upholstery segment:                                
Sales to external customers   $ 262,874     $ 246,650     $ 739,429     $ 715,357  
Intersegment sales     58,084       56,273       160,697       150,771  
Upholstery segment sales     320,958       302,923       900,126       866,128  
Casegoods segment:                                
Sales to external customers     23,887       20,499       68,821       64,651  
Intersegment sales     3,328       2,760       11,969       9,534  
Casegoods segment sales     27,215       23,259       80,790       74,185  
Retail segment sales     125,815       122,121       353,068       325,206  
Corporate and Other:                                
Sales to external customers     1,062       722       2,604       2,140  
Intersegment sales     2,818       1,978       6,839       4,751  
Corporate and Other sales     3,880       2,700       9,443       6,891  
Eliminations     (64,230 )     (61,011 )     (179,505 )     (165,056 )
Consolidated sales   $ 413,638     $ 389,992     $ 1,163,922     $ 1,107,354  
Operating Income (Loss)                                
Upholstery segment   $ 31,699     $ 35,669     $ 88,422     $ 104,388  
Casegoods segment     2,792       1,593       8,833       6,587  
Retail segment     7,076       6,325       12,746       11,515  
Corporate and Other     (8,472 )     (10,015 )     (26,339 )     (32,602 )
Consolidated operating income   $ 33,095     $ 33,572     $ 83,662     $ 89,888  

Kathy Liebmann
(734) 241-2438

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Source: La-Z-Boy Incorporated