La-Z-Boy Reports Second-Quarter Operating Results
MONROE, Mich., Nov. 14 /PRNewswire-FirstCall/ -- La-Z-Boy Incorporated (NYSE: LZB; PCX) today reported its operating results for the 2007 second fiscal quarter ended October 28, 2006. Net sales for the quarter were $440.5 million, up 2%, compared with the prior-year period. Net income for the quarter was $2.0 million, or $0.04 per share, versus a loss of $6.4 million, or a $0.12 loss per share, in last year's second quarter. Results for the fiscal 2007 second quarter included a $0.01 per share charge for stock option expense and $0.02 per share in restructuring charges. Last year's second quarter included an after-tax restructuring charge of $0.10 per share related to the closure of the company's Waterloo, Ontario upholstery facility and $0.01 per share in income from discontinued operations.
Kurt L. Darrow, President and CEO, said, "We were challenged with sales volume this quarter which was reflective of recent trends in furniture demand throughout the broader industry. We continue, however, to be encouraged by our ability to improve wholesale margins on essentially flat volume during what continues to be a difficult period. Our focus remains on our efforts to improve the performance of our company-owned proprietary store system and, this quarter, we took a number of the necessary steps to move in that direction. Additionally, we are working to leverage the unparalleled strength of the La-Z-Boy brand and strategically position ourselves for the future.
Upholstery
For the fiscal 2007 second quarter, upholstery sales increased 0.8% compared with the prior-year period while the operating margin improved year over year from 3.9% to 6.3%. Darrow stated, "We continue to improve our cost structure through increased global sourcing, cost containment and the conversion of our facilities to the cellular production process. A substantial part of our operating margin improvement this quarter demonstrates the success of these initiatives. Paramount to our service and value proposition is the ability to deliver custom furniture quickly and, today, approximately 45% of our orders flow through our system within a three-week timeframe and our objective is to deliver 100% of custom orders in four weeks or less. Going forward, in addition to a focus on customization and speed, we will work to broaden our distribution and further strengthen the La-Z-Boy Furniture Galleries(R) store system."
For the quarter, the La-Z-Boy Furniture Galleries(R) store system, which includes both company-owned and independent-licensed stores, opened four new stores, relocated and/or remodeled eight and closed three, bringing the total store count to 335, of which 171 are in the New Generation format. Darrow noted, "We are on track to open, relocate or remodel approximately 50 New Generation stores in the overall network in fiscal 2007 and plan to add eight new stores to the system in the third quarter, relocate or convert nine and close two."
System-wide, for the third calendar quarter, including company-owned and independent-licensed stores, same-store written sales, which the company tracks as an indicator of retail activity, were down 3.2% and total sales, which includes new stores, decreased 0.8%.
Casegoods
In the second quarter, casegoods sales were $92.1 million, down 1.0% from last year's second quarter. The segment's operating margin was 4.8%, up from last year's margin of 1.8%. Darrow stated, "We saw a rebound in sales from this year's first quarter. Compared with last year's second quarter, on slightly lower volume, we improved our operating profit by $2.7 million as a result of the successful conversion to primarily an import model where we have a much greater variable cost structure. Looking ahead, we will maintain our focus on the continued improvement of our cost structure and service levels to customers."
Retail
For the quarter, retail sales were $52.5 million compared with $49.2 million in last year's second quarter. On an operating basis, the segment incurred a loss, primarily the result of the sluggish retail environment, inefficiencies related to transitional issues and the current fixed cost structure relative to volume.
Darrow commented, "We made numerous changes to our retail operation this quarter. We opened three new stores, relocated two and exited the Rochester, New York market, by closing two stores. We also consolidated six warehouses into two large regional distribution centers. Additionally, in the Northeast region, we rolled out an enhanced operating system which will enable us to better manage our business while reducing redundancies and costs. Although there were various one-time expenses associated with these moves, we are confident they will drive meaningful improvement in our operating efficiency."
Darrow added, "Our emphasis will continue to be on improving our cost structure, particularly in the markets we acquired over the past 18 months. We also have the ability to strengthen our gross margin performance now that we are through a number of closing and clearance sales at the older stores. And, we are focused on increasing the system's volume through greater penetration of the markets in which we operate -- both through additional stores and the relocation and conversion to stores in the New Generation format. In fiscal 2007, we plan to open, remodel and/or relocate 20 company- owned stores, bringing the total number of stores in the new format to 49, representing 70% of the 70 stores we plan to have in our system at year end.
La-Z-Boy Incorporated owns 68 stores, including 37 in the New Generation format. For the third quarter, the company plans to add seven New Generation stores to its retail segment: four brand new stores and three relocations/conversions.
Restructuring
During the quarter, a pre-tax restructuring charge of $2.3 million, or $0.03 per share, was recorded stemming from the consolidation of retail warehouses, store closings and related contract termination costs for leases on these facilities, severance and benefits and the write-down of certain leasehold improvements in addition to other relocation costs.
Balance Sheet
Darrow noted, "For the quarter, our debt-to-capitalization ratio stood at 27.2%, a slight increase from fiscal 2006 year end's ratio of 26.5%. We repurchased approximately 250,000 shares during the quarter at an average price of $12.98, leaving us with approximately 5.4 million shares remaining in our program."
Business Outlook
Commenting on the company's business outlook, Darrow noted: "Although we have made strides in our wholesale divisions from a margin perspective, the volatility of the retail climate continues to concern us. For the fiscal 2007 third quarter, we expect sales to be down in the mid-single-digit range compared with last year's third quarter sales of $477 million and we expect earnings per share to be in the range of $0.06 to $0.10, including up to a $0.01 per share charge for stock option expense. In last year's third- quarter, we reported earnings per share of $0.20, which included $0.01 per share in restructuring charges and $0.01 per share of discontinued operations."
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) changes in housing sales; (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) the potential disruptions from Chinese imports; (i) inventory supply price fluctuations; (j) the impact of imports as it relates to continued domestic production; (k) changes in currency exchange rates; (l) competitive factors; (m) operating factors, such as supply, labor, or distribution disruptions including changes in operating conditions or costs; (n) effects of restructuring actions; (o) changes in the domestic or international regulatory environment; (p) not fully realizing cost reductions through restructurings; (q) ability to implement global sourcing organization strategies; (r) the impact of new manufacturing technologies; (s) the future financial performance and condition of independently operated dealers that we are required to consolidate into our financial statements or changes requiring us to consolidate additional independently operated dealers; (t) fair value changes to our intangible assets due to actual results differing from projected; (u) the impact of adopting new accounting principles; (v) the impact from natural events such as hurricanes, earthquakes and tornadoes; (w) the ability to turn around under- performing retail stores; (x) the impact of retail store relocation costs, the success of new stores or the timing of converting stores to the New Generation format; (y) the ability to procure fabric rolls or cut-and-sewn sets domestically or abroad; and (z) 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, Centurion, England, La-Z-Boy, and Sam Moore. The La-Z-Boy Casegoods Group companies are American Drew, Hammary, Kincaid, Lea, Clayton Marcus, and Pennsylvania House.
The corporation's proprietary distribution network is dedicated exclusively to selling La-Z-Boy Incorporated products and brands, and includes 335 stand-alone La-Z-Boy Furniture Galleries(R) stores and 307 La-Z-Boy In- Store Galleries, in addition to in-store gallery programs at the company's Kincaid, Pennsylvania House, Clayton Marcus, 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
(Unaudited, amounts in thousands, except per share data)
Second Quarter Ended
% Over Percent of Sales
10/28/06 10/29/05 (Under) 10/28/06 10/29/05
Sales $440,538 $433,367 1.7% 100.0% 100.0%
Cost of sales
Cost of goods sold 329,242 336,263 -2.1% 74.7% 77.6%
Restructuring (400) 7,817 -105.1% -0.1% 1.8%
Total cost of sales 328,842 344,080 -4.4% 74.6% 79.4%
Gross profit 111,696 89,287 25.1% 25.4% 20.6%
Selling, general and
administrative 105,315 97,264 8.3% 23.9% 22.4%
Restructuring 2,265 -- N/M 0.5% --
Operating income
(loss) 4,116 (7,977) 151.6% 0.9% -1.8%
Interest expense 2,614 3,090 -15.4% 0.6% 0.7%
Other income, net 1,649 294 460.9% 0.4% 0.1%
Income (loss) from
continuing operations
before income taxes 3,151 (10,773) 129.2% 0.7% -2.5%
Income tax expense
(benefit) 1,197 (3,862) 131.0% 38.0%* 35.8%*
Income (loss) from
continuing operations 1,954 (6,911) 128.3% 0.4% -1.6%
Income from discontinued
operations (net of tax) -- 464 -100.0% -- 0.1%
Net income (loss) $1,954 $(6,447) 130.3% 0.4% -1.5%
Basic average shares 51,373 51,655
Basic income (loss)
from continuing
operations per share $0.04 $(0.13)
Discontinued operations
(net of tax) $-- $0.01
Basic net income (loss)
per share $0.04 $(0.12)
Diluted average shares 51,639 51,655
Diluted income (loss)
from continuing
operations per share $0.04 $(0.13)
Discontinued operations
(net of tax) $-- $0.01
Diluted net income
(loss) per share $0.04 $(0.12)
Dividends paid per share $0.12 $0.11
* As a percent of pretax income, not sales.
N/M = not meaningful
LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited, amounts in thousands, except per share data)
Six Months Ended
% Over Percent of Sales
10/28/06 10/29/05 (Under) 10/28/06 10/29/05
Sales $859,403 $862,242 -0.3% 100.0% 100.0%
Cost of sales
Cost of goods sold 646,152 662,613 -2.5% 75.2% 76.8%
Restructuring (400) 7,817 -105.1% -- 0.9%
Total cost of sales 645,752 670,430 -3.7% 75.1% 77.8%
Gross profit 213,651 191,812 11.4% 24.9% 22.2%
Selling, general and
administrative 204,440 193,080 5.9% 23.8% 22.4%
Restructuring 2,265 -- N/M 0.3% --
Operating income
(loss) 6,946 (1,268) 647.8% 0.8% -0.1%
Interest expense 5,140 5,831 -11.9% 0.6% 0.7%
Other income, net 2,267 303 648.2% 0.3% --
Income (loss) from
continuing operations
before income taxes 4,073 (6,796) 159.9% 0.5% -0.8%
Income tax expense
(benefit) 1,077 (2,362) 145.6% 26.4%* 34.8%*
Income (loss) from
continuing operations 2,996 (4,434) 167.6% 0.3% -0.5%
Income from discontinued
operations (net of tax) 1,253 1,195 4.9% 0.1% 0.1%
Net income (loss) $4,249 $(3,239) 231.2% 0.5% -0.4%
Basic average shares 51,580 51,892
Basic income(loss) from
continuing operations
per share $0.06 $(0.08)
Discontinued operations
(net of tax) $0.02 $0.02
Basic net income (loss)
per share $0.08 $(0.06)
Diluted average shares 51,806 51,892
Diluted income (loss)
from continuing
operations per share $0.06 $(0.08)
Discontinued operations
(net of tax) $0.02 $0.02
Diluted net income
(loss) per share $0.08 $(0.06)
Dividends paid per share $0.24 $0.22
* As a percent of pretax income, not sales.
N/M = not meaningful
LA-Z-BOY INCORPORATED
CONSOLIDATED BALANCE SHEET
(Unaudited, amounts in thousands)
Increase/(Decrease)
10/28/06 10/29/05 Dollars Percent 4/29/06
Current assets
Cash and equivalents $20,529 $15,037 $5,492 36.5% $24,089
Receivables, net 253,519 258,518 (4,999) -1.9% 270,578
Inventories, net 237,885 267,320 (29,435) -11.0% 238,826
Deferred income taxes 32,339 27,247 5,092 18.7% 27,276
Other current assets 29,076 30,676 (1,600) -5.2% 23,790
Total current assets 573,348 598,798 (25,450) -4.3% 584,559
Property, plant and
equipment, net 204,904 214,552 (9,648) -4.5% 209,986
Goodwill 62,736 79,770 (17,034) -21.4% 56,926
Trade names 18,794 18,794 -- -- 18,794
Other long-term assets 80,166 84,214 (4,048) -4.8% 100,909
Total assets $939,948 $996,128 $(56,180) -5.6% $971,174
Current liabilities
Short-term borrowings $35,000 $30,835 $4,165 13.5% $8,000
Current portion of
long-term debt 3,295 1,965 1,330 67.7% 2,844
Accounts payable 72,308 73,397 (1,089) -1.5% 85,561
Accrued expenses and
other current
liabilities 114,762 130,154 (15,392) -11.8% 128,112
Total current
liabilities 225,365 236,351 (10,986) -4.6% 224,517
Long-term debt 147,799 194,533 (46,734) -24.0% 173,368
Deferred income taxes 12,845 4,599 8,246 179.3% 14,548
Other long-term
liabilities 54,920 56,361 (1,441) -2.6% 48,396
Contingencies and
commitments -- -- -- -- --
Shareholders' equity
Common shares, $1
par value 51,364 51,637 (273) -0.5% 51,782
Capital in excess
of par value 206,145 211,838 (5,693) -2.7% 210,826
Retained earnings 236,635 254,855 (18,220) -7.1% 246,387
Unearned compensation -- (3,534) 3,534 100.0% (3,083)
Accumulated other
comprehensive income
(loss) 4,875 (10,512) 15,387 146.4% 4,433
Total shareholders'
equity 499,019 504,284 (5,265) -1.0% 510,345
Total liabilities and
shareholders'
equity $939,948 $996,128 $(56,180) -5.6% $971,174
LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, amounts in thousands)
Second Quarter Ended Six Months Ended
10/28/06 10/29/05 10/28/06 10/29/05
Cash flows from operating activities
Net income (loss) $1,954 $(6,447) $4,249 $(3,239)
Adjustments to reconcile net income
(loss) to cash provided by (used for)
operating activities
Gain on sale of discontinued
operations (net of tax) -- -- (1,280) --
Restructuring 1,865 7,817 1,865 7,817
Change in allowance for doubtful
accounts 592 (1,589) 867 (740)
Depreciation and amortization 6,809 7,178 13,889 14,176
Stock option and restricted
stock expense 1,861 -- 2,732 --
Change in receivables (23,177) (4,703) (1,005) 29,290
Change in inventories 873 (2,581) (17,117) (3,362)
Change in payables (2,060) 4,055 (9,379) (9,904)
Change in other assets
and liabilities (8,623) (2,683) (15,570) (9,984)
Change in deferred taxes (3,110) (2,020) (6,766) (5,258)
Total adjustments (24,970) 5,474 (31,764) 22,035
Net cash provided by (used for)
operating activities (23,016) (973) (27,515) 18,796
Cash flows from investing activities
Proceeds from disposals of assets 3,633 7,718 24,962 7,720
Proceeds from sale of
discontinued operations 3,184 -- 33,166 --
Capital expenditures (5,767) (7,570) (15,010) (14,283)
Purchases of investments (2,760) (3,622) (8,392) (15,560)
Proceeds from sale of investments 2,320 1,925 8,017 4,068
Change in other long-term assets (701) (1,236) (196) (3,301)
Net cash provided by (used for)
investing activities (91) (2,785) 42,547 (21,356)
Cash flows provided by (used for)
financing activities
Proceeds from debt 56,276 26,058 78,675 72,137
Payments on debt (31,266) (18,214) (78,680) (72,119)
Stock issued for stock option
and employee benefits plans (342) 1,045 766 2,045
Repurchase of common stock (3,261) (3,642) (6,947) (10,889)
Dividends paid (6,213) (5,714) (12,462) (11,472)
Net cash provided by (used for)
financing activities 15,194 (467) (18,648) (20,298)
Effect of exchange rate changes on
cash and equivalents 49 251 56 190
Change in cash and equivalents (7,864) (3,974) (3,560) (22,668)
Cash and equivalents at beginning
of period 28,393 19,011 24,089 37,705
Cash and equivalents at end
of period $20,529 $15,037 $20,529 $15,037
Cash paid (net of refunds) during
period - income taxes $16,889 $7,224 $17,097 $1,591
Cash paid during period - interest $1,748 $2,088 $4,660 $5,310
LA-Z-BOY INCORPORATED
Segment Information
(Unaudited, amounts in thousands)
Second Quarter Ended Six Months Ended
10/28/06 10/29/05 10/28/06 10/29/05
Sales
Upholstery Group $312,575 $310,013 $615,658 $614,084
Casegoods Group 92,111 93,057 170,393 185,853
Retail Group 52,485 49,245 104,689 101,900
VIEs/Eliminations (16,633) (18,948) (31,337) (39,595)
Consolidated $440,538 $433,367 $859,403 $862,242
Operating income (loss)
Upholstery Group $19,676 $12,115 $37,322 $26,884
Casegoods Group 4,412 1,703 7,351 5,340
Retail Group (8,769) (6,074) (16,484) (11,482)
Corporate and other* (9,338) (7,904) (19,378) (14,193)
Restructuring (1,865) (7,817) (1,865) (7,817)
Consolidated $4,116 $(7,977) $6,946 $(1,268)
* Variable Interest Entities ("VIEs") are included in corporate and other.
SOURCE La-Z-Boy Incorporated
-0- 11/14/2006
/CONTACT: Mark Stegeman of La-Z-Boy Incorporated, +1-734-241-4418,
mark.stegeman@la-z-boy.com /
/Web site: http://www.la-z-boy.com
http://www.la-z-boy.com/about/investorRelations/IR_email_alerts.aspx
http://www.la-z-boy.com/about/investorRelations/sec_filings.aspx /
(LZB)
CO: La-Z-Boy Incorporated
ST: Michigan
IN: HOU REA
SU: ERN ERP
MB-CS
-- DETU018 --
1531 11/14/2006 16:42 EST http://www.prnewswire.com