La-Z-Boy Reports Fiscal 2018 Third-Quarter Results
- 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
The company reported net income attributable to
Sales in the company’s upholstery segment increased 6.0% to
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
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,
FISCAL 2018 PROJECTED* STORE ACTIVITY
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
Balance Sheet and Cash Flow
During the quarter, the company generated
Conference Call
The call will be webcast live, with corresponding slides, and archived on the Internet. It will be available at https://lazboy.gcs-web.com/. A telephone replay will be available for a week following the call. This replay will be accessible to callers from the U.S. and
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: https://lazboy.gcs-web.com/financial-information/sec-filings . 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: https://lazboy.gcs-web.com/.
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 http://www.la-z-boy.com/.
LA-Z-BOY INCORPORATED | ||||||||
CONSOLIDATED STATEMENT OF INCOME | ||||||||
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 | ||||
LA-Z-BOY INCORPORATED | ||||||||
CONSOLIDATED STATEMENT OF INCOME | ||||||||
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 | ||||
LA-Z-BOY INCORPORATED | ||||||||
CONSOLIDATED BALANCE SHEET | ||||||||
(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 | ||||
LA-Z-BOY INCORPORATED | ||||||||
CONSOLIDATED STATEMENT OF CASH FLOWS | ||||||||
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 period |
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 | ||||
LA-Z-BOY INCORPORATED | ||||||||||||||||
SEGMENT INFORMATION | ||||||||||||||||
Quarter Ended | Nine Months Ended | |||||||||||||||
(Unaudited, amounts in thousands) | 1/27/18 | 1/28/17 | 1/27/18 | 1/28/17 | ||||||||||||
Sales | ||||||||||||||||
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 | ||||||||
Contact:
Kathy Liebmann
(734) 241-2438
kathy.liebmann@la-z-boy.com
Source: La-Z-Boy Incorporated