La-Z-Boy Reports Second Quarter, First Half Results
For the six months ended October 27, 2001, the company earned $0.38 per diluted share, excluding the $0.13 per share restructuring charge, versus $0.64 per diluted share in the first half of fiscal 2001, excluding the $0.05 per share nonrecurring gain. Sales totaled $1.018 billion for this year's first half, 8 percent below the year-earlier level of $1.109 billion.
Upholstery segment sales for the October quarter were essentially unchanged from a year earlier, and for the first six months declined 2 percent -- representing a very favorable showing compared to both the industry and the company's major competitors. Operating profit margin in upholstery, excluding restructuring charges, was 9.2% for the quarter and 6.8% for the six months. "Although below comparable prior-year period margins, these results reflect a positive trend compared to the previous six months, which may prove to have been the bottom of the cycle," according to La-Z-Boy Incorporated president and CEO Jerry Kiser, who continued, "The current trend in our upholstery segment sales is both encouraging and better than many of our competitors, largely as a result of the power of our brand name, and the strength of our proprietary retail distribution. It looks very much as though upholstery sales may have bottomed out, and we would expect to see consecutive quarterly margin improvement going forward as volumes pick up and our previously- announced upholstery capacity reduction initiatives take hold."
Casegoods (wood furniture) segment sales declined 17 percent for the October quarter and fell 20 percent for the first six months. Operating profit margin in casegoods, excluding restructuring charges, was 2.6% for the quarter and 1.4% for the six months. Kiser said, "We anticipate that this segment will be slower to recover, but it has moved from an operating loss to operating profitability over the past two quarters (excluding restructuring charges) and we expect to see continuing consecutive quarterly improvement. We have taken a number of actions to improve this segment's profitability, including facilities restructuring and downsizing to blend imported products and components with our domestically-manufactured furniture.
Commenting on the quarter's operating results, Kiser said, "Considering the severe pressure under which our industry has operated recently, we feel good about our performance. Excluding the restructuring charge, our October quarter gross margin was 24.5%, its highest level in nine quarters -- due in part to our ongoing cost-cutting efforts and actions aimed at streamlining the business. We reduced inventories during the quarter by a total of $15 million, cut our debt to capitalization ratio to 20.6% and repurchased 418,000 shares of La-Z-Boy's common stock for $6.6 million. While we're certainly nowhere near where we want to be, we are working hard to improve the company's basic profitability and believe we're heading in the right direction."
Kiser reiterated that the $0.13 per share restructuring charge, which was announced on October 25th, relates to closing down three of the company's manufacturing facilities and converting two others to warehousing and manufacturing service operations. The charge will primarily cover employee termination costs and the write-down of certain fixed assets and inventories. In total, these efforts will reduce La-Z-Boy Incorporated's U.S. manufacturing operations by about 1.25 million square feet and cut employment by about 570 jobs. "Overall, these restructuring actions are expected to produce savings in the area of $10 million annually," he said.
Noting that the declining sales trends moderated somewhat during the most recent quarter, Kiser added, "We are encouraged that our business has apparently begun to stabilize, and are cautiously optimistic regarding the outlook for the second half of our April fiscal year." He concluded, "While the current unsettled business conditions make it difficult to predict full year results, we will soon start to benefit from easier year-over-year comparisons. We expect a mid single digit percentage sales decline in our January 2002 quarter, and are looking for earnings in the range of $0.26 - $0.30 range per diluted share, versus the $0.27 we earned in the January quarter of fiscal 2001. Our tentative earnings estimate for the fiscal year ending April 2002 is presently $1.05 - $1.12 per diluted share, exclusive of restructuring charges."
Conference Call Information
The dial-in phone number for tomorrow's live conference call (November 15, 2001 at 11 a.m. EST) will be 800-374-1298 for persons calling from within the U.S. or Canada, and the number for international callers will be 706-634-5855. The call will also be webcast live and archived on the Internet, both at www.la-z-boy.com . A telephone replay of the call will be continuously available from approximately 2 p.m. on Thursday, November 15th through noon on Thursday, November 22nd. This replay will be available to callers from the U.S. and Canada at 800-642-1687 and to international callers at 706-645-9291. The replay passcode will be 2171122.
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 or demand, changes in housing sales, the impact of terrorism, 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.
La-Z-Boy Background Information
With annual sales in excess of $2 billion, La-Z-Boy Incorporated is one of the world's largest residential furniture producers, with manufacturing operations in ten states and four foreign countries. The La-Z-Boy Incorporated family of companies produces furniture for every room of the home and office under the brand names 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. And, under the American of Martinsville brand name, La-Z-Boy is also a leading manufacturer of contract furniture for the hospitality and assisted-living markets.
La-Z-Boy Incorporated's vast distribution network of proprietary retailers includes 296 La-Z-Boy Furniture Galleries(R) and 324 La-Z-Boy In-Store Gallerys; in-store gallery programs at Kincaid, Pennsylvania House and Clayton Marcus; England's Custom Comfort Centers and Lea's Kid's Generation displays. According to industry trade publication Furniture/Today, the La-Z-Boy Furniture Galleries retail network, by itself, represents the industry's fifth largest U.S. furniture store. La-Z-Boy's stock is traded on the New York and Pacific stock exchanges under the trading symbol: LZB. Additional information on the company is available at www.la-z-boy.com .
LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF INCOME
(Amounts in thousands, except per share data)
(UNAUDITED)
SECOND QUARTER ENDED
10/27/01 10/28/00 % Over Percent of Sales
(Under)
(13 Weeks) (13 Weeks) 10/27/01 10/28/00
Sales $559,189 $592,700 -6% 100.0% 100.0%
Cost of sales 435,510 450,569 -3% 77.9% 76.0%
Gross profit 123,679 142,131 -13% 22.1% 24.0%
S, G & A 102,073 97,295 5% 18.2% 16.4%
Operating profit 21,606 44,836 -52% 3.9% 7.6%
Interest expense 2,044 4,497 -55% 0.4% 0.8%
Interest income 387 329 18% 0.1% 0.1%
Other income, net 363 5,860 -94% 0.0% 1.0%
Pretax income 20,312 46,528 -56% 3.6% 7.9%
Income tax expense 7,921 17,612 -55% 39.0% * 37.9% *
Net income $12,391 $28,916 -57% 2.2% 4.9%
Basic EPS $0.20 $0.48 -58%
Diluted avg. shares 61,052 60,684 1%
Diluted EPS $0.20 $0.48 -58%
Dividends paid $0.09 $0.09 0%
per share
(UNAUDITED)
SIX MONTHS ENDED
10/27/01 10/28/00 % Over Percent of Sales
(Under)
(26 Weeks) (26 Weeks) 10/27/01 10/28/00
Sales $1,018,170 $1,109,407 -8% 100.0% 100.0%
Cost of sales 796,627 850,935 -6% 78.2% 76.7%
Gross profit 221,543 258,472 -14% 21.8% 23.3%
S, G & A 192,960 189,056 2% 19.0% 17.0%
Operating profit 28,583 69,416 -59% 2.8% 6.3%
Interest expense 5,000 8,849 -43% 0.5% 0.8%
Interest income 745 782 -5% 0.1% 0.1%
Other income, net 626 6,476 -90% 0.1% 0.5%
Pretax income 24,954 67,825 -63% 2.5% 6.1%
Income tax expense 9,732 25,906 -62% 39.0% * 38.2% *
Net income $15,222 $41,919 -64% 1.5% 3.8%
Basic EPS $0.25 $0.69 -64%
Diluted avg. shares 60,994 60,957 0%
Diluted EPS $0.25 $0.69 -64%
Dividends paid $0.18 $0.17 6%
per share
* As a percent of pretax income, not sales.
LA-Z-BOY INCORPORATED
CONSOLIDATED BALANCE SHEET
(Amounts in thousands) Unaudited
Increase/(Decrease) Audited
10/27/01 10/28/00 Dollars Percent 4/28/01
Current assets
Cash and
equivalents $24,797 $16,741 $8,056 48% $23,565
Receivables -
net 377,744 402,603 (24,859) -6% 380,867
Inventories
Raw materials 82,045 100,948 (18,903) -19% 90,381
Work-in-progress 60,250 67,934 (7,684) -11% 62,465
Finished goods 113,010 114,199 (1,189) -1% 115,425
FIFO
inventories 255,305 283,081 (27,776) -10% 268,271
Excess of FIFO
over LIFO (10,850) (7,703) (3,147) -41% (10,384)
Total
inventories 244,455 275,378 (30,923) -11% 257,887
Deferred income
taxes 19,771 18,769 1,002 5% 26,168
Income taxes -
current 2,944 5,655 (2,711) -48% 2,944
Other current
assets 16,133 14,059 2,074 15% 17,345
Total current
assets 685,844 733,205 (47,361) -6% 708,776
Property, plant and
equipment 219,656 226,922 (7,266) -3% 230,341
Goodwill 110,497 116,224 (5,727) -5% 112,755
Trade names 118,876 124,101 (5,225) -4% 120,981
Other long-term
assets 55,503 58,130 (2,627) -5% 52,944
Total
assets $1,190,376 $1,258,582 ($68,206) -5% $1,225,797
Current liabilities
Lines of credit $0 $0 $0 N/M $10,380
Current portion
of long-term debt 6,559 1,622 4,937 304% 5,304
Current portion
of capital leases 488 457 31 7% 541
Accounts payable 88,604 108,305 (19,701) -18% 92,830
Payroll and
other compensation 69,694 67,139 2,555 4% 78,550
Income taxes 10,423 9,808 615 6% 11,490
Other current
liabilities 56,816 51,282 5,534 11% 50,820
Total current
liabilities 232,584 238,613 (6,029) -3% 249,915
Long-term debt 171,477 255,818 (84,341) -33% 196,923
Capital leases 2,278 2,868 (590) -21% 2,496
Deferred income taxes 46,236 52,493 (6,257) -12% 45,709
Other long-term
liabilities 39,380 32,385 6,995 22% 35,608
Contingencies and
commitments
Shareholders'
equity
Common shares,
$1 par value 60,763 60,227 536 1% 60,501
Capital in
excess of par
value 211,138 211,035 103 0% 210,924
Retained
earnings 434,348 408,221 26,127 6% 427,616
Accum. other
comprehensive
loss (7,828) (3,078) (4,750) -154% (3,895)
Total
shareholders'
equity 698,421 676,405 22,016 3% 695,146
Total
liabilities
and
shareholders'
equity $1,190,376 $1,258,582 ($68,206) -5% $1,225,797
LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands)
(Unaudited) (Unaudited)
Second Quarter Ended Six Months Ended
10/27/01 10/28/00 10/27/01 10/28/00
Cash flows from
operating activities
Net income $12,391 $28,916 $15,222 $41,919
Adjustments to
reconcile net income
to cash provided by
operating activities
Depreciation and
amortization 10,700 11,473 21,621 22,038
Change in
receivables (72,396) (52,267) 3,602 (6,651)
Change in
inventories 15,723 (9,407) 13,432 (29,575)
Change in payables 11,759 25,098 (4,226) 17,913
Change in other
assets and
liabilities 33,257 4,350 77 (22,638)
Proceeds from
insurance recovery 5,116 5,116
Change in deferred
taxes 3,465 2,412 6,924 5,818
Total adjustments 2,508 (13,225) 41,430 (7,979)
Cash provided by
operating
activities 14,899 15,691 56,652 33,940
Cash flows from
investing activities
Proceeds from
disposals of assets 304 253 843 439
Capital expenditures (5,871) (9,678) (11,956) (17,073)
Change in other
long-term assets (3,973) (818) (737) 2,330
Cash used for
investing
activities (9,540) (10,243) (11,850) (14,304)
Cash flows from
financing activities
Proceeds from debt 6,206 15,000 41,576 77,000
Payment of debt (21,050) (7,857) (76,147) (66,617)
Capital leases (134) (134) (271) 712
Stock issued for
stock options &
401(k) plans (net) 4,580 3,495 9,528 5,915
Repurchase of
common stock (6,586) (11,241) (6,586) (23,249)
Dividends paid (5,492) (5,432) (10,956) (10,338)
Cash used for
financing
activities (22,476) (6,169) (42,856) (16,577)
Effect of exchange
rate changes on cash (533) (563) (714) (671)
Change in cash
and equivalents (17,650) (1,284) 1,232 2,388
Cash and equivalents
at beginning of period 42,447 18,025 23,565 14,353
Cash and equivalents
at end of period $24,797 $16,741 $24,797 $16,741
Cash paid during period
- Income taxes $5,437 $18,278 $8,500 $24,726
- Interest $2,954 $3,992 $5,216 $6,249
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SOURCE La-Z-Boy Incorporated
CONTACT: Mark Stegeman of La-Z-Boy Incorporated, +1-734-241-4418,
mark.stegeman@la-z-boy.com
URL: http://www.la-z-boy.com
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