La-Z-Boy Reports Fiscal 2014 Second-Quarter Results
Fiscal 2014 second-quarter highlights:
- Consolidated sales for the second quarter increased 13.7% compared with the fiscal 2013 second quarter;
- Same-store written sales for the La-Z-Boy Furniture Galleries® store network increased 9.8% for the second quarter, on top of a 13.3% increase in last year's second quarter;
- Consolidated operating income increased 141% to
$25.4 million from$10.6 million , including$2.7 million of restructuring charges in the fiscal 2013 second quarter; - The upholstery segment posted an 11% operating margin versus 8.4% in last year's second quarter;
- The retail segment posted operating income of
$3.3 million , with a 4.4% operating margin, compared with an operating loss of$0.6 million , or a (0.9%) operating margin, in last year's second quarter; - The company generated cash from operating activities of
$19.4 million during the quarter; and - The company increased its quarterly dividend by 50% to
$0.06 per share.
Sales for the fiscal 2014 second quarter were
Wholesale Segments
For the fiscal 2014 second quarter, sales in the company's upholstery segment increased 14.2% to
Darrow commented, "Our upholstery business continues to exhibit momentum and we are approaching three years of double-digit written same-store sales growth for the La-Z-Boy Furniture Galleries® network of stores. Our marketing and merchandising initiatives are delivering results with our Live life comfortably advertising campaign driving an expanded base of consumers to our brand with awareness of our broad product line growing among a wider demographic. At the October Furniture Market in
Darrow added, "Although the casegoods business continues to face challenges, it is encouraging to see that sales have somewhat stabilized compared with the declines we experienced in recent quarters. During the period, we delivered several new groups from the prior furniture markets and we are beginning to develop traction with them. At the High Point Market last month, we launched a direct container program which will allow customers to mix various Kincaid, American Drew and Lea product in one container. This program gives us the ability to better service smaller dealers with reduced delivery times, which we believe will help to grow our business in the western region of
Retail Segment
For the fiscal 2014 second quarter, retail delivered sales were
Darrow stated, "Our retail segment continues to improve its performance, with this quarter marking the 19th consecutive quarterly improvement over prior-year results. Our increased operating margin was primarily driven by the ability to leverage fixed SG&A expenses with more volume. This volume was attributable to a higher-priced mix driven by differentiated product merchandising. Although traffic for the period was flat, we experienced an increase in average ticket, as well as other key metrics. During the quarter, we closed on the acquisition of three stores in the
La-Z-Boy Furniture Galleries® Stores Network
System-wide, for the second quarter of fiscal 2014, including company-owned and independent-licensed stores, same-store written sales, which the company tracks as an indicator of retail activity, were up 9.8% versus last year's second quarter.
Total written sales, which include new and closed stores, were up 10.1% for the second quarter. At the end of the second quarter, the La-Z-Boy Furniture Galleries® store system was composed of 314 stand-alone stores.
Darrow stated, "We are working diligently on our "4-4-5" strategy, where we aim to have 400 La‑Z‑Boy Furniture Galleries® stores, averaging
In the fiscal 2014 second quarter, the La-Z-Boy Furniture Galleries® store network, including company-owned and independent-licensed stores, opened three new stores and closed one. At the end of the quarter, 23 of the total 314 stores were in the new concept design format introduced in 2011.
Balance Sheet and Cash Flow
During the quarter, the company generated
Dividend
The Board of Directors increased the company's regular quarterly dividend to shareholders by 50% to
Business Outlook
Darrow stated, "We continue to be optimistic about our business model and future opportunities. Over the past five years, we have proactively transformed our company against the backdrop of a challenging macroeconomic environment. We have built a strong foundation across our business in terms of operating efficiencies with creative and fresh marketing and merchandising initiatives. Our brand remains the strongest in the industry and we have excellent retail distribution through approximately 900 branded outlets in addition to numerous other retail outlets. Although there is uncertainty in
Conference Call
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) speed of economic recovery or the possibility of another recession; (c) changes in the real estate and credit markets and their effects on our customers and suppliers; (d) international political unrest, terrorism or war; (e) volatility in energy and other commodities prices; (f) the impact of logistics on imports; (g) interest rate and currency exchange rate changes; (h) operating factors, such as supply, labor or distribution disruptions; (i) any court actions requiring us to return any of the Continued Dumping and Subsidy Offset Act distributions we have received; (j) changes in the domestic or international regulatory environment; (k) adoption of new accounting principles; (l) severe weather or other natural events such as hurricanes, earthquakes, flooding, tornadoes and tsunamis; (m) our ability to procure fabric rolls and leather hides or cut-and-sewn fabric and leather sets domestically or abroad; (n) fluctuations in our stock price; (o) information technology conversions or system failures; (p) effects of our brand awareness and marketing programs; (q) the discovery of defects in our products resulting in delays in manufacturing, recall campaigns, reputational damage, or increased warranty costs; (r) litigation arising out of alleged defects in our products; (s) our ability to locate new La-Z-Boy Furniture Galleries® stores (or store owners) and negotiate favorable lease terms for new or existing locations; (t) our ability to successfully integrate acquired businesses and realize the benefit of anticipated synergies; and (u) those matters discussed in Item 1A of our fiscal 2013 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
Background Information
The corporation's branded distribution network is dedicated to selling
LA-Z-BOY INCORPORATED |
||||
Second Quarter Ended |
||||
(Unaudited, amounts in thousands, except per share data) |
10/26/13 |
10/27/12 |
||
Sales |
$366,403 |
$322,341 |
||
Cost of sales |
242,643 |
222,032 |
||
Gross profit |
123,760 |
100,309 |
||
Selling, general and administrative expense |
98,342 |
89,746 |
||
Operating income |
25,418 |
10,563 |
||
Interest expense |
133 |
191 |
||
Interest income |
176 |
116 |
||
Other income (expense), net |
(279) |
212 |
||
Income before income taxes |
25,182 |
10,700 |
||
Income tax expense |
8,165 |
3,868 |
||
Net income |
17,017 |
6,832 |
||
Net income attributable to noncontrolling interests |
(273) |
(213) |
||
Net income attributable to La-Z-Boy Incorporated |
$16,744 |
$6,619 |
||
Basic weighted average shares outstanding |
52,537 |
52,356 |
||
Basic net income attributable to La-Z-Boy Incorporated per share |
$0.32 |
$0.13 |
||
Diluted weighted average shares outstanding |
53,261 |
53,268 |
||
Diluted net income attributable to La-Z-Boy Incorporated per share |
$0.31 |
$0.12 |
||
Dividends declared per share |
$0.04 |
— |
LA-Z-BOY INCORPORATED |
||||
Six Months Ended |
||||
(Unaudited, amounts in thousands, except per share data) |
10/26/13 |
10/27/12 |
||
Sales |
$685,316 |
$623,842 |
||
Cost of sales |
458,270 |
433,921 |
||
Gross profit |
227,046 |
189,921 |
||
Selling, general and administrative expense |
186,806 |
171,732 |
||
Operating income |
40,240 |
18,189 |
||
Interest expense |
269 |
364 |
||
Interest income |
356 |
237 |
||
Other income, net |
257 |
91 |
||
Income before income taxes |
40,584 |
18,153 |
||
Income tax expense |
13,632 |
6,626 |
||
Net income |
26,952 |
11,527 |
||
Net income attributable to noncontrolling interests |
(618) |
(510) |
||
Net income attributable to La-Z-Boy Incorporated |
$26,334 |
$11,017 |
||
Basic average shares |
52,440 |
52,274 |
||
Basic net income attributable to La-Z-Boy Incorporated per share |
$0.50 |
$0.21 |
||
Diluted average shares |
53,176 |
53,169 |
||
Diluted net income attributable to La-Z-Boy Incorporated per share |
$0.49 |
$0.20 |
||
Dividends declared per share |
$0.08 |
— |
LA-Z-BOY INCORPORATED CONSOLIDATED BALANCE SHEET |
||||
(Unaudited, amounts in thousands) |
10/26/13 |
4/27/13 |
||
Current assets |
||||
Cash and equivalents |
$136,245 |
$131,085 |
||
Restricted cash |
12,566 |
12,686 |
||
Receivables, net of allowance of $13,764 at 10/26/13 and $21,607 at 4/27/13 |
159,509 |
160,005 |
||
Inventories, net |
158,582 |
146,343 |
||
Deferred income taxes – current |
18,317 |
20,640 |
||
Other current assets |
31,778 |
30,121 |
||
Total current assets |
516,997 |
500,880 |
||
Property, plant and equipment, net |
121,924 |
118,060 |
||
Goodwill |
12,837 |
12,837 |
||
Other intangible assets |
5,627 |
4,838 |
||
Deferred income taxes – long-term |
32,423 |
30,572 |
||
Other long-term assets, net |
59,692 |
53,184 |
||
Total assets |
$749,500 |
$720,371 |
||
Current liabilities |
||||
Current portion of long-term debt |
$7,604 |
$513 |
||
Accounts payable |
56,463 |
50,542 |
||
Accrued expenses and other current liabilities |
97,193 |
99,108 |
||
Total current liabilities |
161,260 |
150,163 |
||
Long-term debt |
486 |
7,576 |
||
Other long-term liabilities |
77,420 |
70,664 |
||
Contingencies and commitments |
— |
— |
||
Shareholders' equity |
||||
Preferred shares – 5,000 authorized; none issued |
— |
— |
||
Common shares, $1 par value – 150,000 authorized; 52,567 outstanding at 10/26/13 and 52,392 outstanding at 4/27/13 |
52,567 |
52,392 |
||
Capital in excess of par value |
252,127 |
241,888 |
||
Retained earnings |
233,210 |
226,044 |
||
Accumulated other comprehensive loss |
(34,977) |
(35,496) |
||
Total La-Z-Boy Incorporated shareholders' equity |
502,927 |
484,828 |
||
Noncontrolling interests |
7,407 |
7,140 |
||
Total equity |
510,334 |
491,968 |
||
Total liabilities and equity |
$749,500 |
$720,371 |
LA-Z-BOY INCORPORATED CONSOLIDATED STATEMENT OF CASH FLOWS |
||||
Six Months Ended |
||||
(Unaudited, amounts in thousands) |
10/26/13 |
10/27/12 |
||
Cash flows from operating activities |
||||
Net income |
$26,952 |
$11,527 |
||
Adjustments to reconcile net income to cash provided by (used for) operating activities |
||||
Deferred income tax benefit |
(391) |
(457) |
||
Restructuring |
(54) |
2,686 |
||
Provision for doubtful accounts |
(1,994) |
654 |
||
Depreciation and amortization |
11,661 |
11,239 |
||
Stock-based compensation expense |
5,671 |
6,959 |
||
Pension plan contributions |
— |
(2,320) |
||
Change in receivables |
1,298 |
11,689 |
||
Change in inventories |
(10,561) |
(22,290) |
||
Change in other assets |
(1,920) |
(6,043) |
||
Change in payables |
3,772 |
(4,619) |
||
Change in other liabilities |
(2,021) |
(11,484) |
||
Net cash provided by (used for) operating activities |
32,413 |
(2,459) |
||
Cash flows from investing activities |
||||
Proceeds from disposal of assets |
2,241 |
985 |
||
Capital expenditures |
(14,323) |
(11,637) |
||
Purchases of investments |
(23,180) |
(31,514) |
||
Proceeds from sales of investments |
18,196 |
5,684 |
||
Acquisitions, net of cash acquired |
— |
(15,863) |
||
Change in restricted cash |
120 |
(6,931) |
||
Net cash used for investing activities |
(16,946) |
(59,276) |
||
Cash flows from financing activities |
||||
Payments on debt |
(263) |
(2,255) |
||
Stock issued for stock and employee benefit plans |
2,983 |
1,236 |
||
Excess tax benefit on stock option exercises |
5,228 |
1,025 |
||
Purchases of common stock |
(13,681) |
(4,012) |
||
Dividends paid |
(4,214) |
— |
||
Net cash used for financing activities |
(9,947) |
(4,006) |
||
Effect of exchange rate changes on cash and equivalents |
(360) |
(21) |
||
Change in cash and equivalents |
5,160 |
(65,762) |
||
Cash and equivalents at beginning of period |
131,085 |
152,370 |
||
Cash and equivalents at end of period |
$136,245 |
$86,608 |
LA-Z-BOY INCORPORATED |
||||||||
Second Quarter Ended |
Six Months Ended |
|||||||
(Unaudited, amounts in thousands) |
10/26/13 |
10/27/12 |
10/26/13 |
10/27/12 |
||||
Sales |
||||||||
Upholstery segment: |
||||||||
Sales to external customers |
$261,317 |
$228,487 |
$485,669 |
$438,850 |
||||
Intersegment sales |
34,881 |
30,975 |
65,403 |
58,779 |
||||
Upholstery segment sales |
296,198 |
259,462 |
551,072 |
497,629 |
||||
Casegoods segment: |
||||||||
Sales to external customers |
31,190 |
32,028 |
58,466 |
65,345 |
||||
Intersegment sales |
2,742 |
2,500 |
4,902 |
3,792 |
||||
Casegoods segment sales |
33,932 |
34,528 |
63,368 |
69,137 |
||||
Retail segment sales |
73,359 |
61,198 |
139,633 |
118,317 |
||||
Corporate and Other |
537 |
628 |
1,548 |
1,330 |
||||
Eliminations |
(37,623) |
(33,475) |
(70,305) |
(62,571) |
||||
Consolidated sales |
$366,403 |
$322,341 |
$685,316 |
$623,842 |
||||
Operating Income (Loss) |
||||||||
Upholstery segment |
$32,525 |
$21,790 |
$54,762 |
$37,368 |
||||
Casegoods segment |
645 |
902 |
1,202 |
2,181 |
||||
Retail segment |
3,251 |
(575) |
5,177 |
(2,563) |
||||
Restructuring |
142 |
(2,654) |
55 |
(2,686) |
||||
Corporate and Other |
(11,145) |
(8,900) |
(20,956) |
(16,111) |
||||
Consolidated operating income |
$25,418 |
$10,563 |
$40,240 |
$18,189 |
SOURCE
Kathy Liebmann, (734) 241-2438, kathy.liebmann@la-z-boy.com