Item 5. Other Events
On August 15, 2001, we issued the following press release, which contains
our Consolidated Statement of Income, Consolidated Balance Sheet, and
Consolidated Statement of Cash Flows.
LA-Z-BOY INCORPORATED REPORTS LOWER FIRST QUARTER RESULTS
MONROE, MI Aug. 15, 2001 - La-Z-Boy Incorporated (NYSE, PCX: LZB) today
reported that sales for its first fiscal quarter ended July 28, 2001 were $459
million, down 11 percent compared to the same period last year. Net income for
the first quarter was $2.8 million, or $0.05 per diluted share, which was at the
low end of the company's previous earnings guidance, and down from $13.0
million, or $0.21 per diluted share, in the year-earlier period.
Commenting on these results, La-Z-Boy Incorporated president and chief
executive officer Jerry Kiser said, "The business climate for our industry
continues to be extremely challenging. On top of general softness in consumer
furniture demand, our first quarter sales were negatively impacted by the
bankruptcy of HomeLife Furniture. In fact, taken together, the bankruptcies of
HomeLife, Montgomery Ward and Heilig-Meyers accounted for approximately $16
million of our $58 million year-over-year decline in first quarter sales. These
major bankruptcies have been the most visible outward sign of our industry's
financial distress, and it is unquestionably going to take time for the
resulting void in retail selling space to be filled. But even ignoring this
impact, our first quarter sales performance still compared favorably with many
of our competitors, some of whom had been down as much as 27 percent. This
reflects the strength of our brand names and our overall market position."
Kiser noted, "In the current environment, we are managing our business
conservatively, controlling costs and maintaining production in line with
current demand. Many of the actions we have taken to deal with this difficult
period for our industry and our customers have been painful ones, including the
closing of three of our casegoods plants and an overall reduction of about 10
percent in our workforce, or 2,170 employees, since July 29, 2000. Our asset
base has also been carefully managed, by tightly controlling inventories and
accounts receivable, allowing us to generate strong cash flows, some of which we
used to reduce debt by $20 million during the quarter and $49 million over the
last six months. Our balance sheet has further strengthened to reflect a ratio
of total debt to capital of 21 percent at July 28, 2001, its lowest level in six
quarters."
He continued, "The recent realignment of our corporate management team
structure into just two business groups will allow us to achieve the underlying
synergistic values of our multiple companies and brand names through more
efficient marketing, manufacturing and logistics. John Case, who heads the new
Upholstery Group and Don Mitchell, who heads the new Casegoods Group, both now
report directly to me. Together with David Risley, who became our new CFO last
April, this is a highly talented, effective management team intensely focused on
taking La-Z-Boy Incorporated to new heights of success in the years immediately
ahead."
Kiser added that, "The corporation's financial statements will now reflect
only these two business segments, each of which will contain elements of the
former Contract business segment. Sales of the company's Upholstery Group
segment, which represent 67 percent of sales, were down 4 percent for the first
quarter from a year ago, while sales of the Casegoods Group segment declined 22
percent. The operating performance of the two segments was reflective of the
sales declines each segment experienced. Additionally, although furniture tends
to be a postponable purchase, upholstered product sales tend to drop less than
the overall industry. This is typically a lower dollar purchase, generally wears
faster and needs to be replaced more frequently, is usually more fashion
oriented, and is often purchased in single pieces. Conversely, casegoods
products are generally higher dollar purchases, are in the home longer and
involve multiple pieces of furniture."
"On the marketing side," Kiser said, "we continue to place strong emphasis
on our proprietary retail distribution system, including both La-Z-Boy and our
other brands, since we are convinced this network provides us with major and
sustainable competitive advantages in the markets we serve. Illustrative of this
is the 5 percent plus same store sales performance realized by the La-Z-Boy
Furniture Galleries(R) during the June calendar quarter. It is precisely because
of our strong belief in this proprietary retail network that we continue to
aggressively advertise and promote our brands and products. Finally, we opened a
total of 5 La-Z-Boy Furniture Galleries(R) and 4 La-Z-Boy in-store gallerys
during the first quarter. We also unveiled an exciting new La-Z-Boy Furniture
Galleries(R) store format which we expect will further enhance the already
excellent productivity of these stores."
Kiser concluded, "Current economic reports continue to portray an ongoing
slowing in the U.S. economy which has not yet shown any meaningful signs of
recovery. The one bright spot has been housing, with U.S. home sales and home
prices both holding near record high levels. Consumers seem convinced that their
homes represent a solid investment for the future and, without question, this
will generate a strong rebound in residential furniture demand at some point.
Additionally, we have three powerful factors working to stimulate the economy:
easier money, less burdensome taxes, and lower energy prices. Putting everything
together, the economic downturn now is probably at its lowest point, when viewed
on a year to year basis. Nevertheless, near-term business prospects remain quite
uncertain and incoming order rates during our seasonally strong August-September
period will play a key role in determining our operating performance for the
rest of fiscal 2002. At this point, we are expecting our October second quarter
results to be $0.22-$0.27 and we are tentatively looking for $1.00-$1.15 for our
full fiscal year ending next April."
A conference call will be conducted at 11:00 a.m. EDT on Thursday, August
16, 2001 and is accessible at the company's website at www.la-z-boy.com.
La-Z-Boy Background information:
With annual sales in excess of $2 billion, La-Z-Boy Incorporated is the
largest U.S. residential furniture producer, with approximately 20,000 employees
and 54 manufacturing facilities in ten states and four foreign countries. The
La-Z-Boy Incorporated family of companies - 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 - produces furniture for every room of the home and office. And, under the
American of Martinsville brand, La-Z-Boy Incorporated is also a leading supplier
of contract furniture to the hospitality and assisted-living markets.
The corporation's vast proprietary distribution network includes 293
La-Z-Boy Furniture Galleries(R) and 324 La-Z-Boy In-Store Gallerys, as well as
in-store gallery programs at Kincaid, Pennsylvania House and Clayton Marcus,
England's Custom Comfort Centers and Lea's Kid's Generation displays, and is
dedicated exclusively to selling La-Z-Boy Incorporated products and brands.
According to industry trade publication Furniture/Today, the La-Z-Boy Furniture
Galleries retail network by itself represents the industry's sixth largest U.S.
furniture retailer. The corporation's stock is traded on the New York and
Pacific stock exchanges under the trading symbol: LZB. Additional information is
available at www.la-z-boy.com.
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, 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.
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, including the company's most recent Form 10-K report
and its report on Form 8-K filed today. This information is available at
www.la-z-boy.com.
LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF INCOME
(Amounts in thousands, except per share data)
(UNAUDITED)
FIRST QUARTER ENDED
- -------------------------------------------------------------------------------
Percent of Sales
7/28/01 7/29/00 % Over --------------------
(13 Weeks) (13 Weeks) (Under) 7/28/01 7/29/00
----------- ------------ -------- --------- ---------
Sales $458,981 $516,707 -11% 100.0% 100.0%
Cost of sales 361,117 400,366 -10% 78.7% 77.5%
----------- ------------ -------- --------- ---------
Gross profit 97,864 116,341 -16% 21.3% 22.5%
S, G & A 90,887 91,761 -1% 19.8% 17.7%
----------- ------------ -------- --------- ---------
Operating profit 6,977 24,580 -72% 1.5% 4.8%
Interest expense 2,956 4,352 -32% 0.6% 0.8%
Interest income 358 453 -21% 0.1% 0.0%
Other income, net 263 616 -57% 0.0% 0.1%
----------- ------------ -------- --------- ---------
Pretax income 4,642 21,297 -78% 1.0% 4.1%
Tax expense 1,811 8,294 -78% 39.0%* 38.9%*
----------- ------------ -------- --------- ---------
Net income $2,831 $13,003 -78% 0.6% 2.5%
=========== ============ ======== ========= =========
Basic EPS $0.05 $0.21 -76%
Diluted avg. shares 61,021 61,280 0%
Diluted EPS $0.05 $0.21 -76%
Dividends paid $0.09 $0.08 13%
per share
* As a percent of pretax income, not sales.
LA-Z-BOY INCORPORATED
CONSOLIDATED BALANCE SHEET
(Amounts in thousands, except par value)
Unaudited
----------------------------------------------
Increase/(Decrease)
------------------ Audited
7/28/01 7/29/00 Dollars Percent 04/28/01
---------- ---------- -------- ------- ----------
Current assets
Cash and equivalents $42,447 $18,025 $24,422 135% $23,565
Receivables - net 306,005 348,067 (42,062) -12% 380,867
Inventories
Raw materials 89,497 100,033 (10,536) -11% 90,381
Work-in-process 62,793 67,813 (5,020) -7% 62,465
Finished goods 118,306 105,762 12,544 12% 115,425
---------- ---------- -------- ------- ----------
FIFO inventories 270,596 273,608 (3,012) -1% 268,271
Excess of FIFO over LIFO (10,418) (7,637) (2,781) -36% (10,384)
---------- ---------- -------- ------- ----------
Total inventories 260,178 265,971 (5,793) -2% 257,887
Deferred income taxes 23,281 21,005 2,276 11% 26,168
Income taxes - current 2,944 - 2,944 N/M 2,944
Other current assets 19,612 15,545 4,067 26% 17,345
---------- ---------- -------- ------- ----------
Total current assets 654,467 668,613 (14,146) -2% 708,776
Property, plant and equipment 227,672 226,810 862 0% 230,341
Goodwill 111,624 117,362 (5,738) -5% 112,755
Trade names 119,928 124,130 (4,202) -3% 120,981
Other long-term assets 52,602 55,753 (3,151) -6% 49,650
---------- ---------- -------- ------- ----------
Total assets $1,166,293 $1,192,668 ($26,375) -2% $1,222,503
========== ========== ======== ======= ==========
Current liabilities
Lines of credit $20,750 $6,674 $14,076 211% $10,380
Current portion of long-term debt 3,154 2,730 424 16% 5,304
Current portion of capital leases 541 457 84 18% 541
Accounts payable 76,845 83,207 (6,362) -8% 92,830
Payroll and other compensation 56,260 54,935 1,325 2% 78,550
Income taxes 10,488 5,492 4,996 91% 11,490
Other current liabilities 49,619 51,635 (2,016) -4% 50,820
---------- ---------- -------- ------- ----------
Total current liabilities 217,657 205,130 12,527 6% 249,915
Long-term debt 168,976 240,893 (71,917) -30% 196,923
Capital leases 2,359 3,002 (643) -21% 2,496
Deferred income taxes 46,281 52,317 (6,036) -12% 45,709
Other long-term liabilities 36,724 29,905 6,819 23% 32,314
Contingencies and commitments - -
Shareholders' equity
Common shares, $1 par value 60,898 60,652 246 0% 60,501
Capital in excess of par value 210,559 211,633 (1,074) -1% 210,924
Retained earnings 429,899 391,460 38,439 10% 427,616
Accum. other comprehensive loss (7,060) (2,324) (4,736) -204% (3,895)
---------- ---------- -------- ------- ----------
Total shareholders' equity 694,296 661,421 32,875 5% 695,146
---------- ---------- -------- ------- ----------
Total liabilities and
shareholders' equity $1,166,293 $1,192,668 ($26,375) -2% $1,222,503
========== ========== ======== ======= ==========
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
First Quarter Ended
----------------------
7/28/01 7/29/00
------- -------
Cash flows from operating activities
Net income $2,831 $13,003
Adjustments to reconcile net income to
cash provided by operating activities
Depreciation and amortization 10,921 10,565
Change in receivables 75,998 45,616
Change in inventories (2,291) (20,168)
Change in payables (15,985) (7,185)
Change in other assets and liabilities (33,180) (26,988)
Change in deferred taxes 3,459 3,406
------- -------
Total adjustments 38,922 5,246
------- -------
Cash provided by operating activities 41,753 18,249
Cash flows from investing activities
Proceeds from disposals of assets 539 186
Capital expenditures (6,085) (7,395)
Change in other long-term assets 3,236 3,148
------- -------
Cash used for investing activities (2,310) (4,061)
Cash flows from financing activities
Proceeds from debt 35,370 62,000
Payment of debt (55,097) (58,760)
Capital leases (137) 846
Stock issued for stock options & 401(k) plans 4,948 2,420
Repurchase of common stock - (12,008)
Dividends paid (5,464) (4,906)
------- -------
Cash provided by financing activities (20,380) (10,408)
Effect of exchange rate changes on cash (181) (108)
------- -------
Change in cash and equivalents 18,882 3,672
Cash and equivalents at beginning of period 23,565 14,353
------- -------
Cash and equivalents at end of period $42,447 $18,025
======= =======
Cash paid during period -Income taxes $6,097 $6,448
-Interest $732 $2,257
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LA-Z-BOY INCORPORATED
/s/ James J. Korsnack
------------------------
Date: August 15, 2001 James J. Korsnack
Chief Accounting Officer