MONROE, Mich., June 19 /PRNewswire-FirstCall/ -- La-Z-Boy Incorporated today announced its operating results for the fourth fiscal quarter and full year ended April 28, 2007. Net sales for the quarter were $406.9 million, down 9.4% compared with the prior-year period. The company posted earnings per share from continuing operations of $0.16. This includes a restructuring charge of $0.08 per share, related to the announced closure and consolidation of facilities as well as a reduction in employment, and a gain of $0.14 per share from the sale of various properties.
For the full year ended April 28, 2007, net sales were $1.62 billion, down 4.6% from the prior year. The company posted earnings per share from continuing operations of $0.38 for the full year. The earnings-per-share figure includes:
-- a $0.17 per share gain on the sale of properties;
-- income per share of $0.04 related to anti-dumping duties received on
bedroom furniture imported from China;
-- a restructuring charge of $0.13 per share; and
-- a non-cash stock option expense of $0.03 per share.
These results compare with a loss per share of $0.11 last year, which included:
-- a $0.04 per share gain on the sale of properties;
-- a restructuring charge of $0.10 per share; and
-- a $0.44 per share loss from the write-down of intangible assets.
Kurt L. Darrow, La-Z-Boy's President and Chief Executive Officer, said: "We continue to operate in an environment marked by extremely difficult retail conditions across the industry and have remained focused on running our operations with efficiency and ensuring our cost structure is in line with our revenue stream. Despite significantly lower volume in both of our wholesale businesses, we maintained our operating margins this quarter, reflecting the disciplines established throughout our business. Additionally, we continued to concentrate on managing our balance sheet by reducing our debt and inventory levels while generating cash. In our retail segment, we are applying the same operating disciplines as we have in our wholesale operations and expect to make incremental progress throughout fiscal 2008 even though the external environment will undoubtedly remain challenging."
Upholstery
For the fiscal 2007 fourth quarter, sales in the company's upholstery segment were $303.5 million compared with $341.8 million in the prior year's fourth quarter. For the full year, sales were $1.2 billion compared with $1.3 billion last year. Darrow stated, "On a double-digit sales decline in the fourth quarter, we were able to operate with a 6.0% margin, reflecting our focus on lean manufacturing and global sourcing. For the year, on a 5.7% sales decrease, we maintained our operating margin at 6.6%. "
During the quarter, La-Z-Boy finalized the sale of its Sam Moore upholstered chair company to Hooker Furniture for $9.9 million. Additionally, the company announced it would close its Lincolnton, North Carolina and Iuka, Mississippi upholstery manufacturing facilities and consolidate three operations into one at its Taylorsville, North Carolina facility. Darrow stated, "The sale of Sam Moore is part of our strategy to realign our portfolio of companies while the closures of facilities reflect the necessity to right size our company in the current business environment. These moves will allow us to be more competitive going forward."
The company continues to make progress in the expansion of the La-Z-Boy Furniture Galleries(R) system into the New Generation format. 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 four and closed eight, bringing the total store count to 336, of which 194 are in the New Generation format. For the full year, the system opened, relocated or remodeled 42 New Generation stores in the overall network. For fiscal 2008, the network plans to open 25 to 30 New Generation format La-Z-Boy Furniture Galleries(R) stores, of which 10 to 15 will be new stores and the remainder will be store remodels or relocations.
System-wide, for the first four months of 2007, including company-owned and independent-licensed stores, same-store written sales, which the company tracks as an indicator of retail activity, were down 9.0% and total sales, which includes new stores decreased 5.2%.
Casegoods
For the fourth quarter, casegoods sales were $64.4 million, down 13.3% from the prior year's fourth quarter. For the full year, sales in the segment were off 10.2% at $262.7 million. The segment's quarterly operating margin was 8.0% versus 5.6% in last year's comparable period and, for the year, the operating margin was 7.7%, an increase from 5.9% in the prior year. The operating margin improvement demonstrates the success of the business's transition to primarily an import model with a much greater variable cost structure as well as more efficient domestic manufacturing operations.
Over the course of fiscal 2007, La-Z-Boy continued to evaluate its portfolio of companies and sold American of Martinsville, its hospitality furniture business, and has committed to a plan to sell its Pennsylvania House and Clayton Marcus operation. La-Z-Boy also closed a rough mill lumber operation in North Wilkesboro, North Carolina during the fourth quarter.
Darrow stated, "Going forward, we will continue to focus on increasing the top line through new product introductions, the expansion of channels of distribution and increased service levels to our customers."
Retail
For the quarter, retail sales were $54.5 million, essentially flat against the comparable quarter in fiscal 2006 and, for the full year, sales increased 3.2% to $220.3 million, primarily the result of additional stores. The retail group posted an operating loss for the quarter and full year, with a (14.6%) and (14.1%) margin, respectively. The losses were primarily the result of the difficult retail environment and consolidation costs associated with the markets acquired over the past several years.
Darrow stated, "We continue to make changes to our retail model to ensure the business operates with the efficiency necessary for profitability. In addition to reducing costs through the consolidation of individual market operations, we are opening new stores to garner better penetration and economies of scale in the markets in which we operate and are relocating and/or converting stores to the New Generation format. However, with the challenging retail environment, it has been difficult to achieve top-line traction and we continue to experience negative same-store comps."
During the fourth quarter, the company's retail segment opened two new company-owned stores, relocated one, and converted one store into the New Generation format while closing five. For the full year, the company opened nine new stores, acquired seven, relocated and/or converted 10 stores into the New Generation format and closed nine, including exiting the Rochester, New York and Pittsburgh, Pennsylvania markets. At the end of fiscal 2007, the company owned 70 stores, including 47 in the New Generation format, or 67%, versus 63 company-owned stores at the end of fiscal 2006, of which 28, or 44%, were in the new format. For fiscal 2008, La-Z-Boy plans to add six to ten New Generation stores to its company-owned retail segment, which includes new stores as well as relocations and remodels.
Restructuring
During the quarter, a pre-tax restructuring charge of $6.3 million was taken, net of a $1.6 million gain on previously written-down idled assets. The restructuring charge primarily related to expenses associated with the closure and consolidation of facilities as well as the reduction in employment. The balance of the restructuring charge for the full year relates primarily to store closings in the Rochester and Pittsburgh markets and related contract termination costs for leases, severance and benefits and the write-off of certain leasehold improvements.
Balance Sheet
During the year, the company reduced its debt by $35 million and, at fiscal year end, the company's debt to capitalization ratio was 23.5%, a decrease from last quarter's ratio of 25.4% and the fiscal 2006 year-end ratio of 26.5%. Inventories stood at $197.8 million, down from $238.8 million in the prior year, and receivables decreased to $230.4 million, down from $270.6 million last year, with a portion of the reductions relating to the sale and reclassification of discontinued operations.
Cash generated from operations during the quarter was $32 million and the company generated $21.7 million in cash from the disposal of assets. For the year, the company generated more than $120 million in cash from operating activities and the sale of assets and discontinued operations. The company did not repurchase any shares in the fourth quarter and has authorization to purchase approximately 5.4 million additional shares.
Business Outlook
Commenting on the company's business outlook, Darrow said: "The external environment for home furnishings remains very difficult and the first quarter is typically the company's slowest period due to seasonal factors. While we have made progress in managing the cost structure of our wholesale businesses, we believe challenging conditions in the marketplace will prevail and, we will continue to focus on matching costs to our revenue stream. In a move consistent with recent trends among other public companies, we are moving to yearly guidance for sales and earnings and will no longer provide quarterly projections. We expect sales for the fiscal 2008 year to be down 5% to 10% compared with fiscal 2007 and expect earnings per share to be in the range of $0.45 to $0.60 per share compared with $0.38 per share from continuing operations in fiscal 2007. This estimated range does not include restructuring charges, potential income from any anti-dumping monies or gains/losses on the sale 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) changes in currency exchange rates; (i) competitive factors; (j) operating factors, such as supply, labor or distribution disruptions including changes in operating conditions or costs; (k) effects of restructuring actions; (l) changes in the domestic or international regulatory environment; (m) ability to implement global sourcing organization strategies; (n) fair value changes to our intangible assets due to actual results differing from those projected; (o) the impact of adopting new accounting principles; (p) the impact from natural events such as hurricanes, earthquakes and tornadoes; (q) the impact of retail store relocation costs, the success of new stores or the timing of converting stores to the New Generation format; (r) the ability to procure fabric rolls or cut and sewn fabric sets domestically or abroad; (s) the ability to sell the discontinued operations for their recorded fair value; (t) those matters discussed in Item 1A of the company's 10K and 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, England, La-Z-Boy and La-Z-Boy, U.K. The La-Z-Boy Casegoods Group companies are American Drew, Hammary, Kincaid and Lea.
The corporation's proprietary distribution network is dedicated exclusively to selling La-Z-Boy Incorporated products and brands, and includes 336 stand-alone La-Z-Boy Furniture Galleries(R) stores and 304 La-Z-Boy In- Store Galleries, in addition to in-store gallery programs at the company's Kincaid, 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
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Unaudited
For the Quarter Ended For the Year Ended
(Amounts in 4/28/07 4/29/06 4/28/07 4/29/06
thousands, except per (13 weeks) (13 weeks) (52 weeks) (52 weeks)
share data)
Sales $ 406,949 $ 449,376 $ 1,617,302 $1,695,012
Cost of sales
Cost of goods sold 295,539 331,821 1,187,876 1,273,505
Restructuring 3,771 68 3,371 8,479
Total cost of
sales 299,310 331,889 1,191,244 1,281,987
Gross profit 107,639 117,487 426,055 413,028
Selling, general and
administrative 92,340 98,305 386,438 375,793
Restructuring 2,542 -- 7,662 --
Write-down of
intangibles -- 22,695 -- 22,695
Operating income
(loss) 12,757 (3,513) 31,955 14,540
Interest expense 2,316 2,744 10,206 11,540
Income from
Continued Dumping
and Subsidy Act, net -- -- 3,430 --
Other income, net 1,428 215 4,679 2,168
Income (loss) from
continuing operations
before income taxes 11,869 (6,042) 29,858 5,168
Income tax expense 3,434 6,335 10,090 10,758
Income (loss) from
continuing operations 8,435 (12,377) 19,768 (5,590)
Income (loss) from
discontinued operations
(net of tax) (724) 2,107 (15,629) 2,549
Net income (loss) $ 7,711 $(10,270) $ 4,139 $(3,041)
Basic average shares
outstanding 51,373 51,747 51,475 $ 51,801
Basic net income
(loss) per share:
Income (loss) from
continuing operations $ 0.16 $ (0.24) $ 0.38 $ (0.11)
Income (loss) from
discontinued operations
(net of tax) (0.01) 0.04 (0.30) 0.05
Net income (loss)
per basic share $ 0.15 $ (0.20) $ 0.08 $ (0.06)
Diluted weighted
average shares
outstanding 51,522 51,747 51,606 51,801
Diluted net income
(loss) per share:
Income (loss) from
continuing
operations $ 0.16 $ ( 0.24) $ 0.38 $(0.11)
Income (loss) from
discontinued
operations (net of
tax) (0.01) 0.04 (0.30) 0.05
Net income (loss)
per diluted share $ 0.15 $ (0.20) $ 0.08 $(0.06)
Dividends paid per
share $ 0.12 $ 0.11 $ 0.48 $ 0.44
LA-Z-BOY INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEET
(Amounts in thousands) 4/28/07 4/29/06
Current assets
Cash and equivalents $ 51,721 $ 24,089
Receivables, net 230,399 270,578
Inventories, net 197,790 238,826
Deferred income
taxes - current 17,283 12,854
Assets of discontinued
operations 24,278 --
Other current
assets 19,327 23,730
Total current assets 540,798 570,077
Property, plant and
equipment, net 183,218 209,986
Deferred income taxes
- long-term 15,380 --
Goodwill 55,659 56,926
Trade names 9,472 18,794
Other long-term
assets, net 74,164 100,969
Total assets $ 878,691 $ 956,752
Current liabilities
Short-term borrowings $ -- $ 8,000
Current portion of
long-term debt and capital
leases 37,688 2,844
Accounts payable 68,089 85,561
Other current
liabilities 122,433 128,318
Total current liabilities 228,210 224,723
Long-term debt 111,714 173,368
Deferred income taxes -- 126
Other long-term
liabilities 53,419 48,190
Shareholders' equity 485,348 510,345
Total liabilities and
shareholders' equity $ 878,691 $ 956,752
LA-Z-BOY INCORPORATED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Quarter Ended Year Ended
(Amounts in thousands) 4/28/07 4/29/06 4/28/07 4/29/06
Cash flows from operating
activities
Net income (loss) $7,711 $(10,270) $4,139 $(3,041)
Adjustments to reconcile
net income (loss) to
cash provided by operating
activities
Write-down of intangibles -- 22,695 -- 22,695
Write-down of assets from
businesses held for sale
(net of tax) 1,262 -- 14,936 --
(Gain)Loss on sale of
discontinued operations
(net of tax) 345 -- (935) --
Restructuring 6,313 (1,768) 11,033 6,643
Depreciation and
amortization 7,082 7,559 27,204 29,234
Provision for doubtful
accounts 899 824 3,790 4,527
Stock option and
restricted stock
expense 748 221 3,959 762
Change in working
capital 14,810 14,992 (14,503) 32,360
Change in deferred
taxes (7,354) 3,646 (16,390) (3,403)
Total adjustments 24,105 48,169 29,094 92,818
Net cash provided by
operating
activities 31,816 37,899 33,233 89,777
Cash flows from
investing activities
Proceeds from disposals
of assets 21,698 2,874 46,974 11,499
Proceeds from sale of
discontinued
operations 9,493 -- 42,659 --
Capital expenditures (4,817) (7,512) (25,811) (27,991)
Purchases of
investments (4,704) (3,309) (18,165) (25,289)
Proceeds from sale of
investments 5,508 3,868 17,342 12,983
Acquisitions, net of
cash acquired -- -- -- --
Change in other
long-term assets (1,298) 585 (955) (1,875)
Net cash (provided
by) investing
activities 25,880 (3,494) 62,044 (30,673)
Cash flows from
financing activities
Net changes in debt (16,728) (26,048) (36,696) (43,102)
Stock transactions 7 724 (5,607) (7,211)
Dividends paid (6,212) (5,723) (24,886) (22,923)
Net cash (used for)
financing
activities (22,933) (31,047) (67,189) (73,236)
Effect of exchange
rate changes on cash
and equivalents (526) 223 (456) 516
Change in cash and
equivalents 34,237 3,581 27,632 (13,616)
Cash and equivalents
at beginning of
period 17,484 20,508 24,089 37,705
Cash and equivalents
at end of period $51,721 $24,089 $51,721 $24,089
LA-Z-BOY INCORPORATED
Segment Information
Unaudited
For the Quarter Ended For the Year Ended
4/28/07 4/29/06 4/28/07 4/29/06
(13 weeks) (13 weeks) (52 weeks) (52 weeks)
(Amounts in thousands)
Sales
Upholstery Group $303,545 $341,803 $1,194,220 $1,265,952
Casegoods Group 64,404 74,254 262,721 292,553
Retail Group 54,481 54,106 220,319 213,438
VIEs/Eliminations (15,481) (20,787) (59,958) (76,931)
Consolidated $406,949 $449,376 $1,617,302 $1,695,012
Operating income
(loss)
Upholstery Group $18,286 $31,535 $78,724 $83,160
Casegoods Group 5,126 4,158 20,289 17,125
Retail Group (7,939) (8,537) (31,161) (26,006)
Corporate and other* 3,597 (7,906) (24,864) (28,565)
Restructuring (6,313) (68) (11,033) (8,479)
Write-down of
intangibles -- (22,695) -- (22,695)
Consolidated $12,757 $(3,513) $31,955 $14,540
* Variable Interest Entities ("VIEs") are included in corporate and
other.
LA-Z-BOY INCORPORATED
Unaudited Quarterly Financial Data
Quarter ended 7/29/06 10/28/06 1/27/07 4/28/07
(13 weeks) (13 weeks) (13 weeks) (13 weeks)
(Amounts in thousands,
except per share data)
Sales $392,851 $413,628 $403,874 $406,949
Cost of sales
Cost of goods sold 295,584 305,893 290,860 295,539
Restructuring -- (400) -- 3,771
Total cost of
sales 295,584 305,493 290,860 299,310
Gross profit 97,267 108,135 113,014 107,639
Selling, general and
administrative 94,035 99,359 100,704 92,340
Restructuring -- 2,265 2,855 2,542
Operating income 3,232 6,511 9,455 12,757
Interest expense 2,526 2,614 2,750 2,316
Income from continued
Dumping and Subsidy
Offset Act, net -- -- 3,430 --
Other income, net 270 1,348 1,633 1,428
Pre-tax income 976 5,245 11,768 11,869
Income tax expense
(benefit) (116) 1,949 4,823 3,434
Income from continuing
operations 1,092 3,296 6,945 8,435
Income (loss) from
discontinued operations
(net of tax) 1,203 (1,342) (14,766) (724)
Net income (loss) $2,295 $1,954 $(7,821) $7,711
Diluted weighted average
shares outstanding 51,971 51,639 51,609 51,522
Diluted income from
continuing operations
per share $0.02 $0.06 $0.13 $0.16
Diluted net income
(loss) per share $0.04 $0.04 $(0.15) $0.15
LA-Z-BOY INCORPORATED
Unaudited Quarterly Financial Data
(Amounts in thousands,
except per share data)
Quarter ended 7/30/05 10/29/05 1/28/06 4/29/06
(13 weeks) (13 weeks) (13 weeks) (13 weeks)
Sales $396,695 $402,327 $446,614 $449,376
Cost of sales
Cost of goods sold 300,068 309,932 331,684 331,821
Restructuring -- 7,817 594 68
Total cost of sales 300,068 317,749 332,278 331,889
Gross profit 96,627 84,578 114,336 117,487
Selling, general and
administrative 89,864 90,976 96,648 98,305
Write-down of intangibles -- -- -- 22,695
Operating income
(loss) 6,763 (6,398) 17,688 (3,513)
Interest expense 2,741 3,090 2,965 2,744
Other income, net 149 414 1,390 215
Income (loss) from
continuing operations
before income taxes 4,171 (9,074) 16,113 (6,042)
Income tax expense
(benefit) 1,556 (3,265) 6,132 6,335
Income (loss) from
continuing operations 2,615 (5,809) 9,981 (12,377)
Income (loss) from
discontinued operations
(net of tax) 593 (638) 487 2,107
Net income (loss) $3,208 $(6,447) $10,468 $(10,270)
Diluted weighted average
shares outstanding 52,195 51,655 51,857 51,747
Diluted income (loss)
from continuing operations
per share $0.05 $(0.11) $0.19 $(0.24)
Diluted net income (loss)
per share $0.06 $(0.12) $0.20 $(0.20)
