La-Z-Boy Reports Fiscal 2008 Fourth-Quarter and Full-Year Results
MONROE, Mich., June 16 /PRNewswire-FirstCall/ -- La-Z-Boy Incorporated (NYSE: LZB) today reported its operating results for the fiscal fourth quarter and full year ended April 26, 2008.
Net sales for the quarter were $368 million, down 9.8% compared with the prior year's fourth quarter. The company reported a loss from continuing operations of $4.5 million, or a loss of $0.09 per share, compared with income from continuing operations of $8.4 million, or $0.16 per share, for the same period last year. The 2008 fourth quarter results include a $0.04 per share restructuring charge, primarily related to the pending closure of the company's Tremonton, Utah upholstery facility, and a $0.07 per share charge associated with the make-whole provision on the company's private placements, which were refinanced in February. Last year's fourth quarter included a restructuring charge of $0.08 related to the closure of several of the company's upholstery facilities and retail outlets and a $0.14 gain on the sale of properties.
For the full fiscal 2008 year, La-Z-Boy reported sales of $1.5 billion, down 10.5% compared with the prior year. The company reported a loss from continuing operations of $7.5 million, or a loss of $0.15 per share, compared with income from continuing operations of $19.8 million, or $0.38 per share, for fiscal 2007. The 2008 full-year results include income per share of $0.09 related to anti-dumping duties received on bedroom furniture imported from China, a restructuring charge of $0.10 relating to the closure of the company's Lincolnton facility, retail outlet closures and the pending closure of the company's Tremonton, Utah upholstery facility, a $0.10 per share charge for a write-down of goodwill and a $0.07 per share charge associated with the make-whole provision on the company's private placements, which were refinanced in February.
For the full fiscal 2007 year, the company's results included a $0.13 per share restructuring charge related to plant and retail outlet closures, income of $0.04 per share related to anti-dumping duties, and a $0.17 per share gain on the sale of properties. (See the attached schedule for more information on selected items included in our Consolidated Statement of Operations.)
Kurt L. Darrow, La-Z-Boy's President and Chief Executive Officer, said: "In an operating environment that continues to be marked by challenges, fiscal 2008 was a transitional year for La-Z-Boy. We continued our momentum in making significant changes to our business model, including rationalizing our portfolio of operating companies, transitioning our La-Z-Boy branded manufacturing facilities to cellular production, closing several upholstery facilities, launching a new comprehensive marketing campaign, consolidating our retail warehouses and IT systems and strengthening our balance sheet by reducing our debt by 31%. We made tough decisions during tough times, and are confident our business model has the strength and stability for us to remain an industry leader going forward."
Upholstery
For the fiscal 2008 fourth quarter, sales in the company's upholstery segment decreased 8.9% to $277.5 million compared with $304.7 million in the prior year's fourth quarter; however, the segment's operating margin increased to 8.3% from 6.0% in last year's comparable quarter. Darrow stated, "The success of the conversion of our La-Z-Boy branded facilities to the cellular production process is clearly evident in our results. On lower volume, we improved our operating margin year over year and, with the implementation of cellular now substantially completed, we anticipate our performance going forward will improve. During the quarter, we announced plans to consolidate all cutting and sewing operations at our branded facilities, over a period of 18 to 24 months, and will move those operations to a new facility in Mexico. We also announced we would close our Tremonton, Utah facility this summer. The combined annual savings from these two initiatives are expected to be in excess of $25 million, with the full benefit beginning in fiscal 2011."
For the fiscal 2008 fourth quarter, the La-Z-Boy Furniture Galleries(R) store system, which includes both company-owned and independent-licensed stores, opened two new stores, relocated and/or remodeled two and closed three, bringing the total store count to 335, of which 216 are in the New Generation format. For fiscal 2009, the network plans to open 10 New Generation format La-Z-Boy Furniture Galleries(R) stores (seven new and three will be store remodels or relocations) and will close six. In the first quarter of fiscal 2009, the network plans to open one store, relocate or remodel two and close two.
System-wide, for the first four months of calendar 2008, including company-owned and independent-licensed stores, same-store written sales, which the company tracks as an indicator of retail activity, were down 5.7%. Total written sales, which include new stores, were down 5.2%.
Casegoods
For the 2008 fourth quarter, casegoods sales were $48.8 million, down 24.3% from the prior year's fourth quarter and, as a result, the segment's quarterly operating margin decreased to 3.6%. Darrow commented, "With higher price points typically associated with casegoods collections, as compared to upholstery, our casegoods business continues to be impacted by the housing downturn, with consumers postponing purchases of larger sets of furniture for the dining room and bedroom. In the meantime, our team remains focused on new product development, with unique attributes, to appeal to a wider range of customers. Importantly, we continue to align our cost structure with the current level of business."
Retail
For the quarter, retail sales were $48.9 million, down 10.2% compared with the prior-year period. The retail group posted an operating loss for the quarter, and its operating margin was (25.7%). Approximately 6.5% of the 10.2% sales decline was the result of exiting the Pittsburgh, Pennsylvania market, which was operating during last year's fourth quarter. Darrow stated, "During the quarter, we completed the consolidations of both our warehouse and IT systems, eliminating the redundant costs associated with the multiple markets we acquired over the last several years. Following the consolidation of the warehouses, we were aggressive in reducing our inventory and lowered it by 15% on a 10% sales decline during the course of the quarter. We also closed three stores during the period, selling additional inventory at discounted levels, which negatively impacted our gross margin for the quarter. However, as a result of these moves, beginning in fiscal 2009, we are in-stock on our core assortment, which is improving our service position."
Darrow continued, "Although we are realizing a significant reduction in costs as a result of the consolidation process, the benefit is negated by the decline in volume across our stores coupled with increased occupancy costs associated with additional New Generation format stores. While we cannot control the impact the economy is having on the home furnishings market, we are working to improve our close ratio and average ticket with every customer. Additionally, we continue to examine every cost component of our business while experimenting with various merchandising techniques in several stores as a means to drive top-line growth."
During the fourth quarter, the company's retail segment opened two new company-owned stores, remodeled or relocated two and closed one. At the end of the fourth quarter, the company owned 70 stores, including 56 in the New Generation format, or 80% versus 70 company-owned stores last year at this time, of which 47, or 67%, were in the new format.
New Credit Facility
La-Z-Boy Incorporated entered into a new secured credit agreement in early February, giving it greater flexibility to operate its business. As part of the refinancing, the company's private placement notes were paid off and the company took a charge of $6.0 million, or $0.07 per share, in the fourth quarter as a result of a make-whole provision with the company's note holders.
Balance Sheet
During the year, La-Z-Boy reduced its debt by $47 million, of which $46 million was reduced in the fourth quarter. At the end of fiscal 2008, La-Z-Boy's debt to capitalization ratio was 18.8% compared with 23.8% at the end of fiscal 2007. Net cash provided by operating activities was $49.2 million, primarily the result of a reduction in inventory and accounts receivable.
Business Outlook
Commenting on the company's business outlook, Darrow said: "Overall macroeconomic factors continue to impact the home furnishings industry and we believe it will be some time before the environment improves. As we experienced in fiscal 2008, due to seasonality issues and the way in which our fiscal year rolls out (May through April), we anticipate the second half of our fiscal year to be stronger than the first half. We will continue to make changes to our business to positively impact both the top and bottom lines; however, we remain cautious in our outlook for the full fiscal 2009 year and anticipate a 3% to 7% decrease in sales compared with fiscal 2008 and earnings per share to be in the range of $0.15 to $0.25. Our guidance does not include restructuring charges, potential income from anti-dumping monies, or any further effect from discontinued operations or the write-down of intangible assets."
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) further changes in the housing market; (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 projected; (o) the impact of adopting new accounting principles; (p) the impact from natural events such as hurricanes, earthquakes and tornadoes; (q) the ability to procure fabric rolls or cut and sewn fabric sets domestically or abroad; (r) those matters discussed under "Risk Factors" in our most recent Annual Report of Form 10-K and subsequent Quarterly Reports on Form 10-Q 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 and La-Z-Boy. The La-Z-Boy Casegoods Group companies are American Drew/Lea, Hammary and Kincaid.
The corporation's proprietary distribution network is dedicated exclusively to selling La-Z-Boy Incorporated products and brands, and includes 335 stand-alone La-Z-Boy Furniture Galleries(R) stores, 57 La-Z-Boy In-Store Galleries and 333 Comfort Studios, 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 Unaudited
For the Quarter Ended For the Year Ended
(Amounts in thousands,
except per share data) 4/26/2008 4/28/2007 4/26/2008 4/28/2007
(13 weeks) (13 weeks) (52 weeks) (52 weeks)
Sales $368,030 $408,078 $1,450,941 $1,621,460
Cost of sales
Cost of goods sold 260,777 296,053 1,051,656 1,189,734
Restructuring 2,610 3,771 5,057 3,371
Total cost of sales 263,387 299,824 1,056,713 1,193,105
Gross profit 104,643 108,254 394,228 428,355
Selling, general and
administrative 102,192 92,955 399,470 388,738
Restructuring 632 2,542 3,078 7,662
Write-down of intangibles 2,617 - 8,426 -
Operating income (loss) (798) 12,757 (16,746) 31,955
Interest expense 7,534 2,316 13,899 10,206
Income from Continued Dumping
and Subsidy Act, net - - 7,147 3,430
Interest income 575 1,255 3,614 3,952
Other income (expense), net 691 173 5,393 727
Income (loss) from continuing
operations before income
taxes (7,066) 11,869 (14,491) 29,858
Income tax (benefit) expense (2,595) 3,434 (6,954) 10,090
Income (loss) from continuing
operations (4,471) 8,435 (7,537) 19,768
Income (loss) from
discontinued operations
(net of tax) 50 (724) (6,000) (15,629)
Net income (loss) $(4,421) $7,711 $(13,537) $4,139
Basic average shares 51,425 51,373 51,408 51,475
Basic income (loss) from
continuing operations per
share $(0.09) $0.16 $(0.15) $0.38
Discontinued operations
(net of tax) - (0.01) (0.11) (0.30)
Basic net income (loss) per
share $(0.09) $0.15 $(0.26) $0.08
Diluted average shares 51,425 51,522 51,408 51,606
Diluted income (loss) from
continuing operations per
share $(0.09) $0.16 $(0.15) $0.38
Discontinued operations
(net of tax) - (0.01) (0.11) (0.30)
Diluted net income (loss)
per share $(0.09) $0.15 $(0.26) $0.08
Dividends paid per share $0.04 $0.12 $0.40 $0.48
LA-Z-BOY INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEET
Unaudited
As of
(Amounts in thousands, except par value) 4/26/2008 4/28/2007
Current assets
Cash and equivalents $14,982 $51,721
Receivables, net of allowance of $17,942
in 2008 and $13,635 in 2007 200,422 230,399
Inventories, net 178,361 197,790
Deferred income taxes -- current 12,398 17,283
Assets of discontinued operations - 24,278
Other current assets 21,325 19,327
Total current assets 427,488 540,798
Property, plant and equipment, net 171,001 183,218
Deferred income taxes -- long term 26,922 15,380
Goodwill 47,233 55,659
Trade names 9,006 9,472
Other long-term assets, net of allowance of
$2,801 in 2008 and $1,942 in 2007 87,220 74,164
Total assets $768,870 $878,691
Current liabilities
Current portion of long-term debt $4,792 $38,076
Accounts payable 56,421 66,242
Liabilities of discontinued operations - 3,843
Accrued expenses and other current liabilities 102,700 118,591
Total current liabilities 163,913 226,752
Long-term debt 99,578 113,172
Other long-term liabilities 54,783 53,419
Contingencies and commitments - -
Shareholders' equity
Preferred shares -- 5,000 authorized; none issued - -
Common shares, $1 par value - 150,000
authorized; 51,428 outstanding in 2008 and
51,377 outstanding in 2007 51,428 51,377
Capital in excess of par value 209,388 208,283
Retained earnings 190,215 223,896
Accumulated other comprehensive income (loss) (435) 1,792
Total shareholders' equity 450,596 485,348
Total liabilities and shareholders' equity $768,870 $878,691
LA-Z-BOY INCORPORATED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Quarter Unaudited Year
Ended Ended
(Amounts in thousands) 4/26/2008 4/28/2007 4/26/2008 4/28/2007
Cash flows from operating
activities
Net income (loss) $(4,421) $7,711 $(13,537) $4,139
Adjustments to reconcile
net income (loss) to cash
provided by (used for)
operating activities
Write-down of intangibles 2,617 - 8,426 -
Write-down of assets from
businesses held for sale
(net of tax) - 1,262 2,159 14,936
(Gain) loss on sale of
discontinued operations
(net of tax) (198) 345 3,696 (935)
Restructuring 3,242 6,313 8,135 11,033
Provision for doubtful
accounts 2,177 899 8,550 3,790
Depreciation and amortization 6,190 7,082 24,696 27,204
Stock option, restricted and
performance based stock
expense 1,362 748 4,527 3,959
Change in receivables 11,715 (14,624) 20,956 5,064
Change in inventories 5,574 18,795 23,471 4,486
Change in payables (5,287) 7,621 (10,394) (11,607)
Change in other assets and
liabilities (6,768) 3,018 (25,419) (12,446)
Change in deferred taxes (3,557) (7,354) (6,027) (16,390)
Total adjustments 17,067 24,105 62,776 29,094
Net cash provided by operating
activities 12,646 31,816 49,239 33,233
Cash flows from investing
activities
Proceeds from disposals
of assets 1,023 21,698 8,761 46,974
Proceeds from sale of
discontinued operations - 9,493 4,169 42,659
Capital expenditures (6,548) (4,817) (27,386) (25,811)
Purchases of investments (5,485) (4,704) (34,562) (18,165)
Proceeds from sales of
investments 5,338 5,508 35,580 17,342
Change in other long-term
assets (2,791) (1,298) (705) (955)
Net cash provided by (used
for) investing activities (8,463) 25,880 (14,143) 62,044
Cash flows from financing
activities
Net changes in debt (50,108) (16,728) (50,929) (36,696)
Stock issued/(canceled)
for stock and employee
benefit plans (140) 7 (269) 1,340
Repurchases of common stock - - - (6,947)
Dividends paid (2,076) (6,212) (20,746) (24,886)
Net cash used for financing
activities (52,324) (22,933) (71,944) (67,189)
Effect of exchange rate changes
on cash and equivalents (52) (526) 109 (456)
Change in cash and equivalents (48,193) 34,237 (36,739) 27,632
Cash and equivalents at
beginning of period 63,175 17,484 51,721 24,089
Cash and equivalents at
end of period $14,982 $51,721 $14,982 $51,721
LA-Z-BOY INCORPORATED
Segment Information
Unaudited Unaudited
For the Quarter Ended For the Year Ended
4/26/2008 4/28/2007 4/26/2008 4/28/2007
(Amounts in thousands) (13 weeks) (13 weeks) (52 weeks) (52 weeks)
Sales
Upholstery Group $277,458 $304,674 $1,084,418 $1,198,378
Casegoods Group 48,770 64,403 213,896 262,721
Retail Group 48,902 54,481 190,180 220,319
VIEs/Eliminations (7,100) (15,480) (37,553) (59,958)
Consolidated 368,030 408,078 1,450,941 1,621,460
Operating income (loss)
Upholstery Group 22,961 18,286 70,332 78,724
Casegoods Group 1,752 5,127 10,151 20,289
Retail Group (12,565) (7,939) (40,265) (31,161)
Corporate and Other* (7,087) 3,596 (40,403) (24,864)
Restructuring (3,242) (6,313) (8,135) (11,033)
Intangible write-down (2,617) - (8,426) -
Consolidated $(798) $12,757 $(16,746) $31,955
* Variable Interest Entities ("VIEs") are included in corporate and other.
LA-Z-BOY INCORPORATED
Unaudited Quarterly Financial Data
(Dollar amounts in
thousands, except per
share data) 7/28/2007 10/27/2007 1/26/2008 4/26/2008
Fiscal Quarter Ended (13 weeks) (13 weeks) (13 weeks) (13 weeks)
Sales $344,396 $365,434 $373,081 $368,030
Cost of sales
Cost of goods sold 259,143 266,658 265,078 260,777
Restructuring 2,561 518 (632) 2,610
Total cost of sales 261,704 267,176 264,446 263,387
Gross profit 82,692 98,258 108,635 104,643
Selling, general and
administrative 94,508 98,098 104,672 102,192
Restructuring 1,120 449 877 632
Write-down of intangibles - 5,809 - 2,617
Operating income (loss) (12,936) (6,098) 3,086 (798)
Interest expense 2,097 2,120 2,148 7,534
Income from Continued
Dumping and Subsidy Offset
Act, net - - 7,147 -
Interest income 882 1,023 1,134 575
Other income, net 566 351 3,785 691
Income (loss) from
continuing operations
before income taxes (13,585) (6,844) 13,004 (7,066)
Income tax expense (benefit) (5,043) (3,192) 3,876 (2,595)
Income (loss) from
continuing operations (8,542) (3,652) 9,128 (4,471)
Income (loss) from
discontinued operations
(net of tax) (152) (6,282) 384 50
Net income (loss) $(8,694) $(9,934) $9,512 $(4,421)
Diluted weighted average
shares outstanding 51,380 51,410 51,590 51,425
Diluted income (loss) from
continuing operations
per share $(0.17) $(0.07) $0.18 $(0.09)
Diluted net income (loss)
per share $(0.17) $(0.19) $0.18 $(0.09)
LA-Z-BOY INCORPORATED
Unaudited Quarterly Financial Data
(Dollar amounts in thousands,
except per share data) 7/29/2006 10/28/2006 1/27/2007 4/28/2007
Fiscal Quarter Ended (13 weeks) (13 weeks) (13 weeks) (13 weeks)
Sales $393,923 $414,614 $404,845 $408,078
Cost of sales
Cost of goods sold 296,008 306,351 291,322 296,053
Restructuring - (400) - 3,771
Total cost of sales 296,008 305,951 291,322 299,824
Gross profit 97,915 108,663 113,523 108,254
Selling, general and
administrative 94,683 99,887 101,213 92,955
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 -
Interest income 815 773 1,109 1,255
Other income (expense), net (545) 575 524 173
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
Selected Items Included in the Consolidated Statement of Operations
Unaudited Unaudited
For the Quarter Ended For the Year Ended
4/26/2008 4/28/2007 4/26/2008 4/28/2007
(Amounts in millions) (13 weeks) (13 weeks) (52 weeks) (52 weeks)
Writedown of Intangible
Assets(1) $2.7 $- $8.4 $-
Restructuring (2) 3.2 6.3 8.1 11.0
Make Whole on Private
Placements (3) 6.0 - 6.0 -
(Gain)/Loss on Property
Sales(4) 0.3 (11.5) 0.3 (14.1)
Litigation Settlement(5) (2.6) - (2.6) -
(Gain)/Loss on Sales of
Investments(6) (0.3) (0.2) (3.9) (0.7)
Income from CDSOA(7) - - (7.1) (3.4)
Selected Items included in
Income from Continuing
Operations $9.3 $(5.4) $9.2 $(7.2)
(1) Write-down of a portion of the goodwill of one of our VIEs in the
fourth quarter of fiscal 2008. Full year includes the write-down of
goodwill for our South Florida market.
(2) Severance, benefits, write-down of assets, contract terminations costs
and other costs related to our plant and retail store closures.
(3) Make whole premium on the repayment of our private placement notes.
(4) Gains and losses on property sales which were not previously
written-down as part of a restructuring plan. FY07 includes the sale
of our plant in the U.K. in addition to several other properties
during the year.
(5) Settlement related to one of our VIEs who was in litigation with the
former independent dealer of the VIE's market.
(6) Gains and losses on various investments.
(7) Income received under the Continued Dumping and Subsidy Offset Act.
SOURCE La-Z-Boy Incorporated
-0- 06/16/2008
/CONTACT: Kathy Liebmann of La-Z-Boy Incorporated, +1-734-241-2438,
kathy.liebmann@la-z-boy.com/
/Web site: http://www.la-z-boy.com /
(LZB)
CO: La-Z-Boy Incorporated
ST: Michigan
IN: HOU REA
SU: ERN ERP
JT-EE
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3755 06/16/2008 19:02 EDT http://www.prnewswire.com