La-Z-Boy Reports Fiscal 2015 First-Quarter Results; Increases Share Purchase Authorization
Fiscal 2015 first-quarter highlights for continuing operations:
- Consolidated sales for the first quarter increased 7.0% compared with the fiscal 2014 first quarter;
- Consolidated operating income increased to
$16.5 million compared with$14.8 million in the fiscal 2014 first quarter; - Earnings per share were
$0.25 , including$0.05 attributable to discontinued operations compared with earnings per share of$0.18 in last year's first quarter; - The casegoods segment posted a 16.6% increase in sales and a 5.3% operating margin compared with 1.8% in last year's first quarter; and
- Same-store written sales for the La-Z-Boy Furniture Galleries® store network increased 1.0% for the first quarter after a 12.7% increase in last year's first quarter.
Sales for the fiscal 2015 first quarter were
The following table provides a reconciliation of our income from continuing operations attributable to
Reconciliation of Non-GAAP Financial Information |
||||
Quarter Ended |
||||
(Amounts in thousands, except per share data) |
7/26/2014 |
7/27/2013 |
||
Income from continuing operations attributable to La-Z-Boy Incorporated |
$10,584 |
$9,556 |
||
Adjustment for special items (after-tax impact): |
||||
Restructuring |
(231) |
56 |
||
Adjusted income from continuing operations attributable to La-Z-Boy Incorporated |
$10,354 |
$9,612 |
||
Diluted net income attributable to La-Z-Boy Incorporated per share: |
||||
Income from continuing operations attributable to La-Z-Boy Incorporated |
$0.20 |
$0.18 |
||
Adjustment for special items: |
||||
Restructuring |
- |
- |
||
Adjusted income from continuing operations attributable to La-Z-Boy Incorporated |
$0.20 |
$0.18 |
||
Wholesale Segments
For the fiscal 2015 first quarter, sales in the company's upholstery segment increased 6.8% to
Darrow commented, "Inherent in our overall marketing philosophy is a multi-channel distribution approach that canvases our branded outlets, including the La-Z-Boy Furniture Galleries® stores and Comfort Studio® locations, as well as other independent dealers in a variety of markets. For the quarter, we experienced sales increases across all channels of distribution. During the period, our upholstery segment recorded higher expenses associated with advertising, a new distribution center in southern
Darrow continued, "We are continuing to highlight our Live Life Comfortably advertising campaign and spent additional money during the quarter to launch the Urban Attitudes collection through various marketing initiatives. Given the collection's importance to the overall positioning of the brand and significance to our ability to expand our consumer base by attracting younger individuals, we developed a comprehensive marketing campaign to support the group's introduction. As our marketing program continues to deliver results in terms of market share gains, the increased volume inherent in a larger business will allow us to leverage the fixed-cost structure of our manufacturing facilities, improving absorption at the plant level and delivering long-term results."
Darrow added, "Our casegoods business benefitted from several factors during the quarter, including increased sales resulting from new product introductions, the continued strength in our occasional business and an improved in-stock position in the segment. During this quarter, as we began transitioning the remaining Kincaid and American Drew bedroom product lines overseas, we were successful in reducing our inventory of the domestic groups that we discontinued as part of the restructuring. As announced last quarter, we plan to cease production at the
During the period, the company received
Retail Segment
In the first quarter of fiscal 2015, retail delivered sales were
Darrow stated, "During the quarter, we opened one store and have five new stores in the company-owned retail segment slated to open in the second quarter. Although costs associated with opening these six stores impacted our conversion during the period, these one-time costs, primarily labor and other start-up expenses, represent an investment in our business which will help drive our long-term growth strategy. We also invested in refreshing and updating the accessories offering across all company-owned stores prior to the fall selling season to further enhance our ability to drive larger tickets and more complete room group purchases."
Darrow added, "For the period, we increased our gross margin and improved our conversion while experiencing lower traffic. These metrics would indicate a more qualified consumer is entering our stores and that our sales processes and disciplines are achieving results. In addition to opening one store, we remodeled two as we work to strengthen our portfolio of stores as part of the company's overall 4-4-5 build out strategy. As the size of this business increases, the overall enterprise will benefit from the blended wholesale and retail margin associated with our integrated retail platform."
La-Z-Boy Furniture Galleries® Store Network
System-wide, for the first quarter of fiscal 2015, including company-owned and independent-licensed stores, same-store written sales, which the company tracks as an indicator of retail activity, were up 1.0% versus last year's first quarter. As a result of our 4-4-5 store growth strategy and our acceleration of store changes, we have refined our same-store sales definition as follows: Same-store written sales include the sales of all currently active stores which have been opened for a minimum of 12 months. When a store is identified for relocation, it is no longer considered comparable one month prior to its relocation. When the relocated store has been opened for a comparable period, it is then treated as a same store.
Total written sales, which include new and closed stores, were up 3.5% for the first quarter. At the end of the first quarter, the La-Z-Boy Furniture Galleries® store system was composed of 317 stand-alone stores.
For the first quarter, across the network, two stores were opened and five stores were remodeled. Darrow commented, "We have an ambitious plan for fiscal 2015 that includes 30 to 35 store projects, including openings, remodels and relocations, and, as a result of this activity, we expect to nearly double the number of new concept design stores while adding approximately 12 net new stores. The activity related to our store build out includes adding new strategic locations, updating older stores into the new concept design format, and relocating and closing certain locations. At the end of the first quarter, 38 stores of the total 317 were in the new concept design format. For the second quarter of 2015, we plan to open seven stores, remodel five, relocate two and close one."
Balance Sheet and Cash Flow
During the quarter, the company used
Dividend and Share Purchase Authorization
The company's Board of Directors declared a regular quarterly cash dividend of
Darrow stated, "The increase in our share purchase authorization demonstrates the board's confidence in the company's ability to successfully execute its growth strategy while generating ongoing strong free cash flow. With a solid balance sheet enabling us to invest in long-term growth, we are committed to a disciplined capital allocation structure that allows us to return value to shareholders through various means."
Business Outlook
Darrow concluded, "We are confident we have a solid strategy in place to drive long-term profitable growth. The La-Z-Boy brand is the strongest in the furniture industry, our branded distribution network is vast, including more than 900 locations, and we have a unique multi-channel network, where we sell through both the branded channel and to a large and varied dealer base. Our 4-4-5 store growth strategy has great potential, and we are investing in the company across multiple areas to deliver future performance. Importantly, as our retail network grows, we will leverage the efficiencies of our lean manufacturing operations and deliver ongoing results through our integrated retail model."
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) information technology conversions or system failures; (o) effects of our brand awareness and marketing programs; (p) the discovery of defects in our products resulting in delays in manufacturing, recall campaigns, reputational damage, or increased warranty costs; (q) litigation arising out of alleged defects in our products; (r) our ability to locate new La-Z-Boy Furniture Galleries® stores (or store owners) and negotiate favorable lease terms for new or existing locations; (s) our ability to integrate acquired businesses and realize the benefit of anticipated synergies; (t) the results of our restructuring actions; and (u) those matters discussed in Item 1A of our fiscal 2014 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
Non-GAAP Financial Information
The information contained in this press release is intended to supplement, rather than to supersede, our consolidated financial statements. We report our financial results in accordance with accounting principles generally accepted in
Management does not expect the excluded items to significantly affect future operating results and believes that presenting income from continuing operations attributable to
Background Information
The corporation's branded distribution network is dedicated to selling
LA-Z-BOY INCORPORATED |
||||
Quarter Ended |
||||
(Unaudited, amounts in thousands, except per share data) |
7/26/14 |
7/27/13 |
||
Sales |
$326,980 |
$305,502 |
||
Cost of sales |
||||
Cost of goods sold |
215,831 |
203,949 |
||
Restructuring |
(357) |
87 |
||
Total cost of sales |
215,474 |
204,036 |
||
Gross profit |
111,506 |
101,466 |
||
Selling, general and administrative expense |
95,015 |
86,701 |
||
Operating income |
16,491 |
14,765 |
||
Interest expense |
132 |
136 |
||
Interest income |
202 |
180 |
||
Other income (expense), net |
(258) |
537 |
||
Income from continuing operations before income taxes |
16,303 |
15,346 |
||
Income tax expense |
5,755 |
5,445 |
||
Income from continuing operations |
10,548 |
9,901 |
||
Income from discontinued operations, net of tax |
2,497 |
34 |
||
Net income |
13,045 |
9,935 |
||
Net (income) loss attributable to noncontrolling interests |
36 |
(345) |
||
Net income attributable to La-Z-Boy Incorporated |
$13,081 |
$9,590 |
||
Net income attributable to La-Z-Boy Incorporated: |
||||
Income from continuing operations attributable to La-Z-Boy |
$10,584 |
$9,556 |
||
Income from discontinued operations |
2,497 |
34 |
||
Net income attributable to La-Z-Boy Incorporated |
$13,081 |
$9,590 |
||
Basic average shares |
52,191 |
52,343 |
||
Basic net income attributable to La-Z-Boy Incorporated per share: |
||||
Income from continuing operations attributable to La-Z-Boy |
$0.20 |
$0.18 |
||
Income from discontinued operations |
0.05 |
— |
||
Basic net income attributable to La-Z-Boy Incorporated per share |
$0.25 |
$0.18 |
||
Diluted average shares |
52,627 |
53,051 |
||
Diluted net income attributable to La-Z-Boy Incorporated per share: |
||||
Income from continuing operations attributable to La-Z-Boy |
$0.20 |
$0.18 |
||
Income from discontinued operations |
0.05 |
— |
||
Diluted net income attributable to La-Z-Boy Incorporated per |
$0.25 |
$0.18 |
||
Dividends declared per share |
$0.06 |
$0.04 |
LA-Z-BOY INCORPORATED CONSOLIDATED BALANCE SHEET |
||||
(Unaudited, amounts in thousands) |
7/26/14 |
4/26/14 |
||
Current assets |
||||
Cash and equivalents |
$116,309 |
$149,661 |
||
Restricted cash |
5,283 |
12,572 |
||
Receivables, net of allowance of $11,692 at 7/26/14 and $12,368 at 4/26/14 |
139,760 |
152,614 |
||
Inventories, net |
161,318 |
147,009 |
||
Deferred income taxes – current |
15,557 |
15,037 |
||
Business held for sale |
3,188 |
4,290 |
||
Other current assets |
42,372 |
41,490 |
||
Total current assets |
483,787 |
522,673 |
||
Property, plant and equipment, net |
144,815 |
127,535 |
||
Goodwill |
13,923 |
13,923 |
||
Other intangible assets |
4,544 |
4,544 |
||
Deferred income taxes – long-term |
32,790 |
32,430 |
||
Other long-term assets, net |
75,266 |
70,190 |
||
Total assets |
$755,125 |
$771,295 |
||
Current liabilities |
||||
Current portion of long-term debt |
$376 |
$7,497 |
||
Accounts payable |
58,354 |
56,177 |
||
Business held for sale |
730 |
832 |
||
Accrued expenses and other current liabilities |
92,246 |
102,876 |
||
Total current liabilities |
151,706 |
167,382 |
||
Long-term debt |
207 |
277 |
||
Other long-term liabilities |
76,119 |
73,918 |
||
Contingencies and commitments |
— |
— |
||
Shareholders' equity |
||||
Preferred shares – 5,000 authorized; none issued |
— |
— |
||
Common shares, $1 par value – 150,000 authorized; 52,529 outstanding |
52,529 |
51,981 |
||
Capital in excess of par value |
264,919 |
262,901 |
||
Retained earnings |
231,951 |
238,384 |
||
Accumulated other comprehensive loss |
(30,215) |
(31,380) |
||
Total La-Z-Boy Incorporated shareholders' equity |
519,184 |
521,886 |
||
Noncontrolling interests |
7,909 |
7,832 |
||
Total equity |
527,093 |
529,718 |
||
Total liabilities and equity |
$755,125 |
$771,295 |
LA-Z-BOY INCORPORATED CONSOLIDATED STATEMENT OF CASH FLOWS |
||||
Quarter Ended |
||||
(Unaudited, amounts in thousands) |
7/26/14 |
7/27/13 |
||
Cash flows from operating activities |
||||
Net income |
$13,045 |
$9,935 |
||
Adjustments to reconcile net income to cash provided by (used for) operating activities |
||||
Restructuring |
(347) |
87 |
||
Deferred income tax expense (benefit) |
(1,342) |
700 |
||
Provision for doubtful accounts |
(618) |
(1,245) |
||
Depreciation and amortization |
5,379 |
5,847 |
||
Equity-based compensation expense |
3,010 |
3,193 |
||
Change in receivables |
12,441 |
21,812 |
||
Change in inventories |
(15,874) |
(11,688) |
||
Change in other assets |
2,985 |
(1,193) |
||
Change in payables |
(255) |
1,907 |
||
Change in other liabilities |
(19,646) |
(16,335) |
||
Net cash provided by (used for) operating activities |
(1,222) |
13,020 |
||
Cash flows from investing activities |
||||
Proceeds from disposal of assets |
1,348 |
2,078 |
||
Capital expenditures |
(19,406) |
(3,216) |
||
Purchases of investments |
(15,941) |
(6,432) |
||
Proceeds from sales of investments |
10,422 |
8,558 |
||
Change in restricted cash |
7,289 |
(6) |
||
Net cash provided by (used for) investing activities |
(16,288) |
982 |
||
Cash flows from financing activities |
||||
Payments on debt |
(7,212) |
(132) |
||
Stock issued for stock and employee benefit plans |
131 |
763 |
||
Excess tax benefit on stock option exercises |
249 |
3,277 |
||
Purchases of common stock |
(6,062) |
(7,071) |
||
Dividends paid |
(3,119) |
(2,110) |
||
Net cash used for financing activities |
(16,013) |
(5,273) |
||
Effect of exchange rate changes on cash and equivalents |
171 |
(314) |
||
Change in cash and equivalents |
(33,352) |
8,415 |
||
Cash and equivalents at beginning of period |
149,661 |
131,085 |
||
Cash and equivalents at end of period |
$116,309 |
$139,500 |
||
Supplemental disclosure of non-cash investing activities |
||||
Capital expenditures included in payables |
$8,024 |
$— |
LA-Z-BOY INCORPORATED SEGMENT INFORMATION |
||||
Quarter Ended |
||||
(Unaudited, amounts in thousands) |
7/26/14 |
7/27/13 |
||
Sales |
||||
Upholstery segment: |
||||
Sales to external customers |
$227,156 |
$215,547 |
||
Intersegment sales |
35,703 |
30,522 |
||
Upholstery segment sales |
262,859 |
246,069 |
||
Casegoods segment: |
||||
Sales to external customers |
25,953 |
22,670 |
||
Intersegment sales |
2,970 |
2,129 |
||
Casegoods segment sales |
28,923 |
24,799 |
||
Retail segment sales |
72,905 |
66,274 |
||
Corporate and Other |
966 |
1,011 |
||
Eliminations |
(38,673) |
(32,651) |
||
Consolidated sales |
$326,980 |
$305,502 |
||
Operating Income (Loss) |
||||
Upholstery segment |
$22,017 |
$22,286 |
||
Casegoods segment |
1,525 |
450 |
||
Retail segment |
315 |
1,926 |
||
Restructuring |
357 |
(87) |
||
Corporate and Other |
(7,723) |
(9,810) |
||
Consolidated operating income |
$16,491 |
$14,765 |
SOURCE
Kathy Liebmann (734) 241-2438 kathy.liebmann@la-z-boy.com