La-Z-Boy Reports Fourth-Quarter and Full-Year Profit
MONROE, Mich., June 14, 2010 /PRNewswire via COMTEX/ --La-Z-Boy Incorporated (NYSE: LZB) today reported its operating results for the fiscal fourth quarter and full year ended April 24, 2010.
Fiscal 2010 fourth-quarter highlights:
- Net income attributable to La-Z-Boy Incorporated was $0.26 per share, including a $0.01 per share restructuring charge and income of $0.04 related to a reversal of valuation reserves on deferred taxes;
- Consolidated sales increased 9.2%, led by a double-digit increase in the company's upholstery group;
- The upholstery segment posted an 11.9% operating margin;
- The retail segment's performance continued to improve, with the operating loss reduced by 36%, or $2.6 million; and
- The company generated $31 million in cash from operating activities.
Fiscal 2010 full-year highlights:
- Net income attributable to La-Z-Boy Incorporated was $0.62 per share, including a $0.04 per share restructuring charge, income of $0.04 related to a reversal of valuation reserves on deferred taxes, and income of $0.05 per share in anti-dumping duties received on wood bedroom furniture imported from China;
- Consolidated sales decreased by 3.9% compared with fiscal 2009;
- The upholstery segment posted a 10.7% operating margin;
- The retail segment's performance improved, with the operating loss reduced by 43%, or $15 million from last year's level;
- The company generated $89.7 million in cash from operating activities; and
- The company increased its cash position to $108.4 million and reduced its total debt by $12.9 million to $48.0 million at year end.
Net sales for the fourth quarter were $310.7 million, up 9.2% compared with the prior year's fourth quarter. The company reported income attributable to La-Z-Boy Incorporated of $13.7 million, or $0.26 per share, compared with $5.2 million, or $0.10 per share, in the fourth quarter of fiscal 2009. The fiscal 2010 fourth-quarter results include a $0.01 per share restructuring charge, primarily related to costs associated with the consolidation of the company's casegoods facilities, and income of $0.04 related to a reversal of valuation reserves on deferred taxes. The company's 2009 fourth-quarter results include a $0.01 per share impairment of long-lived assets related to the company's retail operation, a $0.01 restructuring charge, primarily related to store closures within the company's retail segment and a $0.05 tax benefit.
For the full fiscal 2010 year, La-Z-Boy Incorporated reported sales of $1.2 billion, down 3.9% from the prior-year period. The company reported income attributable to La-Z-Boy Incorporated of $32.5 million, or $0.62 per share, versus a loss of $122.7 million, or a loss of $2.39 per share. The 2010 full-year results include a $0.04 per-share restructuring charge related to the consolidation of the company's casegoods facility as well as costs associated with the previously announced store closures in the company's retail segment, income of $0.04 per share related to a reversal of valuation reserves on deferred taxes and income of $0.05 per share in anti-dumping duties received on wood bedroom furniture imported from China.
The 2009 full-year results were impacted negatively by charges totaling $1.08 per share for asset impairments and restructuring net of $0.16 per share in income related to anti-dumping monies received on bedroom furniture imported from China. The company's fiscal 2009 full-year results also include a non-cash $0.74 per-share charge recognized in the second quarter for a valuation allowance against the company's deferred tax assets.
Kurt L. Darrow, President and Chief Executive Officer of La-Z-Boy, said, "Our results for the quarter and full year reflect the success of the many strategic initiatives implemented over the course of the last several years combined with a focus to ensure our cost structure is in line with order flow. Our manufacturing operations are governed by lean principles, we are focused on building the La-Z-Boy brand, the core growth engine of the company, and are working to strengthen the performance of our retail segment. Additionally, we have managed our balance sheet aggressively, by reducing our total debt to $48 million while increasing our cash position to $108.4 million, to ensure we have the greatest financial flexibility. While challenges still remain, we believe that today La-Z-Boy Incorporated is well positioned to not only compete in this environment, but to grow profitably."
Wholesale Segments
For the fiscal 2010 fourth quarter, sales in the company's upholstery segment increased 12.2% to $241.1 million compared with $215.0 million in the prior year's fourth quarter. The segment's operating margin increased to 11.9% for the quarter and, for the year, on relatively flat volume, the operating margin was 10.7%. Sales in the casegoods segment for the fourth quarter decreased 4.5% to $37.5 million and the segment's operating margin was (0.6%). For the year, the casegoods operation posted a small operating loss, with a margin of (0.2%), on a 17.6% sales decline.
Darrow stated, "The performance in our upholstery segment was largely fueled by the cellular production process that we implemented throughout our La-Z-Boy branded facilities. Although a capital-intensive and lengthy undertaking over a three-year period, it has enhanced the efficiencies of our operations, even in the lower volume environment in which we are operating. In addition to the lower cost structure associated with the cellular production process, our throughput and quality are better, enabling us to deliver custom furniture to the consumer more quickly, a key differentiator for our company in the marketplace. Further, we have substantially completed the transition of our cutting-and-sewing operations to our Mexico Cut-and-Sew facility and we will realize significant cost savings from this initiative throughout fiscal 2011, particularly in the second half of the year as the rate of savings accelerates. We have also implemented lean practices throughout our other two upholstery companies and both contributed positively to our results."
Darrow continued, "Although our casegoods segment continues to be challenged in this macroeconomic environment, with consumers postponing larger ticket purchases of dining room and bedroom groups, the structural changes implemented throughout the segment enabled us to operate at a near breakeven point for both the quarter and year on lower volume. During the year, we consolidated our two remaining casegoods manufacturing operations into one and, during the fourth quarter, we vacated a leased warehouse facility, moving the operation to a company-owned building. The result of these consolidations is an anticipated annual cost savings of approximately $5 million, a portion of which we realized in fiscal 2010. Also, during the fourth quarter, we consolidated our American Drew/Lea operation with Hammary and believe the newly combined organization will not only allow us to offer our customers a one-stop solution for bedroom, dining room, youth, home office and occasional, but will strengthen our sales, marketing and merchandising groups under one umbrella. Our team is continuing to find ways to strengthen our product offering while ensuring we provide excellent service to our customers."
System-wide, for the fiscal 2010 fourth quarter (February 2010 through April 2010), including company-owned and independent-licensed stores, same-store written sales, which the company tracks as an indicator of retail activity, were up 2.5% compared with the fiscal 2009 fourth quarter. Total written sales, which include new and closed stores, were down 1.5%.
Retail Segment
For the fourth quarter, retail sales were $39.2 million, up 2.1% compared with the prior-year period. The retail group posted an operating loss for the quarter, and its operating margin was (12.0%), an improvement from last year's fourth quarter margin of (19.1%). For the year, sales in the retail segment declined 4.5%. Darrow stated, "Our retail team continues to make progress in improving the performance of the segment. For the quarter, we stemmed the loss from the comparable prior-year period by $2.6 million, or 36%. For the full year, we decreased our loss by $15 million, or 43%. Our marketing platform continues to drive traffic to our store base. We have lowered our cost structure, increased our margins, increased the average ticket and improved our profitability. These metrics bode well for ongoing improvement and the segment's potential to contribute to the overall results of the La-Z-Boy Incorporated, particularly when evaluating the blended margin between the wholesale and retail components."
Balance Sheet
During the fiscal 2010 fourth quarter, La-Z-Boy generated $31 million in cash from operating activities and, for the year, generated $90 million. La-Z-Boy's debt-to-capitalization ratio was 12.2%, down from 16.6% a year ago. During the quarter, the company continued to strengthen its balance sheet and closed the year with $108.4 million in cash, up from $17.4 million at the end of fiscal 2009. Darrow stated, "Financial flexibility remains of paramount importance to our company and we worked diligently during the year to ensure the strength of our balance sheet, through a low debt structure and strong cash position. We also have $90.6 million of availability under our revolving line of credit."
Business Outlook
Darrow stated, "While our results and other public data points indicate the beginning of improved industry conditions, we remain cautious going into fiscal 2011. Sales growth and cost-savings initiatives will need to be balanced against various macroeconomic factors, including relatively low consumer confidence levels, ongoing high unemployment and volatility within the housing market, as well as headwinds relating to raw material price increases versus last year. Against this backdrop, we will continue to manage our business aggressively. We believe our company is well positioned to compete in this environment and we are focused on improving our operations across all business segments."
Darrow continued, "As it relates to the first quarter, we are experiencing a significant delta in raw material costs when compared with the year-ago period, and we expect cost savings initiatives, including efficiencies from the Mexico Cut and Sew Center, to accelerate as we move through the year as volumes increase and projects are completed. Additionally, as a result of normal seasonality factors, our first quarter, which ends in July, is typically the weakest in terms of sales and profits as the furniture industry, in general, experiences weaker demand throughout the summer. Accordingly, our plants shut down for one week for vacation, yielding 12 weeks of shipping versus the normal 13 weeks."
Conference Call
La-Z-Boy will hold a conference call with the investment community on Tuesday, June 15, 2010, at 8:30 a.m. eastern time. The toll-free dial-in number is 877.407.0778; international callers may use 201.689.8565.
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 and demographics; (b) continued economic recession; (c) changes in the real estate and credit markets and the potential impacts on our customers and suppliers; (d) the impact of political unrest internationally, terrorism or war; (e) continued energy and other commodity price changes; (f) the impact of logistics on imports; (g) the impact of interest rate and currency exchange rate changes; (h) operating factors, such as supply, labor or distribution disruptions including changes in operating conditions, product recalls or costs; (i) effects of restructuring actions; (j) changes in the domestic or international regulatory environment; (k) the impact of adopting new accounting principles; (l) the impact from severe weather or other natural events such as hurricanes, earthquakes and tornadoes; (m) the 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) impact of IT system failures; and (p) those matters discussed in Item 1A of our fiscal 2010 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, 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/Investor-Relations/Sec-Filings/. 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/Investor-Relations/Email-Alerts/
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 operating units in the Casegoods Group consist of two groups, one including American Drew, Lea and Hammary, and the second being Kincaid.
The corporation's proprietary distribution network is dedicated exclusively to selling La-Z-Boy Incorporated products and brands, and includes 306 stand-alone La-Z-Boy Furniture Galleries(R) stores and 510 independent Comfort Studios(R), in addition to in-store gallery programs for the company's Kincaid, England and Lea operating units. Additional information is available at http://www.la-z-boy.com/.
LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF OPERATIONS
Unaudited Unaudited
--------- ---------
For the Quarter
Ended For the Year Ended
---------------- ------------------
(Amounts in
thousands,
except per
share data) 4/24/2010 4/25/2009 4/24/2010 4/25/2009
(13 (13 (52 (52
----------- weeks) weeks) weeks) weeks)
------- ------- ------- -------
Sales $310,740 $284,498 $1,179,212 $1,226,674
Cost of sales
Cost of goods
sold 208,938 193,394 802,344 $879,889
Restructuring 350 123 2,141 9,818
--- --- ----- -----
Total cost of
sales 209,288 193,517 804,485 889,707
Gross profit 101,452 90,981 374,727 336,967
Selling,
general and
administrative 85,480 86,901 331,491 373,502
Restructuring 271 433 1,293 2,642
Write-down of
long-lived
assets - 467 - 7,503
Write-down of
trade names - - - 5,541
Write-down of
goodwill - - - 42,136
--- --- --- ------
Operating
income (loss) 15,701 3,180 41,943 (94,357)
Interest
expense 584 1,049 2,972 5,581
Interest income 109 619 724 2,504
Income from
Continued
Dumping and
Subsidy Offset
Act, net - - 4,436 8,124
Other income
(expense), net 236 (23) 590 (7,998)
--- --- --- ------
Earnings (loss)
before income
taxes 15,462 2,727 44,721 (97,308)
Income tax
expense
(benefit) 1,922 (2,275) 12,670 25,112
----- ------ ------ ------
Net income
(loss) 13,540 5,002 32,051 (122,420)
Net (income)
loss
attributable
to
noncontrolling
interests 132 155 487 (252)
----
Net income
(loss)
attributable
to La-Z-Boy
Incorporated $13,672 $5,157 $32,538 $(122,672)
======= ====== ======= =========
Diluted
weighted
average shares 52,101 51,478 51,732 51,460
Diluted net
income (loss)
attributable
to La-Z-Boy
Incorporated
per share $0.26 $0.10 $0.62 $(2.39)
Dividends paid
per share $- $- $- $0.10
LA-Z-BOY INCORPORATED
CONSOLIDATED BALANCE SHEET
Unaudited As of
---------------
(Amounts in thousands, except par value) 4/24/2010 4/25/2009
---------------------------------------- --------- ---------
Current assets
Cash and equivalents $108,421 $17,364
Restricted cash - 18,713
Receivables, net of allowance of $20,258 in
2010 and $28,385 in 2009 165,038 147,858
Inventories, net 134,187 140,178
Deferred income taxes - current 2,305 795
Other current assets 18,159 22,872
------ ------
Total current assets 428,110 347,780
Property, plant and equipment, net 138,857 146,896
Trade names 3,100 3,100
Deferred income taxes - long term 458 -
Other long-term assets, net of allowance of
$942 in 2010 and $4,309 in 2009 38,293 51,431
------ ------
Total assets $608,818 $549,207
======== ========
Current liabilities
Current portion of long-term debt $1,066 $8,724
Accounts payable 54,718 41,571
Accrued expenses and other current
liabilities 91,496 75,733
------ ------
Total current liabilities 147,280 126,028
Long-term debt 46,917 52,148
Deferred income taxes - 724
Other long-term liabilities 68,381 63,875
Contingencies and commitments - -
Shareholders' equity
Common shares, $1 par value - 150,000
authorized; 51,770 outstanding in 2010 and
51,478 outstanding in 2009 51,770 51,478
Capital in excess of par value 201,873 205,945
Retained earnings 108,707 67,431
Accumulated other comprehensive loss (20,251) (22,559)
------- -------
Total La-Z-Boy Incorporated shareholders'
equity 342,099 302,295
Noncontrolling interests 4,141 4,137
----- -----
Total equity 346,240 306,432
------- -------
Total liabilities and equity $608,818 $549,207
======== ========
LA-Z-BOY INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Quarter Unaudited Year
Ended Ended
(Amounts in thousands) 4/24/2010 4/25/2009 4/24/2010 4/25/2009
Cash flows from operating
activities
Net income (loss) $13,540 $5,002 $32,051 $(122,420)
Adjustments to reconcile
net income (loss) to
cash provided by
operating activities
Gain on sale of assets (488) (106) (538) (2,813)
Write-down of long-
lived assets - 467 - 7,503
Write-down of trade
names - - - 5,541
Write-down of goodwill - - - 42,136
Write-down of
investments - - - 5,140
Restructuring 621 556 3,434 12,460
Provision for doubtful
accounts 942 6,815 6,535 25,254
Depreciation and
amortization 6,060 5,875 25,246 24,142
Stock-based compensation
expense 1,154 952 5,236 3,819
Change in receivables (3,114) 3,909 (17,287) 27,223
Change in inventories 10,858 29,615 5,991 36,995
Change in other assets (2,784) 992 4,187 2,946
Change in payables 6,471 (8,120) 13,147 (14,544)
Change in other
liabilities 91 (12,914) 14,349 (41,160)
Change in deferred taxes (2,391) 624 (2,692) 39,466
------ --- ------ ------
Total adjustments 17,420 28,665 57,608 174,108
------ ------ ------ -------
Net cash provided by
operating activities 30,960 33,667 89,659 51,688
Cash flows from investing
activities
Proceeds from disposals
of assets 1,413 1,229 3,338 9,060
Capital expenditures (5,278) (1,546) (10,986) (15,625)
Purchases of investments (999) (735) (4,933) (11,330)
Proceeds from sales of
investments 3,040 12,794 8,833 34,675
Change in restricted cash - (10,543) 17,507 (18,207)
Change in other long-
term assets 121 (235) 250 (581)
--- ---- --- ----
Net cash provided by
(used for) investing
activities (1,703) 964 14,009 (2,008)
Cash flows from financing
activities
Proceeds from debt 10,426 (4,664) 41,817 50,794
Payments on debt (10,971) (23,100) (54,707) (92,139)
Stock issued/(canceled)
for stock and employee
benefit plans 1,035 - 1,035 -
Dividends paid - 11 - (5,177)
--- --- --- ------
Net cash provided by
(used for) financing
activities 490 (27,753) (11,855) (46,522)
Effect of exchange rate
changes on cash and
equivalents (837) (30) (756) (901)
---- --- ---- ----
Change in cash and
equivalents 28,910 6,848 91,057 2,257
Cash acquired from
consolidation of VIEs - - - 631
Cash and equivalents at
beginning of period 79,511 10,516 17,364 14,476
------ ------ ------ ------
Cash and equivalents at
end of period $108,421 $17,364 $108,421 $17,364
======== ======= ======== =======
LA-Z-BOY INCORPORATED
Segment Information
Unaudited Unaudited
--------- ---------
For the Quarter Ended For the Year Ended
--------------------- ------------------
4/24/2010 4/25/2009 4/24/2010 4/25/2009
(Amounts in (13 (13 (52 (52
thousands) weeks) weeks) weeks) weeks)
----------- ------- ------- ------- -------
Sales
Upholstery
Group $241,137 $214,952 $904,871 $899,204
Casegoods
Group 37,510 39,290 146,706 178,000
Retail Group 39,233 38,430 153,620 160,838
VIEs 13,557 11,555 53,173 50,856
Corporate and
Other 440 1,413 4,583 4,775
Eliminations (21,137) (21,142) (83,741) (66,999)
------- ------- ------- -------
Consolidated
Sales $310,740 $284,498 $1,179,212 $1,226,674
======== ======== ========== ==========
Operating
income
(loss)
Upholstery
Group $28,641 $19,405 $96,392 $35,947
Casegoods
Group (230) (1,265) (243) 554
Retail Group (4,721) (7,332) (19,825) (34,841)
VIEs 222 (349) 104 (5,771)
Corporate and
Other (7,590) (6,256) (31,051) (22,606)
Restructuring (621) (556) (3,434) (12,460)
Write-down
of long-
lived assets - (467) - (7,503)
Write-down
of trade
names - - - (5,541)
Write-down
of goodwill - - - (42,136)
--- --- --- -------
Consolidated
Operating
Income
(Loss) $15,701 $3,180 $41,943 $(94,357)
======= ====== ======= ========
LA-Z-BOY INCORPORATED
Unaudited Quarterly Financial Data
(Dollar amounts
in thousands,
except per share
data) (13 weeks) (13 weeks) (13 weeks) (13 weeks)
Fiscal Quarter
Ended 7/25/2009 10/24/2009 1/23/2010 4/24/2010
-------------- --------- ---------- --------- ---------
Sales $262,671 $300,707 $305,094 $310,740
Cost of sales
Cost of goods
sold 181,549 204,962 206,895 208,938
Restructuring 736 663 392 350
--- --- --- ---
Total cost of
sales 182,285 205,625 207,287 209,288
Gross profit 80,386 95,082 97,807 101,452
Selling, general
and
administrative 77,622 84,862 83,527 85,480
Restructuring 301 520 201 271
Operating income 2,463 9,700 14,079 15,701
Interest expense 980 831 577 584
Interest income 276 199 140 109
Income from
Continued
Dumping and
Subsidy Offset
Act, net - - 4,436 -
Other income
(expense), net 711 236 (593) 236
--- --- ---- ---
Earnings before
income taxes 2,470 9,304 17,485 15,462
Income tax
expense 439 3,762 6,547 1,922
--- ----- ----- -----
Net income 2,031 5,542 10,938 13,540
Net (income) loss
attributable to
noncontrolling
interest (48) 365 38 132
--- --- --- ---
Net income
attributable to
La-Z-Boy
Incorporated $1,983 $5,907 $10,976 $13,672
====== ====== ======= =======
Diluted weighted
average shares 51,479 51,755 51,845 52,101
Diluted net
income
attributable to
La-Z-Boy
Incorporated per
share $0.04 $0.11 $0.21 $0.26
LA-Z-BOY INCORPORATED
Unaudited Quarterly Financial Data
(Dollar amounts in thousands, (13 (13 (13 (13
except per share data) weeks) weeks) weeks) weeks)
Fiscal Quarter Ended 7/26/2008 10/25/2008 1/24/2009 4/25/2009
-------------------- --------- ---------- --------- ---------
Sales $321,652 $331,948 $288,576 $284,498
Cost of sales
Cost of goods sold 235,596 243,090 207,809 193,394
Restructuring 5,795 2,236 1,664 123
----- ----- ----- ---
Total cost of sales 241,391 245,326 209,473 193,517
Gross profit 80,261 86,622 79,103 90,981
Selling, general and
administrative 91,435 101,665 93,501 86,901
Restructuring 781 687 741 433
Write-down of long-lived assets - - 7,036 467
Write-down of trade names - - 5,541 -
Write-down of goodwill 1,292 408 40,436 -
----- --- ------ ---
Operating income (loss) (13,247) (16,138) (68,152) 3,180
Interest expense 1,495 1,651 1,386 1,049
Interest income 932 630 323 619
Income from Continued Dumping
and Subsidy Offset Act, net - - 8,124 -
Other income (expense), net 143 (685) (7,433) (23)
--- ---- ------ ---
Earnings (loss) before income
taxes (13,667) (17,844) (68,524) 2,727
Income tax expense (benefit) (5,107) 36,757 (4,263) (2,275)
------ ------ ------ ------
Net income (loss) (8,560) (54,601) (64,261) 5,002
Net (income) loss attributable
to noncontrolling interest (86) (34) (287) 155
--- --- ---- ---
Net income (loss) attributable
to La-Z-Boy Incorporated $(8,646) $(54,635) $(64,548) $5,157
======= ======== ======== ======
Diluted weighted average shares 51,428 51,458 51,475 51,478
Diluted net income (loss)
attributable to La-Z-Boy
Incorporated per share $(0.17) $(1.06) $(1.25) $0.10
SOURCE La-Z-Boy Incorporated