Attached files
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| 8-K - LA-Z-BOY INC | v211109_8k.htm |
EXHIBIT
99.1
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NEWS
RELEASE
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Contact:
Kathy Liebmann
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(734)
241-2438
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kathy.liebmann@la-z-boy.com
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LA-Z-BOY REPORTS
THIRD-QUARTER RESULTS
MONROE,
MI. February 15, 2011—La-Z-Boy Incorporated (NYSE: LZB) today
reported its operating results for the fiscal third quarter ended January 22,
2011.
Fiscal
2011 third-quarter:
|
|
·
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Sales
for the third quarter declined 4.3%, of which 2.1% was due to the
deconsolidation of a VIE, with the remainder reflecting ongoing
macroeconomic challenges relating to housing and consumer
confidence;
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·
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Net
income for the fiscal 2011 third quarter was $0.19 per share, which
includes a $0.06 tax benefit, versus $0.21 per share in last year’s third
quarter;
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|
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·
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The
fiscal 2011 third quarter included $0.01 per-share in anti-dumping duties
and last year’s third quarter included $0.05 per share in anti-dumping
duties;
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|
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·
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The
upholstery segment’s sales declined 3.9% and its operating margin was 8.2%
versus 11.1% in last year’s third
quarter;
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·
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The
casegoods segment’s sales decreased 1.7% and its operating margin was 4.7%
compared with 0.8% in the previous year’s third
quarter;
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·
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The
retail segment’s sales increased 9.2% and it experienced its eighth
consecutive quarterly improvement of operating margin performance compared
with the prior year;
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·
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The
company generated $29.5 million of cash from operations during the
quarter, ending the period with $109.6 million of cash on its balance
sheet and $89.4 million of availability on its revolving line of
credit.
|
Net sales
for the third quarter were $292 million, down 4.3% compared with the prior
year’s third quarter. The company reported net income attributable to
La-Z-Boy Incorporated of $10.0 million, or $0.19 per share, compared with $11.2
million, or $0.21 per share in the fiscal 2010 third quarter. During
the quarter, the company reduced its estimated annual effective tax rate and
realized a $0.06 tax benefit. The reduction in the effective tax rate
primarily related to tax benefits associated with our southern California
VIE. The fiscal 2011 third-quarter’s results also include income of
$0.9 million, or $0.01 per share, reflecting anti-dumping duties received on
imports of Chinese wood bedroom furniture compared with $4.4 million, or $0.05
per share, in anti-dumping duties received in the third quarter of fiscal
2010. The fiscal 2010 third-quarter results also included a $0.01 per
share restructuring charge, primarily related to costs associated with the
consolidation in the company’s casegoods facilities and the previously announced
store closures within the company’s retail segment.
Kurt L.
Darrow, President and Chief Executive Officer of La-Z-Boy, said, “We continue to
execute effectively against our strategic objectives and achieved improved
operating results in both the casegoods and retail business segments. We are
also encouraged by the improvement of the La-Z-Boy Furniture Galleries® store
network’s same-store sales comparison after last quarter’s negative 7.1%
performance and this quarter’s increase of 4.7%. Although
macroeconomic challenges continue to impact our overall business, we are
cautiously optimistic the consumer is more confident in returning to the
marketplace.”
Wholesale
Segments
For the
fiscal 2011 third quarter, sales in the company’s upholstery segment decreased
3.9% to $225.2 million compared with $234.3 million in the prior year’s third
quarter. The operating margin for the 2011 quarter was 8.2% compared
with 11.1% in last year’s comparable quarter. In the casegoods
segment, sales for the fiscal third quarter were $35.4 million, down 1.7% from
$36.0 million in the fiscal 2010 third quarter, and the segment’s operating
margin was 4.7% compared with 0.8%.
Darrow
commented, “Sales in our upholstery segment declined for the quarter, primarily
due to the weaker demand environment during the Fall selling season leading up
the holiday period. Our operating margin remains solid and continues
to demonstrate the benefit of the cellular production process throughout the
La-Z-Boy branded facilities. We are also continuing to make
efficiency gains at our Mexico cut-and-sew facility. Raw material
pricing remains higher quarter over quarter, but the magnitude of change is
somewhat lower compared to the first half of the year.
“The
launch in November of our new marketing platform, featuring Brooke Shields as
the La-Z-Boy brand ambassador, has met with positive reaction. While
still too early to quantify the results of the campaign, anecdotal evidence
suggests it is bearing fruit and we are optimistic the campaign will drive
additional traffic to all our retailers while highlighting La-Z-Boy as a brand
that offers consumers a full array of comfortable and stylish
furniture. The investment in this marketing platform is just one
example of the various initiatives underway to ensure the company is well
positioned to increase its market share and fuel growth and
profitability.”
Darrow
added, “On the casegoods side of the business, the consolidation last year of
our two manufacturing facilities and the transitions from a leased warehouse to
a company-owned building, as well as combining our American Drew/Lea and Hammary
operations has enabled us to run the business with much greater efficiencies,
contributing to the 4.7% operating margin on reduced sales. In
addition to increasing sales, service remains a key priority for our
team. With our ability to deliver to customers quickly, we are
gaining floor space among retailers who do not want to warehouse significant
quantities of casegoods inventory. At the same time, we are seeing
the consumer gradually moving toward higher price point items and, going
forward, we believe we are well positioned to participate in this trend given
that most of our product lines fall into the medium-to-medium-high price
range.”
Retail
Segment
For the
quarter, retail sales were $44.1 million, up 9.2% compared with the prior-year
period. The retail group posted an operating loss of $2.8 million for
the quarter, and its operating margin was (6.2%) compared with a loss of $4.1
million and operating margin of (10.2%) in last year’s third
quarter. Darrow stated, “The increase in sales was a result of an
effective promotional plan which led to improved conversion on customer
traffic. The higher conversion and the lower cost structure
throughout the business are improving the segment’s operating
results. Furthermore, our team is continuing to pursue lease
renegotiations or other opportunities to bring our sales-to-occupancy ratio into
balance.
“Following
the close of the quarter, due to a dealer retirement, the company-owned retail
segment assumed responsibility for 15 La-Z-Boy Furniture Galleries® stores in
Los Angeles, San Diego and Orange County, which previously had operated as a
VIE. The southern California market has great potential from a
demographic standpoint and we are confident our retail team will improve the
results of the 15-store operation as they institute the sales, marketing and
operational processes alongside cost-containment initiatives that have fueled
the improvements in the retail segment over the past two years. As a
result of taking on the 15 stores, the store count within our retail segment has
been brought to 83.”
La-Z-Boy Furniture
Galleries® Stores Network
System-wide,
for the third quarter of fiscal 2011, including company-owned and
independent-licensed stores, same-store written sales, which the company tracks
as an indicator of retail activity, were up 4.7%. Total written
sales, which include new and closed stores, were up 3.6%. At the end
of the third quarter, 305 stand-alone stores comprised the La-Z-Boy Furniture
Galleries® store system.
Balance
Sheet
During
the quarter, the company generated $29.5 million in cash provided by operating
activities and ended the quarter with $109.6 million in cash and $89.4 million
of availability under its revolving line of credit. At quarter
end, La-Z-Boy’s debt-to-capitalization ratio was 11.2% compared with 12.9% a
year ago and 11.6% at the end of the fiscal 2011 second quarter.
Business
Outlook
Darrow
stated, “With a rebound in same-store sales for the quarter, it appears the
consumer is more comfortable making larger ticket furniture
purchases. However, until the housing sector strengthens and we see a
steady improvement in the overall consumer confidence level, we are guardedly
optimistic that we are experiencing a turnaround in the marketplace for
furniture. We believe La-Z-Boy is well positioned to capitalize on an
increase in furniture spending based on our industry-leading brand and strong
network of branded distribution outlets. We believe our new marketing
campaign will continue to drive additional traffic to our dealer network and the
changes we have made and continue to make to our cost structure across all
business segments are positioning the company for growth and
profitability.”
Note: The
2011 fiscal fourth quarter will comprise 14 weeks rather than 13.
Conference
Call
La-Z-Boy
will hold a conference call with the investment community on Wednesday, February
16, 2011, 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
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 recovery from the recent
economic 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) continued energy and other commodity price changes; (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, product recalls or costs; (i) restructuring actions; (j) changes in
the domestic or international regulatory environment; (k) adopting new
accounting principles; (l) severe weather or other natural events such as
hurricanes, earthquakes and tornadoes; (m) our 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) information technology system
failures; and (p) the 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, and expressly disclaim any such 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
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://investors.la-z-boy.com/phoenix.zhtml?c=92596&p=irol-sec. 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://investors.la-z-boy.com/phoenix.zhtml?c=92596&p=irol-alerts&t=&id=&.
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 305 stand-alone
La-Z-Boy Furniture Galleries® stores and 536 independent Comfort Studios®, 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/.
EXHIBIT
99.2
LA-Z-BOY
INCORPORATED
CONSOLIDATED
STATEMENT OF INCOME
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Third Quarter Ended
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(Unaudited, amounts in thousands, except per share
data)
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01/22/11
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01/23/10
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||||||
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Sales
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$ | 291,943 | $ | 305,094 | ||||
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Cost
of sales
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||||||||
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Cost
of goods sold
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203,662 | 206,930 | ||||||
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Restructuring
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(65 | ) | 392 | |||||
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Total
cost of sales
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203,597 | 207,322 | ||||||
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Gross
profit
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88,346 | 97,772 | ||||||
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Selling,
general and administrative
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78,057 | 83,811 | ||||||
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Restructuring
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297 | 201 | ||||||
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Operating
income
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9,992 | 13,760 | ||||||
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Interest
expense
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561 | 577 | ||||||
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Interest
income
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250 | 140 | ||||||
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Income
from Continued Dumping and Subsidy Offset Act, net
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903 | 4,436 | ||||||
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Other
income (expense), net
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251 | (593 | ) | |||||
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Earnings
before income taxes
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10,835 | 17,166 | ||||||
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Income
tax expense
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2,451 | 6,502 | ||||||
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Net
income
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8,384 | 10,664 | ||||||
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Net
loss attributable to noncontrolling interests
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1,626 | 489 | ||||||
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Net
income attributable to La-Z-Boy Incorporated
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$ | 10,010 | $ | 11,153 | ||||
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Basic
average shares
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51,865 | 51,546 | ||||||
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Basic
net income attributable to La-Z-Boy Incorporated per share
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$ | 0.19 | $ | 0.21 | ||||
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Diluted
average shares
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52,270 | 51,845 | ||||||
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Diluted
net income attributable to La-Z-Boy Incorporated per share
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$ | 0.19 | $ | 0.21 | ||||
LA-Z-BOY
INCORPORATED
CONSOLIDATED
STATEMENT OF INCOME
|
Nine Months Ended
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(Unaudited, amounts in thousands, except per share
data)
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01/22/11
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01/23/10
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Sales
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$ | 848,239 | $ | 868,472 | ||||
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Cost
of sales
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||||||||
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Cost
of goods sold
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602,101 | 594,645 | ||||||
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Restructuring
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(148 | ) | 1,791 | |||||
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Total
cost of sales
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601,953 | 596,436 | ||||||
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Gross
profit
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246,286 | 272,036 | ||||||
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Selling,
general and administrative
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232,033 | 246,346 | ||||||
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Restructuring
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572 | 1,022 | ||||||
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Operating
income
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13,681 | 24,668 | ||||||
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Interest
expense
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1,743 | 2,387 | ||||||
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Interest
income
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716 | 615 | ||||||
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Income
from Continued Dumping and Subsidy Offset Act, net
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903 | 4,436 | ||||||
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Other
income (expense), net
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182 | 242 | ||||||
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Earnings
before income taxes
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13,739 | 27,574 | ||||||
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Income
tax expense
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3,126 | 10,027 | ||||||
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Net
income
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10,613 | 17,547 | ||||||
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Net
loss attributable to noncontrolling interests
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3,126 | 1,149 | ||||||
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Net
income attributable to La-Z-Boy Incorporated
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$ | 13,739 | $ | 18,696 | ||||
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Basic
average shares
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51,835 | 51,517 | ||||||
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Basic
net income attributable to La-Z-Boy Incorporated per share
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$ | 0.26 | $ | 0.36 | ||||
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Diluted
average shares
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52,242 | 51,595 | ||||||
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Diluted
net income attributable to La-Z-Boy Incorporated per share
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$ | 0.26 | $ | 0.36 | ||||
LA-Z-BOY
INCORPORATED
CONSOLIDATED
BALANCE SHEET
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(Unaudited, amounts in
thousands)
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01/22/11
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04/24/10
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||||||
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Current
assets
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||||||||
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Cash
and equivalents
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$ | 109,632 | $ | 108,427 | ||||
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Receivables,
net of allowance of $23,318 at 01/22/11 and $20,258 at
04/24/10
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154,277 | 165,001 | ||||||
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Inventories,
net
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142,051 | 132,480 | ||||||
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Deferred
income taxes – current
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2,314 | 2,305 | ||||||
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Other
current assets
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19,443 | 18,862 | ||||||
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Total
current assets
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427,717 | 427,075 | ||||||
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Property,
plant and equipment, net
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128,310 | 138,857 | ||||||
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Trade
names
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3,100 | 3,100 | ||||||
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Deferred
income taxes – long-term
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458 | 458 | ||||||
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Other
long-term assets
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36,357 | 38,293 | ||||||
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Total
assets
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$ | 595,942 | $ | 607,783 | ||||
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Current
liabilities
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||||||||
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Current
portion of long-term debt
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$ | 5,099 | $ | 1,066 | ||||
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Accounts
payable
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50,734 | 54,718 | ||||||
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Accrued
expenses and other current liabilities
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77,061 | 91,523 | ||||||
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Total
current liabilities
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132,894 | 147,307 | ||||||
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Long-term
debt
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40,030 | 46,917 | ||||||
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Other
long-term liabilities
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66,557 | 70,445 | ||||||
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Contingencies
and commitments
|
— | — | ||||||
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Equity
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||||||||
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La-Z-Boy
Incorporated shareholders’ equity:
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||||||||
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Common
shares, $1 par value
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51,865 | 51,770 | ||||||
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Capital
in excess of par value
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201,544 | 201,873 | ||||||
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Retained
earnings
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124,138 | 106,466 | ||||||
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Accumulated
other comprehensive loss
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(18,753 | ) | (20,284 | ) | ||||
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Total
La-Z-Boy Incorporated shareholders' equity
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358,794 | 339,825 | ||||||
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Noncontrolling
interests
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(2,333 | ) | 3,289 | |||||
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Total equity
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356,461 | 343,114 | ||||||
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Total
liabilities and equity
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$ | 595,942 | $ | 607,783 | ||||
LA-Z-BOY
INCORPORATED
CONSOLIDATED
STATEMENT OF CASH FLOWS
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Nine Months Ended
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(Unaudited, amounts in
thousands)
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01/22/11
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01/23/10
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||||||
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Cash
flows from operating activities
|
||||||||
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Net
income
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$ | 10,613 | $ | 17,547 | ||||
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Adjustments
to reconcile net income to cash provided by operating
activities
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||||||||
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(Gain)
loss on sale of assets
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112 | (50 | ) | |||||
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Restructuring
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424 | 2,813 | ||||||
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Provision
for doubtful accounts
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3,739 | 5,593 | ||||||
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Depreciation
and amortization
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17,745 | 19,186 | ||||||
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Stock-based
compensation expense
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3,043 | 4,082 | ||||||
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Pension
plan contributions
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(2,500 | ) | — | |||||
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Change
in receivables
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10,995 | (14,101 | ) | |||||
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Change
in inventories
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(14,138 | ) | (4,192 | ) | ||||
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Change
in other assets
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(3,120 | ) | 6,224 | |||||
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Change
in payables
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(3,232 | ) | 6,676 | |||||
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Change
in other liabilities
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(12,976 | ) | 15,222 | |||||
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Change
in deferred taxes
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11 | (301 | ) | |||||
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Total
adjustments
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103 | 41,152 | ||||||
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Net
cash provided by operating activities
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10,716 | 58,699 | ||||||
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Cash
flows from investing activities
|
||||||||
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Proceeds
from disposals of assets
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423 | 1,925 | ||||||
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Capital
expenditures
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(8,169 | ) | (5,708 | ) | ||||
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Purchases
of investments
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(8,290 | ) | (3,934 | ) | ||||
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Proceeds
from sales of investments
|
8,013 | 5,793 | ||||||
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Change
in restricted cash
|
— | 17,507 | ||||||
|
Other
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(51 | ) | 129 | |||||
|
Net
cash provided by (used for) investing activities
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(8,074 | ) | 15,712 | |||||
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Cash
flows from financing activities
|
||||||||
|
Proceeds
from debt
|
30,488 | 31,391 | ||||||
|
Payments
on debt
|
(31,450 | ) | (43,736 | ) | ||||
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Stock
issued from stock plans
|
58 | — | ||||||
|
Net
cash used for financing activities
|
(904 | ) | (12,345 | ) | ||||
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Effect
of exchange rate changes on cash and equivalents
|
99 | 81 | ||||||
|
Change
in cash and equivalents
|
1,837 | 62,147 | ||||||
|
Cash
reduction upon deconsolidation of VIE
|
(632 | ) | — | |||||
|
Cash
and equivalents at beginning of period
|
108,427 | 17,370 | ||||||
|
Cash
and equivalents at end of period
|
$ | 109,632 | $ | 79,517 | ||||
LA-Z-BOY
INCORPORATED
SEGMENT
INFORMATION
|
Third Quarter Ended
|
Nine Months Ended
|
|||||||||||||||
|
(Unaudited, amounts in
thousands)
|
01/22/11
|
01/23/10
|
01/22/11
|
01/23/10
|
||||||||||||
|
Sales
|
||||||||||||||||
|
Upholstery
Group
|
$ | 225,213 | $ | 234,262 | $ | 652,025 | $ | 663,734 | ||||||||
|
Casegoods
Group
|
35,426 | 36,029 | 111,785 | 109,196 | ||||||||||||
|
Retail
Group
|
44,146 | 40,411 | 118,699 | 114,387 | ||||||||||||
|
VIEs
|
10,173 | 15,629 | 25,459 | 39,616 | ||||||||||||
|
Corporate
and Other
|
612 | 603 | 1,438 | 4,143 | ||||||||||||
|
Eliminations
|
(23,627 | ) | (21,840 | ) | (61,167 | ) | (62,604 | ) | ||||||||
|
Consolidated
Sales
|
$ | 291,943 | $ | 305,094 | $ | 848,239 | $ | 868,472 | ||||||||
|
Operating
Income (Loss)
|
||||||||||||||||
|
Upholstery
Group
|
$ | 18,468 | $ | 26,071 | $ | 45,580 | $ | 67,122 | ||||||||
|
Casegoods
Group
|
1,648 | 292 | 4,599 | (13 | ) | |||||||||||
|
Retail
Group
|
(2,759 | ) | (4,135 | ) | (12,043 | ) | (15,104 | ) | ||||||||
|
VIEs
|
(1,130 | ) | 62 | (3,842 | ) | (1,063 | ) | |||||||||
|
Corporate
and Other
|
(6,003 | ) | (7,937 | ) | (20,189 | ) | (23,461 | ) | ||||||||
|
Restructuring
|
(232 | ) | (593 | ) | (424 | ) | (2,813 | ) | ||||||||
|
Consolidated
Operating Income
|
$ | 9,992 | $ | 13,760 | $ | 13,681 | $ | 24,668 | ||||||||