MONROE, Mich., Feb. 17 /PRNewswire-FirstCall/ -- La-Z-Boy
Incorporated (NYSE:LZB) today reported its operating results for
the fiscal third quarter ended January 24, 2009. -- Net sales for
the period were $288.6 million, down 23% compared with the prior
year's third quarter, reflecting ongoing demand challenges in a
difficult macroeconomic environment. -- The company generated $28.0
million in cash from operations, including $8.1 million in
anti-dumping duties received on bedroom furniture imported from
China. -- La-Z-Boy paid down its debt by $27.8 million to $90.4
million. Over the past 12 months, the company decreased its total
debt by $60.2 million, or by 40%. -- Including the charges
highlighted below, the company posted a net loss of $64.4 million,
or a loss of $1.25 per share. This includes various non- cash
accounting charges which impacted the company's results for the
quarter. They included an intangible write-down of $46.0 million
and a $7.0 million impairment of property, plant and equipment,
reflecting the continued weakness in the financial markets and the
impact of the current economy on our business, which caused the
company's market capitalization to fall below its book value and
triggered the requirement to test the valuation of the company's
long-lived assets. Selected non-cash items increasing/(decreasing)
operating income (loss): Three months ended Nine months ended Jan.
24, Jan. 26, Jan. 24, Jan. 26, 2009 2008 2009 2008 Adjusted
operating income (loss) $(5,397) $5,911 $(22,405) $(3,431)
Restructuring - non-cash portion (441) (71) (1,908) (335) Provision
for bad debts (9,439) (2,754) (18,439) (6,373) Impairment of
Intangible assets (45,977) - (47,677) (5,809) Impairment of P, P
& E (7,036) - (7,036) - Operating income (loss) - as reported
$(68,290) $3,086 $(97,465) $(15,948) -- Due to market conditions,
in the fiscal 2009 third quarter, the company had $5.1 million in
write-downs of investments. In the prior year's quarter, it had
$3.5 million of gains on the sale of investments. -- In the prior
year's third quarter, La-Z-Boy reported net income of $9.5 million,
or $0.18 per share, which included income per share of $0.09 after
tax related to anti-dumping duties received on bedroom furniture
imported from China. Kurt L. Darrow, La-Z-Boy's President and Chief
Executive Officer, said: "In what remains an extraordinarily
challenging demand environment for furniture, on a 23%, or $85
million, sales decline, we limited our adjusted operating loss to
$5.4 million, reflecting the many structural changes we have made
to our business. Importantly, in the third quarter, we generated
cash from operations, reduced our debt, improved our liquidity,
reduced our retail losses and maintained our focus on strategic
projects. "We are managing our business aggressively. In November,
we reacted quickly and decisively to the rapid deterioration in
sales trends experienced during October, and, we have continued to
make changes to the business model on a monthly basis to align our
operating platform with order trends. Since November, we removed
approximately $60 million in structural costs on an annual basis
from our operations in the form of personnel reductions, the
closure of a Bauhaus upholstery manufacturing facility, changes to
our employee benefit plans and other cost reductions across the
entire company. Compared with year-ago levels, our employment has
decreased by 24%, or approximately 2,500 people." Darrow continued,
"With the objective of strengthening and improving our operating
structure, over the past four years, we have invested in
modernizing our manufacturing facilities, upgrading our proprietary
store program, and improving our Information Technology platform.
Currently, we are in the process of completing our structural
improvement projects, including our Mexican cut-and-sew center and
our regional distribution centers to serve both company-owned and
dealer stores. Most importantly, as a result of the strategic
investments we have made, we are operating with a new and
competitive infrastructure, which allows us to function more
efficiently. We will continue to make whatever operating
improvements are necessary to ensure that we thrive within the
difficult macroeconomic environment. Going forward, we will require
minimal near-term capital expenditures, which will improve our cash
flow. Wholesale Segments For the fiscal 2009 third quarter, sales
in the company's upholstery segment decreased 30% to $199.2 million
compared with $282.5 million in the prior year's third quarter. The
segment's operating margin was (1.0%). In the casegoods segment,
sales for the fiscal third quarter were $42.1 million, down 20%
from $52.7 million in the prior year's third quarter. The segment's
operating margin decreased to (0.7%) from 4.2% in last year's
comparable period. During the quarter, La-Z-Boy shifted the
reporting of its retail warehouse operations to the upholstery
segment to garner greater efficiencies as the warehouse operations
have been expanded to service some independent dealers through the
company-operated warehouse system. This reporting change affected
the timing of inter-company revenue and profit recognition for the
Upholstery Group. This resulted in a reduction in inter-company
sales and operating income for the Upholstery Group of $12.1
million and $3.3 million, respectively, with corresponding offsets
recorded in consolidation. The adjustments did not affect the
company's consolidated operating results. Darrow commented, "With a
significant decline in volume for the quarter, without the one-time
adjustment to sales and operating income that impacted the segment,
the upholstery operation would have been profitable, reflecting the
improvements we have made to our operating structure, particularly
those derived from cellular manufacturing. Additionally, most of
the bad debt charge for the quarter resided in the upholstery
group, further affecting its results. Going forward, we expect to
see further progress in the segment's performance with an
increasing number of custom-order cut-and-sewn kits coming from
Mexico. We are pleased to report we opened the Mexican cut-and-sew
facility last month on time and on budget." Darrow continued, "Our
casegoods segment's business model is predicated upon the ability
to deliver products in two weeks or less. As retail demand slowed
during the quarter, we experienced cancellations or postponements
of orders from large dealers and reluctance to purchase stock
inventory. As a result of the 20% decline in sales experienced
during the quarter, the casegoods segment operated essentially at a
break-even level. Moving forward, our team is continuing to work on
a smaller but more productive product line and align the cost
structure of the business to the current economic challenges." For
the fiscal 2009 third 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 three and closed four, bringing the total store
count to 328, of which 223 are in the New Generation format. For
the fourth quarter of fiscal 2009, the network plans to open three
New Generation format La-Z-Boy Furniture Galleries(R) stores (one
remodeled store and two relocations) and anticipates closing 10.
Darrow added, "Last November, we announced that 15 to 20 La-Z-Boy
Furniture Galleries(R) stores, principally independently owned,
would close. To date, 15 stores, located primarily in the southeast
Michigan, California and Florida markets, have already closed or
are in the process of a store closing sale. Additionally, in
several instances, certain independent dealers in nearby markets
have taken on some of these locations. While the closure of stores
will impact our volumes, it is prudent to make these moves to
allocate resources to more productive stores in the system in what
continues to be a tight credit environment." During the quarter,
the company incurred a charge of $9.4 million for bad debts,
reflecting the continued weak retail environment, particularly in
Florida, Michigan and the West Coast markets. System-wide, for the
fiscal 2009 third quarter, including company-owned and
independent-licensed stores, same-store written sales, which the
company tracks as an indicator of retail activity, were down 12.4%.
Total written sales, which include new and closed stores, were down
14.5%. Retail For the quarter, retail sales were $40.5 million,
down 19% compared with the prior-year period. The retail group
posted an operating loss for the quarter, and its operating margin
was (17.6%). Darrow stated, "The macroeconomic challenges pervasive
throughout our industry are magnified in our retail operation. Our
new Chief Retail Officer, Mark Bacon, and his team are making
significant changes to the business platform to improve our
performance and we have already seen some positive results due to
more effective advertising programs, the change in our warehouse
structure and improved gross margins. For the quarter, on
significantly lower volume, we decreased our operating loss by $1.4
million compared with last year's third quarter. We will continue
to evaluate best demonstrated practices to operate the stores more
efficiently and improve our performance despite this difficult
sales environment." Intangibles and Long-Lived Asset Impairment Due
to the continued weakness in the financial and credit markets and
the impact of economic conditions on our business, La-Z-Boy's
market capitalization fell below its book value and triggered the
requirement to test the valuation of its intangible assets before
year end when it normally performs its annual testing. The result
was a significant impairment of the company's goodwill and trade
name valuations, principally from acquisitions made years ago when
economic conditions were very different. Consequently, the company
was required to take a non-cash write-down of $46 million on its
intangible assets. In addition, we recorded a $7 million write-down
of long- lived assets relating to buildings and leasehold
improvements of some of our retail stores. Balance Sheet At the end
of the fiscal 2009 third quarter, the company's debt-to-
capitalization ratio was 22.0% compared with 24.8% a year ago and
23.5% at the end of the second quarter. Although the company paid
down its debt by $27.8 million in the third quarter, the
debt-to-capitalization ratio was impacted by the change in
shareholders' equity, driven primarily by the write-down of
intangible assets. During the quarter, the company's accounts
receivables decreased $43.4 million, net of write-downs, to $153.4
million, and its accounts payable decreased by $8.5 million to
$49.8 million. Inventories increased to $172.3 million from $167.1
million, reflecting the long lead times associated with foreign
sourcing and the orders placed before October when consumer demand
was significantly curtailed. The company plans to decrease its
inventory by 10% during the fourth quarter. Dividend Given the
continued challenges of the business environment coupled with
limited visibility as to when the economy will improve, the company
believes it prudent to conserve cash and increase its financial
flexibility. Accordingly, it made the decision to suspend the
quarterly dividend to shareholders. Conference Call La-Z-Boy will
hold a conference call with the investment community on Wednesday,
18 February 2009, 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; (b) changes
in demographics; (c) further changes in residential housing and
commercial real estate market; (d) the impact of terrorism or war;
(e) continued energy and other commodity 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) continued
economic recession and decline in the equity market; (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 and leather hides or cut and sewn
fabric and leather sets domestically or abroad; (r) continued
decline in the credit market and potential impacts on our customers
and suppliers; (s) unanticipated labor/industrial actions (t) those
matters discussed in Item 1A of our fiscal 2008 Annual Report 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 328 stand-alone La-Z-Boy Furniture Galleries(R) stores
and 449 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
CONSOLIDATED STATEMENT OF OPERATIONS Third Quarter Ended
(Unaudited, amounts in thousands, 01/24/09 01/26/08 except per
share data) Sales $288,576 $373,081 Cost of sales Cost of goods
sold 207,356 265,078 Restructuring 1,664 (632) Total cost of sales
209,020 264,446 Gross profit 79,556 108,635 Selling, general and
administrative 94,092 104,672 Write-down of long-lived assets 7,036
- Write-down of intangibles 45,977 - Restructuring 741 877
Operating income (loss) (68,290) 3,086 Interest expense 1,386 2,148
Interest income 323 1,134 Income from Continued Dumping and Subsidy
Offset Act, net 8,124 7,147 Other income (expense), net (7,433)
3,785 Income (loss) from continuing operations before income taxes
(68,662) 13,004 Income tax (benefit) expense (4,280) 3,876 Income
(loss) from continuing operations (64,382) 9,128 Income from
discontinued operations (net of tax) - 384 Net income (loss)
$(64,382) $9,512 Basic average shares 51,475 51,417 Basic income
(loss) from continuing operations per share $(1.25) $0.18
Discontinued operations per share (net of tax) - 0.01 Basic net
income (loss) per share $(1.25) $0.19 Diluted average shares 51,475
51,590 Diluted income (loss) from continuing operations per share
$(1.25) $0.18 Discontinued operations per share (net of tax) - -
Diluted net income (loss) per share $(1.25) $0.18 Dividends paid
per share $0.02 $0.12 LA-Z-BOY INCORPORATED CONSOLIDATED STATEMENT
OF OPERATIONS Nine Months Ended (Unaudited, amounts in thousands,
01/24/09 01/26/08 except per share data) Sales $942,176 $1,082,911
Cost of sales Cost of goods sold 685,151 790,879 Restructuring
9,696 2,447 Total cost of sales 694,847 793,326 Gross profit
247,329 289,585 Selling, general and administrative 287,873 297,278
Write-down of long-lived assets 7,036 - Write-down of intangibles
47,677 5,809 Restructuring 2,208 2,446 Operating loss (97,465)
(15,948) Interest expense 4,532 6,365 Interest income 1,885 3,039
Income from Continued Dumping and Subsidy Offset Act, net 8,124
7,147 Other income (expense), net (7,974) 4,701 Loss from
continuing operations before income taxes (99,962) (7,426) Income
tax expense (benefit) 26,708 (4,359) Loss from continuing
operations (126,670) (3,067) Loss from discontinued operations (net
of tax) - (6,050) Net loss $(126,670) $(9,117) Basic average shares
51,454 51,402 Basic loss from continuing operations per share
$(2.46) $(0.06) Discontinued operations per share (net of tax) -
(0.12) Basic net loss per share $(2.46) $(0.18) Diluted average
shares 51,454 51,402 Diluted loss from continuing operations per
share $(2.46) $(0.06) Discontinued operations per share (net of
tax) - (0.12) Diluted net loss per share $(2.46) $(0.18) Dividends
paid per share $0.10 $0.36 LA-Z-BOY INCORPORATED CONSOLIDATED
BALANCE SHEET (Unaudited, amounts in thousands) 01/24/09 04/26/08
Current assets Cash and equivalents $18,686 $14,982 Receivables,
net of allowance of $31,045 in 2009 and $17,942 in 2008 153,401
200,422 Inventories, net 172,259 178,361 Deferred income
taxes-current 3,397 12,398 Other current assets 25,458 21,325 Total
current assets 373,201 427,488 Property, plant and equipment, net
156,341 171,001 Deferred income taxes-long term 1,292 26,922
Goodwill 5,097 47,233 Trade names 3,100 9,006 Other long-term
assets, net of allowance of $4,723 in 2009 and $2,801 in 2008
66,912 87,220 Total assets $605,943 $768,870 Current liabilities
Current portion of long-term debt $9,547 $4,792 Accounts payable
49,821 56,421 Accrued expenses and other current liabilities 89,263
102,700 Total current liabilities 148,631 163,913 Long-term debt
80,828 99,578 Deferred income taxes-long term 3,995 - Other
long-term liabilities 52,121 54,783 Shareholders' equity Common
shares, $1 par value 51,478 51,428 Capital in excess of par value
204,735 209,388 Retained earnings 65,693 190,215 Accumulated other
comprehensive loss (1,538) (435) Total shareholders' equity 320,368
450,596 Total liabilities and shareholders' equity $605,943
$768,870 LA-Z-BOY INCORPORATED CONSOLIDATED STATEMENT OF CASH FLOWS
Third Quarter Ended Nine Months Ended (Unaudited, amounts in
01/24/09 01/26/08 01/24/09 01/26/08 thousands) Cash flows from
operating activities Net income (loss) $(64,382) $9,512 $(126,670)
$(9,117) Adjustments to reconcile net income (loss) to cash
provided by operating activities Gain on sale of assets (37) -
(2,707) - (Gain) loss on the sale of discontinued operations (net
of tax) - (96) - 3,894 Write-down of businesses held for sale (net
of tax) - - - 2,159 Write-down of long-lived assets 7,036 - 7,036 -
Write-down of intangibles 45,977 - 47,677 5,809 Write-down of
investments 5,140 - 5,140 - Restructuring 2,405 245 11,904 4,893
Provision for doubtful accounts 9,439 2,754 18,439 6,373
Depreciation and amortization 5,827 6,193 17,770 18,506 Stock-based
compensation expense 1,012 1,303 2,867 3,165 Change in receivables
31,405 53 23,314 9,241 Change in inventories (3,463) 8,645 7,380
17,897 Change in payables (8,351) 9,161 (6,424) (5,107) Change in
other assets and liabilities 640 147 (25,885) (18,650) Change in
deferred taxes (4,658) 3,676 38,180 (2,470) Total adjustments
92,372 32,081 144,691 45,710 Net cash provided by operating
activities 27,990 41,593 18,021 36,593 Cash flows from investing
activities Proceeds from disposals of assets 45 456 7,831 7,738
Proceeds from sale of discontinued operations - 150 - 4,169 Capital
expenditures (4,089) (5,239) (14,079) (20,838) Purchases of
investments (1,630) (15,807) (10,595) (29,077) Proceeds from sales
of investments 10,854 15,649 21,881 30,242 Change in other
long-term assets (575) 1,701 (346) 2,086 Net cash provided by (used
for) investing activities 4,605 (3,090) 4,692 (5,680) Cash flows
from financing activities Proceeds from debt 15,992 574 55,458
1,391 Payments on debt (43,752) (974) (69,039) (2,212) Stock
issued/canceled for stock and employee benefit plans - (13) - (129)
Dividends paid (1,037) (6,229) (5,188) (18,670) Net cash used for
financing activities (28,797) (6,642) (18,769) (19,620) Effect of
exchange rate changes on cash and equivalents (228) (1,378) (871)
161 Change in cash and equivalents 3,570 30,483 3,073 11,454 Cash
and equivalents at beginning of period 15,116 32,692 15,613 51,721
Cash and equivalents at end of period $18,686 $63,175 $18,686
$63,175 Cash paid (net of refunds) during period - income taxes
$(660) $(4,336) $(456) $(443) Cash paid during period - interest
$1,337 $2,652 $3,750 $6,057 LA-Z-BOY INCORPORATED SEGMENT
INFORMATION Third Quarter Ended Nine Months Ended 01/24/09 01/26/08
01/24/09 01/26/08 (Unaudited, amounts (13 weeks) (13 weeks) (39
weeks) (39 weeks) in thousands) Sales Upholstery Group $199,200
$282,453 $684,252 $806,959 Casegoods Group 42,116 52,660 138,710
165,126 Retail Group 40,497 49,884 122,408 141,278
VIEs/Eliminations 6,763 (11,916) (3,194) (30,452) Consolidated
$288,576 $373,081 $942,176 $1,082,911 Operating income (loss)
Upholstery Group $(1,938) $19,467 $16,037 $47,370 Casegoods Group
(313) 2,222 1,819 8,399 Retail Group (7,108) (8,507) (27,509)
(27,700) Corporate and Other* (3,513) (9,851) (21,195) (33,315)
Long-lived asset write-down (7,036) - (7,036) - Intangible
write-down (45,977) - (47,677) (5,809) Restructuring (2,405) (245)
(11,904) (4,893) Consolidated $(68,290) $3,086 $(97,465) $(15,948)
*Variable Interest Entities ("VIEs") are included in corporate and
other. DATASOURCE: La-Z-Boy Incorporated CONTACT: Kathy Liebmann,
La-Z-Boy Incorporated, +1-734-241-2438, Web site:
http://www.la-z-boy.com/
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