La-Z-Boy Reports Fiscal 2012 Year-End And Fourth-Quarter Results

19 Jun, 2012, 16:24 ET from La-Z-Boy Incorporated

 MONROE, Mich.,  June 19, 2012 /PRNewswire/ -- La-Z-Boy Incorporated (NYSE: LZB) today reported its operating results for the fiscal 2012 full year and fourth quarter ended April 28, 2012.

Fiscal 2012 full year highlights:

  • Sales for the full fiscal 2012 year increased 3.8% compared with fiscal 2011, which was a 53-week year, with the additional week having an approximate 2 percentage point impact;
  • Same-store written sales for the  La-Z-Boy Furniture Galleries® store network increased 9.4% for the full fiscal 2012 year;
  • Consolidated operating income increased 92% to $49.6 million from $25.9 million in fiscal 2011;
  • The company generated cash from operations of $82.8 million;
  • The upholstery segment's operating margin was 8.4% compared with 7.9% in fiscal 2011;
  • The casegoods segment's operating margin was 4.0% compared with 4.4% in fiscal 2011;
  • The retail segment's performance continued to improve, with an operating loss of $7.8 million, a 48% improvement from the loss of $15.1 million in fiscal 2011; and
  • Diluted earnings per share attributable to La-Z-Boy Incorporated were $1.64, including $0.88 per share reflecting a reduction in valuation reserves and $0.21 per share in anti-dumping duties. This compares with $0.45 in fiscal 2011, which included a $0.05 per share impairment.

Fiscal 2012 fourth quarter highlights:

  • Sales for the fourth quarter decreased 3.4% compared with the fiscal 2011 fourth quarter which included an additional week, with that week having an approximate 7 percentage point impact;
  • Same-store written sales for the La-Z-Boy Furniture Galleries® store network increased 10.0% for the fourth quarter;
  • Consolidated operating income was essentially flat at $16.9 million compared with $12.2 million in the fiscal 2011 fourth quarter, taking into account the inclusion of a $4.5 million impairment on long-lived assets in last year's fourth quarter;
  • The company generated cash from operations of $27.0 million during the quarter;
  • The upholstery segment posted a 10.1% operating margin versus 10.3% in last year's fourth quarter;
  • The retail segment improved its operating performance for the thirteenth consecutive quarter, reducing its operating loss to $1.1 million from $3.0 million in last year's fourth quarter; and
  • Diluted earnings per share attributable to La-Z-Boy Incorporated were $0.37, including $0.19 per share reflecting anti-dumping duties.  This compares with earnings per diluted share of $0.19 in the fourth quarter of fiscal 2011, which included a $0.05 per share impairment of long-lived assets.

Sales for the full fiscal year 2012 were $1.2 billion, an increase of 3.8% over fiscal 2011, which included an additional week, with the week having an approximate 2 percentage point impact.  The company reported net income attributable to La-Z-Boy Incorporated of $88.0 million, or $1.64 per share versus $24.0 million, or $0.45 per share.  The fiscal 2012 results included $0.88 per share related to a reduction of valuation reserves against the company's deferred tax assets and $0.21 per share in anti-dumping duties.  The fiscal 2011 results included a $0.01 per share restructuring charge, a $0.05 per share impairment of long-lived assets and $0.01 per share in anti-dumping duties.

Sales for the fiscal 2012 fourth quarter were $327.4 million, down 3.4% compared with the prior year's fourth quarter, which included an additional week with that week equivalent to approximately 7 percentage points.  The company reported net income attributable to La-Z-Boy Incorporated of $19.6 million, or $0.37 per diluted share, of which $0.19 per share related to anti-dumping duties.  This compares with $10.3 million, or $0.19 per diluted share, which included a $0.05 per share impairment of long-lived assets.

Compared with last year's fourth quarter, the fiscal 2012 fourth-quarter results were impacted by the 13-versus-14-week comparison, changes in the company's effective tax rate, and $4.2 million in additional incentive compensation.  This increase included a $1.6 million bonus to all employees not participating in the company's annual incentive program, and an increase of $2.6 million related to other incentive compensation, including both short- and long-term stock compensation. Last year's fourth quarter included a minimal level of incentive compensation.

Kurt L. Darrow, Chairman, President and Chief Executive Officer of La-Z-Boy, said, "Increased sales, an efficient operating structure, brand strength, a strong network of proprietary distribution and better execution throughout our business segments delivered a 92% increase in the company's consolidated operating income for fiscal 2012.  We also strengthened our balance sheet, ending the year with more than $150 million in cash and less than $10 million in total debt. As we look to the future, we will continue to execute on our strategic objectives and are well positioned to achieve sales growth, retail profitability and positive conversion on our additional volume." 

Wholesale Segments

Fiscal 2012 segment sales for the quarter are compared to a 14-week quarter in fiscal 2011, with the additional week representing an approximate 7 percentage point impact. 

For the fiscal 2012 fourth quarter, sales in the company's upholstery segment increased to $266.9 million from $264.8 million in the prior year's fourth quarter.  The operating margin for the quarter was 10.1% compared with 10.3% in last year's fourth quarter.  In the casegoods segment, sales for the fiscal 2012 fourth quarter were $35.3 million, down from $40.7 million in the fiscal 2011 fourth quarter, and the operating margin for the segment declined to 3.3% from 5.2% in last year's fourth quarter. 

Darrow commented, "Our operating structure for our three upholstery entities remains lean and efficient.  For the quarter, we maintained a better-than-10% operating margin, and for the full year, we increased the upholstery margin to 8.4%.  On the sales side, the upholstery segment is maintaining its momentum with full-year sales up about 6.4%.  With 18 months of high single-digit same-store-sales increases across our La-Z-Boy Furniture Galleries® network, we are continuing to gain market share.  Our brand platform is driving a more qualified consumer to our stores, and we are pleased to have extended our contract with Brooke Shields as our brand ambassador for an additional two years.  Both the company and our dealer base plan to open additional La-Z-Boy Furniture Galleries® stores, which will deliver incremental sales and provide us with the opportunity to leverage our operating structure across all our branded upholstery facilities and Mexico-based cut-and-sew center to deliver improved results."

Darrow continued, "Our casegoods segment continues to face challenges given the higher ticket associated with bedroom and dining room groups.  However, we were profitable for the year on a decline in volume, reflecting the variable cost structure of the business model. At this past furniture market, we introduced several new bedroom groups from American Drew that will be made at our Hudson, North Carolina facility, and they were all well received.  Production of these groups will begin in August, which should deliver improved operating efficiencies for the plant."

Retail Segment

For the quarter, retail delivered sales were $55.6 million, down 4.7% compared with the fourth quarter of last year, which included an additional week, representing approximately 7 percentage points.  The retail group continued to make progress in its operating performance, posting an operating loss of $1.1 million, with an operating margin of (2.0%) compared with an operating loss of $3.0 million, or an operating margin of (5.2%) in last year's fourth quarter. 

Darrow stated, "Our retail performance continues to improve, and we are moving steadily toward profitability in the segment.  With a lean operating structure in place, volume and margin expansion are driving our performance.  During the quarter, we improved the gross margin 2.9 percentage points.  Additionally, with a more qualified consumer entering our stores, our retail teams are utilizing established team selling processes, which drove an improvement in our close ratio and average ticket for the quarter. For the full year, we reduced our loss to $7.8 million from $15.1 million.  Our team remains focused on servicing the consumer and increasing sales to drive profitability in the segment."

La-Z-Boy Furniture Galleries® Stores Network

System-wide, for the fourth quarter of fiscal 2012, including company-owned and independent-licensed stores, same-store written sales, which the company tracks as an indicator of retail activity, were up 10.0% versus last year's fourth quarter. 

Total written sales, which include new and closed stores, for the fourth quarter, were up 11.1%.   At the end of the fourth quarter, the La-Z-Boy Furniture Galleries® store system was composed of 312 stand-alone stores, an increase of three stores since the end of the fiscal 2012 third quarter.

Additionally, the La-Z-Boy Furniture Galleries® store network, including company-owned and independent-licensed stores, plans to open, remodel or relocate 10 to 15 additional stores throughout fiscal 2013.

Balance Sheet and Cash Flow

During the quarter, the company generated $27.0 million in cash from operating activities, which included $16 million in anti-dumping duties, ending the year with $152.4 million in cash while decreasing total debt to $9.8 million through the repayment of its revolving line of credit.  At quarter end, La-Z-Boy's debt-to-capitalization ratio was 2.1% compared with 8.8% at the end of fiscal 2011 and its net cash position was $142.6 million as of April 28, 2012.  During fiscal 2012, the company purchased 0.5 million shares of stock in the open market under its existing authorized share purchase program.

Business Outlook

Darrow stated, "Given the strength of our brand, the breadth of our branded distribution network, plans for store growth and the level of same-store-sales improvements over the past 18 months, La-Z-Boy Incorporated is positioned to continue to improve its market share and will further capitalize on any strengthening in the economy, particularly consumer confidence and the housing market.  We have an efficient operating structure, a successful brand platform, a strong dealer distribution network and a team that is committed to driving growth, retail profitability and positive conversion on our additional volume."

Conference Call

La-Z-Boy will hold a conference call with the investment community on Wednesday, June 20, 2012, 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 or the emergence of a second wave of the 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 our share of certain Continued Dumping and Subsidy Offset Act distributions; (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) fluctuations in our stock price; (o) information technology conversions or system failures; (p) effects of our brand awareness and marketing programs; (q) the discovery of defects in our products resulting in delays in manufacturing, recall campaigns, reputational damage, or increased warranty costs; (r) litigation arising out of alleged defects in our products; (s) our ability to locate new La-Z-Boy Furniture Galleries® stores owners and negotiate favorable lease terms for new or existing locations; and (t) those matters discussed in Item 1A of our fiscal 2012 Annual Report 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 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 company-owned retail segment includes 85 of the 312 La-Z-Boy Furniture Galleries® stores.

The corporation's proprietary distribution network is dedicated exclusively to selling La-Z-Boy Incorporated products and brands, and includes 312 stand-alone La-Z-Boy Furniture Galleries® stores and 553 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/.

LA-Z-BOY INCORPORATED CONSOLIDATED STATEMENT OF INCOME

Unaudited

For the Quarter Ended

Unaudited

For the Year Ended

(Amounts in thousands, except per share data)

4/28/2012 (13 weeks)

4/30/2011 (14 weeks)

4/28/2012 (52 weeks)

4/30/2011 (53 weeks)

Sales

$327,388

$338,905

$1,231,676

$1,187,143

Cost of sales

224,033

230,847

851,819

832,799

Gross profit

103,355

108,058

379,857

354,344

Selling, general and administrative

86,465

91,358

330,226

323,964

Write-down of long-lived assets

4,471

4,471

Operating income

16,890

12,229

49,631

25,909

Interest expense

297

603

1,384

2,346

Interest income

124

228

611

944

Income from Continued Dumping and Subsidy Offset Act, net

16,300

151

18,037

1,054

Other income (expense), net

(214)

221

(38)

405

Income before income taxes

32,803

12,226

66,857

25,966

Income tax expense (benefit)

12,769

5,466

(22,051)

8,593

Net income

20,034

6,760

88,908

17,373

Net (income) loss attributable to noncontrolling  

    interests

(432)

3,548

(942)

6,674

Net income attributable to La-Z-Boy Incorporated

$19,602

$10,308

$87,966

$24,047

Basic average shares

51,993

51,890

51,944

51,849

Basic net income per share attributable to La-Z-Boy Incorporated

$0.37

$0.20

$1.66

$0.46

Diluted average shares

52,609

52,359

52,478

52,279

Diluted net income per share attributable to La-Z-Boy Incorporated

$0.37

$0.19

$1.64

$0.45

 

LA-Z-BOY INCORPORATED CONSOLIDATED BALANCE SHEET

Unaudited As of

 (Amounts in thousands, except par value)

4/28/2012

4/30/2011

Current assets

Cash and equivalents

$152,370

$115,262

Restricted cash

2,861

Receivables, net of allowance of $22,705 at 4/28/12 and $23,937 at 4/30/11

167,232

161,299

Inventories, net

143,787

138,444

Deferred income taxes – current

19,081

Other current assets

14,669

17,218

Total current assets

500,000

432,223

Property, plant and equipment, net

114,366

120,603

Trade names

3,028

3,100

Deferred income taxes – long term

33,649

2,883

Other long-term assets

34,696

34,646

Total assets

$685,739

$593,455

Current liabilities

Current portion of long-term debt

$1,829

$5,120

Accounts payable

56,630

49,537

Accrued expenses and other current liabilities

91,300

77,447

Total current liabilities

149,759

132,104

Long-term debt

7,931

29,937

Other long-term liabilities

80,234

67,274

Contingencies and commitments

Shareholders' equity

Common shares, $1 par value – 150,000 authorized; 52,244 outstanding at 4/28/12 and 51,909 outstanding at 4/30/11

52,244

51,909

Capital in excess of par value

231,332

222,339

Retained earnings

189,609

105,872

Accumulated other comprehensive loss

(31,281)

(18,804)

Total La-Z-Boy Incorporated shareholders' equity

441,904

361,316

Noncontrolling interests

5,911

2,824

Total equity

447,815

364,140

Total liabilities and equity

$685,739

$593,455

 

LA-Z-BOY INCORPORATED CONSOLIDATED STATEMENT OF CASH FLOWS

Unaudited Fiscal Year Ended

(Amounts in thousands)

4/28/2012

4/30/2011

4/24/2010

Cash flows from operating activities

Net income

$88,908

$17,373

$31,359

Adjustments to reconcile net income (loss) to cash provided by operating activities

(Gain) loss on sale of assets

45

201

(538)

Gain on deconsolidation of VIE

(1,125)

Write-down of long-lived assets

4,471

Deferred income tax benefit

(42,146)

(120)

(2,693)

Provision for doubtful accounts

4,196

7,197

6,535

Depreciation and amortization

23,486

24,302

25,246

Stock-based compensation expense

5,718

3,720

5,236

Pension plan contributions

(5,798)

(4,495)

Change in receivables

(6,182)

1,599

(17,250)

Change in inventories

(7,414)

(10,531)

7,074

Change in other assets

2,799

(1,092)

3,225

Change in payables

7,470

(4,429)

13,147

Change in other liabilities

12,891

(10,350)

18,318

    Net cash provided by operating activities

82,848

27,846

89,659

Cash flows from investing activities

Proceeds from disposals of assets

372

506

3,338

Capital expenditures

(15,663)

(10,540)

(10,986)

Purchases of investments

(7,944)

(10,200)

(4,933)

Proceeds from sales of investments

8,649

10,655

8,833

Change in restricted cash

(2,861)

17,507

   Cash effects upon deconsolidation of VIE

(971)

(632)

Other

(676)

(49)

250

Net cash provided by (used for) investing activities

(19,094)

(10,260)

14,009

Cash flows from financing activities

Proceeds from debt

30,585

41,817

Payments on debt

(25,936)

(41,618)

(54,707)

Payments for debt issuance costs

(568)

Stock issued for stock and employee benefit plans

4,943

270

1,035

Excess tax benefit on stock option exercises

223

Purchases of common stock

(5,179)

Net cash used for financing activities

(26,517)

(10,763)

(11,855)

Effect of exchange rate changes on cash and equivalents

(129)

12

(756)

Change in cash and equivalents

37,108

6,835

91,057

Cash and equivalents at beginning of period

115,262

108,427

17,370

Cash and equivalents at end of period

$152,370

$115,262

$108,427

LA-Z-BOY INCORPORATED Segment Information

Unaudited

For the Quarter Ended

Unaudited

For the Year Ended

4/28/2012

4/30/2011

4/28/2012

4/30/2011

(Amounts in thousands)

(13 weeks)

(14 weeks)

(52 weeks)

(53 weeks)

Sales

Upholstery Segment

$266,893

$264,842

$975,103

$916,867

Casegoods Segment

35,337

40,749

139,639

152,534

Retail Segment

55,578

58,288

215,490

176,987

VIEs

3,646

8,840

29,105

Corporate and Other

554

471

2,356

1,909

   Eliminations

(30,974)

(29,091)

(109,752)

(90,259)

Consolidated Sales

$327,388

$338,905

$1,231,676

$1,187,143

Operating income (loss)

Upholstery Segment

$27,032

$27,163

$81,753

$72,743

Casegoods Segment

1,181

2,099

5,540

6,698

Retail Segment

(1,112)

(3,035)

(7,819)

(15,078)

VIEs

(1,107)

959

(4,949)

Corporate and Other

(10,211)

(8,420)

(30,802)

(29,034)

Write-down of long-lived assets

(4,471)

(4,471)

Consolidated Operating Income

$16,890

$12,229

$49,631

$25,909

 

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

7/30/2011

10/29/2011

1/28/2012

4/28/2012

Sales

$280,094

$307,679

$316,515

$327,388

Cost of sales

199,166

211,896

216,724

224,033

Gross profit

80,928

95,783

99,791

103,355

Selling, general and administrative expense

77,455

83,535

82,771

 

86,465

Operating income

3,473

12,248

17,020

16,890

Interest expense

424

389

274

297

Interest income

183

166

138

124

Income from Continued Dumping and Subsidy Offset Act, net

322

1,415

16,300

Other income (expense), net

373

(108)

(89)

(214)

Income before income taxes

3,927

11,917

18,210

32,803

Income tax expense (benefit)

(41,929)

4,245

2,864

12,769

Net income

45,856

7,672

15,346

20,034

Net (income) loss attributable to

   noncontrolling interests

(320)

198

(388)

(432)

   Net income attributable to La-Z-Boy Incorporated

$45,536

$7,870

$14,958

$19,602

Diluted weighted average shares

52,443

52,475

52,379

52,609

Diluted net income per share attributable to

    La-Z-Boy Incorporated

$0.85

$0.15

$0.28

$0.37

 

LA-Z-BOY INCORPORATED Unaudited Quarterly Financial Data

 

(Dollar amounts in thousands, except per share data)

(13 weeks)

(13 weeks)

(13 weeks)

(14 weeks)

Fiscal Quarter Ended

7/24/2010

10/23/2010

1/22/2011

4/30/2011

Sales

$263,313

$292,982

$291,943

$338,905

Cost of sales

190,479

207,876

203,597

230,847

Gross profit

72,834

85,106

88,346

108,058

Selling, general and administrative expense

74,485

79,767

78,354

91,358

Write-down of long-lived assets

4,471

Operating income (loss)

(1,651)

5,339

9,992

12,229

Interest expense

590

592

561

603

Interest income

243

223

250

228

Income from Continued Dumping and Subsidy Offset Act, net

903

151

Other income (expense), net

351

(418)

251

221

Income (loss) before income taxes

(1,647)

4,552

10,835

12,226

Income tax expense (benefit)

(705)

1,381

2,451

5,466

Net income (loss)

(942)

3,171

8,384

6,760

Net loss attributable to noncontrolling interests

726

774

1,626

3,548

   Net income (loss) attributable to La-Z-Boy Incorporated

$(216)

$3,945

$10,010

$10,308

Diluted weighted average shares

51,785

52,214

52,270

52,359

Diluted net income per share attributable to

    La-Z-Boy Incorporated

$—

$0.07

$0.19

$0.19

 

SOURCE La-Z-Boy Incorporated



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