La-Z-Boy Reports Fourth-Quarter Profit

MONROE, Mich., June 15 /PRNewswire-FirstCall/ -- La-Z-Boy Incorporated (NYSE: LZB) today reported its operating results for the fiscal fourth quarter and full year ended April 25, 2009.

Fiscal 2009 fourth quarter highlights:

• Income from continuing operations was $0.10 per share versus a loss of $0.09 per share in last year's fourth quarter, despite a 23% decline in net sales, reflecting ongoing macroeconomic challenges
• The company generated $34 million in cash from operating activities and reduced debt by $28 million
• Net debt at year end was less than $44 million - the lowest level the company experienced in this decade
• The retail segment's performance improved - operating loss reduced by $5 million on a 21% sales decline

Net sales for the fourth quarter were $284.5 million, down 23% compared with the prior year's fourth quarter. The company reported income from continuing operations of $5.3 million, or $0.10 per share, compared with a loss of $4.5 million, or a loss of $0.09 per share in the same period of fiscal 2008. The 2009 fourth-quarter results include a $0.01 per share impairment of long-lived assets related to its retail operation, a $0.01 restructuring charge, primarily related to store closures within the company's retail segment and a $0.05 tax benefit. The company's 2008 fourth-quarter results include a $0.04 restructuring charge, primarily related to the closing of its Tremonton, UT manufacturing facility.

Kurt L. Darrow, President and Chief Executive Officer of La-Z-Boy, said, "We were profitable during the quarter on a sales decline of $84 million as the operating environment continues to be very difficult. This is the direct result of the decisive actions taken and the significant changes made to our cost structure over the past year, coupled with the ongoing execution of strategic initiatives that will continue to increase the company's operating efficiencies. Additionally, during the quarter, we generated $34 million in cash from operating activities. We remained focused on improving our liquidity by paying down debt by $27.8 million, bringing our net debt at year end to less than $44 million. Additionally, subsequent to year end, restricted cash of about $18 million became available to be used for operations due to a change in our captive insurance company. We also reduced our losses in the retail segment by $5 million when compared with the previous year's fourth quarter, even on declining volume. Going forward, we will maintain our aggressive stance in managing our business and, with our new infrastructure, I am confident La-Z-Boy Incorporated will emerge from this difficult macroeconomic period as a stronger and more competitive entity."

For the full fiscal 2009 year, La-Z-Boy Incorporated reported sales of $1.2 billion, down 15.5% from $1.5 billion in the prior-year period. The company posted a loss from continuing operations of $121.3 million, or $2.36 per share, versus a loss of $7.5 million, or a loss of $0.15 per share. The 2009 full-year results include income of $0.16 per share related to anti-dumping monies received on bedroom furniture imported from China, a restructuring charge of $0.24 per share related to various plant, warehouse facilities and retail store closures, a non-cash intangible write-down of $0.85 per share relating to goodwill and trade names and a $0.15 per share non-cash impairment of long-lived assets relating to the company's retail operation. The company's full-year results also include a non-cash $0.74 per-share charge recognized in the second quarter of fiscal 2009 for a valuation allowance against the company's deferred tax assets.

Wholesale Segments

For the fiscal 2009 fourth quarter, sales in the company's upholstery segment decreased 22.5% to $215.0 million compared with $277.5 million in the prior year's fourth quarter. On the $62.5 million decline in sales, the segment's operating margin increased to 9.0% from 8.3% in the prior year's quarter. In the casegoods segment, sales for the fiscal fourth quarter were $39.3 million, down 19.4% from $48.8 million in the prior year's fourth quarter. The segment's operating margin decreased to (3.2%) from 3.6% in last year's comparable period.

Darrow commented, "Our operating margin performance in our upholstery segment demonstrates the efficiencies with which we are running our business. On a significant decline in volume, we not only operated with a 9% margin, but improved our operating performance quarter over quarter. This is a testament to the number of changes we have made to our manufacturing structure. In addition to the benefits derived from cellular production at our La-Z-Boy branded facilities, we are also achieving similar lean benefits at our other upholstery companies. And, with the transition to our new Mexican cut-and-sew facility in progress and on schedule, we look forward to achieving further cost savings and efficiencies, as planned. However, we are currently running dual cut-and-sew operations as we go through the transition process and are not yet realizing the anticipated cost benefits from the Mexican operation. We expect to start seeing benefits in early calendar 2010."

Darrow continued, "In our casegoods business, we made the decision to consolidate our two separate manufacturing operations into one facility in Hudson, NC. We will close our plant in North Wilkesboro, NC and convert it to a finished-goods warehouse and vacate a leased warehouse operation in Statesville, NC. These moves will take place over a nine-month period and, when completed, will provide an annual cost savings of approximately $5 to $6 million, based on current volume. Additionally, we are narrowing the number of collections we offer to focus on our best sellers and a core group of products. As a result, during the quarter, the operating margin for the segment was negatively impacted by higher-than-usual discounting of certain product to reduce inventory levels and generate cash."

In fiscal 2009, the La-Z-Boy Furniture Galleries(R) store system, which includes both company-owned and independent-licensed stores, opened six new stores, relocated and/or remodeled nine and closed 21, bringing the total store count to 320, of which 224 are in the New Generation format. For fiscal 2010, the network plans to be opportunistic in opening or relocating stores and anticipates closing five to 10 stores.

System-wide, for the fiscal 2009 fourth quarter, including company-owned and independent-licensed stores, same-store written sales, which the company tracks as an indicator of retail activity, were down 16.4%. Total written sales, which include new and closed stores, were down 20.6%.

Retail

For the quarter, retail sales were $38.4 million, down 21.4% compared with the prior-year period. The retail group posted an operating loss for the quarter, and its operating margin was (19.1%). Darrow stated, "Although our retail business continues to be impacted by the weak demand environment, I am pleased with the progress our team is making in stemming the losses in the segment. In spite of the sales decline, we decreased our operating loss for the quarter by $5 million compared with last year's fourth quarter, reflecting the numerous changes made to the business over the previous six-month period. Those changes include structural improvements within each store, more efficient and effective marketing, higher gross margins and lower warehousing costs due to the shift we instituted last quarter. Going forward, working within the confines of a difficult macroeconomic environment and associated lower traffic levels, our sales team is focused on improving the customer shopping experience, leveraging new selling strategies and improving on the execution of our In-Home Design capabilities. We believe that even in the lower-volume environment, we can continue to improve the segment's operating performance."

Balance Sheet

During the fourth quarter, La-Z-Boy generated $34 million in cash from operating activities and paid down its debt by $27.8 million. La-Z-Boy's debt-to-capitalization ratio was 16.6% compared with 18.8% a year ago and to 22% at the end of the third quarter. During the quarter, the company's inventory was reduced by 18.6%, or $32 million. Darrow stated, "In addition to managing all facets of our business aggressively, we are focused on improving our liquidity. In a difficult sales environment, we were able to generate cash, pay down debt and increase our availability under our revolving line of credit by $7.8 million to $65 million."

Business Outlook

Darrow stated, "We anticipate business conditions to remain difficult throughout the year and are structuring our business accordingly. Should conditions change in either direction, we will react swiftly and make the necessary changes to our operating structure. Due to seasonality factors and plant shutdowns for vacation and maintenance, the summer period is usually the slowest for the furniture industry and, historically, our first quarter, which ends in July, is typically the weakest in terms of sales and profits."

Conference Call

La-Z-Boy will hold a conference call with the investment community on Tuesday, 16 June 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) continued economic recession and decline in our stock price; (c) changes in demographics; (d) further changes in residential housing and commercial real estate market; (e) the impact of terrorism or war; (f) continued energy and other commodity price changes; (g) the impact of logistics on imports; (h) the impact of interest rate changes; (i) changes in currency exchange rates; (j) competitive factors; (k) operating factors, such as supply, labor or distribution disruptions including changes in operating conditions or costs; (l) effects of restructuring actions; (m) changes in the domestic or international regulatory environment; (n) ability to implement global sourcing organization strategies; (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 2009 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 320 stand-alone La-Z-Boy Furniture Galleries(R) stores and 466 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

                                 Unaudited                Unaudited
     (Amounts in          For the Quarter Ended      For the Year Ended
     thousands, except     4/25/2009  4/26/2008    4/25/2009    4/26/2008
     per share data)       (13 weeks) (13 weeks)   (52 weeks)   (52 weeks)



    Sales                   $284,498   $368,030   $1,226,674   $1,450,941
    Cost of sales
       Cost of goods sold    192,937    260,777     $878,089    1,051,656
       Restructuring             123      2,610        9,818        5,057
    Total cost of sales      193,060    263,387      887,907    1,056,713
       Gross profit           91,438    104,643      338,767      394,228
    Selling, general and
     administrative           87,140    102,192      375,011      399,470
    Restructuring                433        632        2,642        3,078
    Write-down of
     long-lived assets           467          -        7,503            -
    Write-down of
     intangibles                   -      2,617       47,677        8,426
       Operating income
        (loss)                 3,398       (798)    (94,066)      (16,746)
    Interest expense           1,049      7,534        5,581       13,899
    Income from Continued
     Dumping and Subsidy
     Offset Act, net               -          -        8,124        7,147
    Interest income              619        575        2,504        3,614
    Other income (expense),
     net                         (23)       691       (7,998)       5,393
       Income (loss) from
        continuing
        operations before
        income taxes           2,945     (7,066)     (97,017)     (14,491)
    Income tax (benefit)
     expense                  (2,378)    (2,595)      24,330       (6,954)
       Income (loss) from
        continuing
        operations             5,323     (4,471)    (121,347)      (7,537)
       Income (loss) from
        discontinued
        operations (net of
        tax)                       -         50            -       (6,000)
       Net income (loss)      $5,323    $(4,421)   $(121,347)    $(13,537)

    Basic average shares      52,035     51,425       51,460       51,408

      Basic income (loss)
       from continuing
       operations per share    $0.10     $(0.09)      $(2.36)      $(0.15)
    Discontinued
     operations per share
     (net of tax)                  -          -            -        (0.11)
       Basic net income
        (loss) per share       $0.10     $(0.09)      $(2.36)      $(0.26)

    Diluted average shares    52,035     51,425       51,460       51,408

    Diluted income (loss)
     from continuing
     operations per share      $0.10     $(0.09)      $(2.36)      $(0.15)
    Discontinued
     operations per share
     (net of tax)                  -          -            -        (0.11)
      Diluted net income
       (loss) per share        $0.10     $(0.09)      $(2.36)      $(0.26)

    Dividends paid per share      $-      $0.04        $0.10        $0.40



                                LA-Z-BOY INCORPORATED
                              CONSOLIDATED BALANCE SHEET

                                                         As of
    (Amounts in thousands, except par value)   4/25/2009       4/26/2008

    Current assets
       Cash and equivalents                      $17,364         $14,476
       Restricted cash                            18,713             506
       Receivables, net of allowance of
        $28,385 in 2009 and $17,942 in 2008      147,858         200,422
       Inventories, net                          140,178         178,361
       Deferred income taxes - current               795          12,398
       Other current assets                       22,872          21,325
         Total current assets                    347,780         427,488
    Property, plant and equipment, net           150,234         171,001
    Deferred income taxes - long term                  -          26,922
    Goodwill                                           -          47,233
    Trade names                                    3,100           9,006
    Other long-term assets, net of allowance
     of $4,309 in 2009 and $2,801 in 2008         51,431          87,220
         Total assets                           $552,545        $768,870

    Current liabilities
       Current portion of long-term debt          $8,724          $4,792
       Accounts payable                           41,571          56,421
       Accrued expenses and other current
        liabilities                               75,733         102,700
         Total current liabilities               126,028         163,913
    Long-term debt                                52,148          99,578
    Deferred income taxes                            724               -
    Other long-term liabilities                   67,912          54,783
    Contingencies and commitments                      -               -
    Shareholders' equity
       Common shares, $1 par value - 150,000
        authorized; 51,478 outstanding in
        2009 and 51,428 outstanding in 2008       51,478          51,428
       Capital in excess of par value            205,945         209,388
       Retained earnings                          70,769         190,215
       Accumulated other comprehensive (loss)    (22,459)           (435)
         Total shareholders' equity              305,733         450,596
         Total liabilities and shareholders'
          equity                                $552,545        $768,870



                                LA-Z-BOY INCORPORATED
                         CONSOLIDATED STATEMENT OF CASH FLOWS

                                 Unaudited Quarter         Unaudited Year
                                      Ended                    Ended
    (Amounts in thousands)    4/25/2009   4/26/2008    4/25/2009   4/26/2008



    Cash flows from
     operating activities
       Net income (loss)         $5,323     $(4,421)   $(121,347)   $(13,537)
       Adjustments to reconcile
        net income (loss) to
        cash provided by
        operating activities
       (Gain) loss on sale of
        assets                     (106)        270       (2,813)        270
       Write-down of investments      -           -        5,140           -
       Write-down of intangibles      -       2,617       47,677       8,426
       Write-down of long-lived
        assets                      467           -        7,503           -
       Write-down of assets
        from businesses held
        for sale (net of tax)         -           -            -       2,159
       (Gain) loss on sale of
        discontinued operations
        (net of tax)                  -        (198)           -       3,696
       Restructuring                556       3,242       12,460       8,135
       Provision for doubtful
        accounts                  6,815       2,177       25,254       8,550
       Depreciation and
        amortization              5,709       6,190       23,479      24,696
       Stock-based compensation
        expense                     952       1,362        3,819       4,527
       Change in receivables      3,909      11,715       27,223      20,956
       Change in inventories     29,615       5,574       36,995      23,471
       Change in payables        (8,120)     (5,287)     (14,544)    (10,394)
       Change in other assets
        and liabilities         (12,076)     (7,038)     (37,961)    (25,689)
       Change in deferred taxes     623      (3,557)      38,803      (6,027)
         Total adjustments       28,344      17,067      173,035      62,776
    Net cash provided by
     operating activities        33,667      12,646       51,688      49,239

    Cash flows from
     investing activities
       Proceeds from disposals
        of assets                 1,229       1,023        9,060       8,761
       Proceeds from sale of
        discontinued operations       -           -            -       4,169
       Capital expenditures      (1,546)     (6,548)     (15,625)    (27,386)
       Purchases of investments    (735)     (5,485)     (11,330)    (34,562)
       Proceeds from sales of
        investments              12,794       5,338       34,675      35,580
       Change in restricted
        cash                    (10,543)      1,321      (18,207)        160
       Change in other
        long-term assets           (235)     (2,791)        (581)       (705)
         Net cash provided by
          (used for) investing
          activities                964      (7,142)      (2,008)    (13,983)

      Cash flows from
       financing activities
       Proceeds from debt           336      92,470       50,794      93,861
       Payments on debt         (28,100)   (142,578)     (92,139)   (144,790)
       Stock issued/(canceled)
        for stock and employee
        benefit plans                 -        (140)           -        (269)
       Dividends paid                11      (2,076)      (5,177)    (20,746)
         Net cash used for
          financing activities  (27,753)    (52,324)     (46,522)    (71,944)

      Effect of exchange rate
       changes on cash and
       equivalents                  (30)        (52)        (901)        109
    Change in cash and
     equivalents                  6,848     (46,872)       2,257     (36,579)
    Cash acquired from
     consolidation of VIEs            -           -          631           -
    Cash and equivalents at
     beginning of period         10,516      61,348       14,476      51,055
    Cash and equivalents at
     end of period              $17,364     $14,476      $17,364     $14,476



                                LA-Z-BOY INCORPORATED
                                 Segment Information

                                   Unaudited              Unaudited
                              For the Quarter Ended   For the Year Ended
                              4/25/2009  4/26/2008   4/25/2009   4/26/2008
    (Amounts in thousands)    (13 weeks) (13 weeks)  (52 weeks)  (52 weeks)

    Sales
      Upholstery Group         $214,952   $277,458    $899,204  $1,084,418
      Casegoods Group            39,290     48,770     178,000     213,896
      Retail Group               38,430     48,902     160,838     190,180
      VIEs/Eliminations          (8,174)    (7,100)    (11,368)    (37,553)
       Consolidated            $284,498   $368,030  $1,226,674  $1,450,941

    Operating income (loss)
      Upholstery Group          $19,373    $22,961     $35,410     $70,332
      Casegoods Group            (1,265)     1,752         554      10,151
      Retail Group               (7,332)   (12,565)    (34,841)    (40,265)
      Corporate and Other*       (6,355)    (7,087)    (27,549)    (40,403)
      Restructuring                (556)    (3,242)    (12,460)     (8,135)
      Long-lived asset
       write-down                  (467)         -      (7,503)          -
      Intangible write-down           -     (2,617)    (47,677)     (8,426)
       Consolidated              $3,398      $(798)   $(94,066)   $(16,746)

    * Variable Interest Entities ("VIEs") are included in corporate and other.



                                LA-Z-BOY INCORPORATED
                          Unaudited Quarterly Financial Data

    (Dollar amounts in
     thousands, except per
     share data)             7/26/2008   10/25/2008    1/24/2009  4/25/2009
    Fiscal Quarter Ended     (13 weeks)   (13 weeks)   (13 weeks) (13 weeks)
    Sales                      $321,652     $331,948    $288,576   $284,498
    Cost of sales
       Cost of goods sold       235,115      242,681     207,356    192,937
       Restructuring              5,795        2,236       1,664        123
         Total cost of sales    240,910      244,917     209,020    193,060
            Gross profit         80,742       87,031      79,556     91,438
    Selling, general and
     administrative              91,837      101,942      94,092     87,140
    Restructuring                   781          687         741        433
    Write-down of
     long-lived assets                -            -       7,036        467
    Write-down of
     intangibles                  1,292          408      45,977          -
       Operating income
        (loss)                  (13,168)     (16,006)    (68,290)     3,398
    Interest expense              1,495        1,651       1,386      1,049
       Income from Continued
        Dumping and Subsidy
        Offset Act, net               -            -       8,124          -
    Interest income                 932          630         323        619
    Other income (expense),
     net                            143         (685)     (7,433)       (23)
       Pretax income (loss)     (13,588)     (17,712)    (68,662)     2,945
    Income tax expense (benefit) (5,044)      36,032      (4,280)    (2,378)
          Net income (loss)     $(8,544)    $(53,744)   $(64,382)    $5,323

    Diluted weighted
     average shares
     outstanding                 51,428       51,458      51,475     52,035

    Diluted net income
     (loss) per share            $(0.17)      $(1.04)     $(1.25)     $0.10




                                LA-Z-BOY INCORPORATED
                         Unaudited Quarterly Financial Data

    (Dollar amounts in
     thousands, except
     per share data)          7/28/2007   10/27/2007   1/26/2008   4/26/2008
    Fiscal Quarter Ended      (13 weeks)   (13 weeks)  (13 weeks)  (13 weeks)
    Sales                      $344,396     $365,434    $373,081    $368,030
    Cost of sales
       Cost of goods sold       259,143      266,658     265,078     260,777
       Restructuring              2,561          518        (632)      2,610
         Total cost of sales    261,704      267,176     264,446     263,387
            Gross profit         82,692       98,258     108,635     104,643
    Selling, general and
     administrative              94,508       98,098     104,672     102,192
    Restructuring                 1,120          449         877         632
    Write-down of
     intangibles                      -        5,809           -       2,617
       Operating income
        (loss)                  (12,936)      (6,098)      3,086        (798)
    Interest expense              2,097        2,120       2,148       7,534
       Income from Continued
        Dumping and Subsidy
        Offset Act, net               -            -       7,147           -
    Interest income                 882        1,023       1,134         575
    Other income, net               566          351       3,785         691
       Income (loss) from
        continuing
        operations before
        income taxes            (13,585)      (6,844)     13,004      (7,066)
    Income tax expense
     (benefit)                   (5,043)      (3,192)      3,876      (2,595)
       Income (loss) from
        continuing
        operations               (8,542)      (3,652)      9,128      (4,471)
       Income (loss) from
        discontinued
        operations (net of tax)    (152)      (6,282)        384          50
          Net income (loss)     $(8,694)     $(9,934)     $9,512     $(4,421)

       Diluted weighted
        average shares
        outstanding              51,380       51,410      51,590      51,425

       Diluted income (loss)
        from continuing
        operations per share     $(0.17)      $(0.07)      $0.18      $(0.09)
       Diluted net income
        (loss) per share         $(0.17)      $(0.19)      $0.18      $(0.09)

SOURCE La-Z-Boy Incorporated